Lehman: The Lying Lemon Lemming Anecdotal Timeline?

Let's see here. Lehman (LEH) is the largest MBS underwriter and the smallest bulge bracket bank on the street (the bank that had the #1 spot was just taken under). The company has hit the capital markets twice and the Fed window once to access capital to (Ahem!) "prove to the market that it has liquidity" and for "testing purposes only". They then take this money that they got from the suckers, oops, investors and buy their own stock with it. Is that what those suck..., I mean investors, had in mind for that money?

The company alleges that short sellers conspired to drive their stock down, so they went on the PR warpath to fight these [us] bad guys. Instead of opening up their books to prove to them that they [I] am wrong, they try to sick the government on the short sellers. Merrill Lynch (MER) issued a buy on Lehman yesterday, after downgrading them a couple of days ago. Lehman stock then shoots up after being beat up for a few days, probably incited by David Einhorns choreographed, publicized short selling campaign.

Now, we have these s.. (oh, there I go again) investors buying up Lehman stock, totally disregarding the fact that Lehman took and economic loss last quarter if you strip away non-cash accounting shenanigans, smoke and mirrors. We then find out that the NYS Attorney General (Cuomo) has reached a prospective settlement with the credit wizards (see below, click to enlarge).

and then...

Coincidentally, not a full 48 hours after the end of the Attorney General's stern talk, ratings agencies get religion and decide to declare what the entire world figured out some time ago - MBIA (MBI) and Ambac (ABK) probably don't deserve AAA ratings. Really!!!!????

As I type this, Lehman Brothers, Morgan Stanley are rallying. WHAAAT!!!!??? Don't these guys read my blog? Morgan and Lehman only have two ways to hedge multi-billion dollar assets, and neither are very reliable these days. Short a broad index and risk a lot of slippage and uncertain correlations, or pay a counterparty to accept a risk. You know, a counterparty like MBIA and Ambac. Let's revisit my "Who's holding the $119 billion bag" post from 4 months ago. If you don't want to read through the rest of my rather dated ramblings, it can be summarized in realizing how lucky Lehman is that they just closed the last quarter, for 14% of their gross equity (as calculated in February), is about to get downgraded, give or take.

Read the rest of the piece here. 

 

 

 

 

Comments

[Reggie Midd...:]

For some reason, the editors at seekalpha decided to link to a pdf generation tag, rather than the actual article, which has significantly destroyed the value of the message trying to be delivered. See the post here: boombustblog.com/compo.../
and the follow up to it here: boombustblog.com/compo.../.

I would like to make it clear that the content of my articles are often modified without my consent by the seeking alpha editors. For and unadulterated version of anything that I write, always refer to my blog: boombustblog.com. It may come a time where the diminishing returns of the exposure on SeekingAlpha may be outweighed by the dilution of the percieved content as is modified, and filtered through, the seekinglpha business model.

There is actually an interesting dialog about this here: seekingalpha.com/artic... and I have many of the same complaints and positive observations that have been brought to light in that forum.

Of course, I find my content to be of unusual value (at least it is for me), for my analysis and opinion is generaly significantly more documented and indepth than most of what is freely available on the Internet and free (or pay) blogs. It also has (knock on wood) and uncannily accurate and profitable track record. Since I feel this way, I am concerned about dilution of brand. More than once credit for my work had been given to SeekingAlpha versus Reggie Middleton or BoomBustBlog.com, despite the fact that there is scarcely any 3- page forensic analysis reports to be had here outside of what I post - and most of it is rejeced due to its complexity.

I am curious to see how, if at all, the SA business model wil morph to retain contributors who deliver higher end commentary and analysis, since that is what will ultimately enable them to deliver the valuation to command a truly profitable buyout.

2008 Jun 05 08:16 AM

[Reggie Midd...:]

I meant 30 page forensic analysis reports, not 3 page. One of the biggest faux pas in my work is copy editing:-)

2008 Jun 05 08:18 AM

[Robt1947:]

let's all drop our egos for a moment and try to remember that all these type of sites are potentially good for individual investors who dont use Wall Street analysts. I for one really appreciate all the various community sites where individuals (some highly perceptive) share their views, hopefully without deceptive intentions.

2008 Jun 05 08:37 AM

[adan:]

hope you keep contributing here, great exposure; i probably wouldn't've known about you as easily if not

re good thing quarter ended for brokers; the alt-a downgrade process by the raters also wasn't begun til this quarter's end, negative results / actions thus wouldn't show til end of next quarter's #'s - if then :-)

2008 Jun 05 09:58 AM

[The Market ...:]

Reggie,

I am a member of your site but I find the layout a little odd and user unfriendly,not a dig at you just a user feedback comment.Now on to the real reason I write:I have noticed that in the July contract month for LEH, there are call and put contracts with strike prices as low as $2.50.There is also a large(in my opinion) open interest in some of these put contracts-17000 in the 10's and 46000 in the 20's. I find this a little curious that there are contracts so far out of the money and that there is so much activity in them.Even in the June expiration,there are contracts at 17.50 with open interest at almost 17000.
I recall reading a SA article a while back that there was a request to the options exchanges to open up far out of the money put contracts on BSC shortly before the bottom fell out on them.Something similar seems to be happening here.I don't know when trading in these contracts on LEH(also similarly priced contracts on MS) started,but doesn't a special request to the exchanges have to made to open up contracts so far out of the money? Any way you or I can figure out when those requests were made?
The mere fact that these contracts are out there and the level of trading that is occurring tells my LEH and/or MS geese are about to get cooked,or am I reading too much into this? Given my risk tolerance I am considering taking positions in far out of the money July's,could be a great way to make a killing if what you have been writing about the 2 companies truly starts to manifest in street perception. BTW today we have a fed governor criticizing bailout of BSC and saying next time we will have to let a big I-bank fail.So if LEH or MS do get into real trouble,we could see 0 on their stock price.I like shorts that go to 0!

2008 Jun 05 12:09 PM

[Kunst:]

sic (not sick):
1. to set upon; pursue and attack
2. to urge or incite to attack

2008 Jun 05 10:58 PM

[bill d:]

Also: sic 2
Verb
[sicking, sicked]
1. to attack: used only in commands to a dog
2. to urge (a dog) to attack (someone) [dialect variant of seek]
Collins Essential English Dictionary 2nd Edition 2006 © HarperCollins Publishers 2004, 2006

Are you calling the gov't dogs ???

2008 Jun 06 04:45 PM