lavalyn

Four Questions About How We Got Here

JasonC: on the global scale, does it really make a difference? Lehman going bankrupt and debtholders getting pennies... versus Barclays buying Lehman out, and Lehman shareholders taking the hit instead. Barclays buying the shreds of Lehman doesn't make the value of Lehman assets increase. Surprisingly enough, it *is* a zero-sum game, just a matter of who gets burned.

Given that the Bear Stearns, and then Fannie Mae/Freddie Mac bailouts created a reputation that the "Fed has your back," a collapse is definitely necessary. Systemwide, worldwide, maybe some sense can be put back into credit worthiness review, instead of letting the US Treasury subsidize every ailing company.

Four Questions About How We Got Here

There has to be a (fuzzy) line between maintaining stability in the marketplace and letting the market reward and punish its participants. Wall Street, what do you think of when you read those words? To me, they bring images of ruthless profit-hungry vultures that will punish any misstep of any company from the corporate ideal of the bottom line. Look at their analysts, moving markets with the magic words "Market Outperform," "Conviction Sell," "Overweight." Listen to the conference calls, hear them harp on next quarter's profits... lash out at any deviation from the mantra of profit profit profit.

The very meaning of the phrase Seeking Alpha is an underlying belief that superior research, superior reasoning, and superior decision making results in superior returns. The flip side of that is that inferior decision making results in inferior returns.

Lehman Brothers made inferior decisions, choosing first to hide their assets and refrain from deleveraging in April, then continuing to try to hide their assets in "Level 3" in July. They chose to redouble their bets when they had a good base of capital (share price) that they could have deleveraged with instead. They chose to ask too much of a price of the Korean Development Bank in June. And in doing so, they totally forgot that they were a bank, a wholesaler of financial risk. The role of a bank is to *manage financial risk*.

Equity holders deserve nary a penny for holding to the end like this. Debt holders deserve, as dictated by insolvency law, that they will get priority recovery on those debts. Why should they get more, at your and my expense?

Point of No Return or Perfect Buying Opportunity?

There's no such thing as excessive speculation. Or rather, where there's excessive speculation, there's a profit opportunity.

And no, oil going up like this did not cause the financials to implode. Overzealous and irresponsible lending by the banks did.

Point of No Return or Perfect Buying Opportunity?

I like these "non-answer" type articles. If anything, it's these sorts of articles that help astute investors find alpha. Specifically, I don't like being spoon-fed the analysis and conclusion.

Bespoke points out some anomaly in the market, to illuminate where to do some further due diligence. Sure beats the pumping of the usual suspects (ETFC, FSLR, etc.) by the usual fanboy/girl crowd.