MattDC

The Crazy Lehman Share Price

Have to agree with SnPTrader and lcandolton.

Bad numbers, such as are released to the market, the rest assumed in suitably scary way, are driving the stocks down. Why? Opaque market actors in crisis do not trust imperfect information, esp at ugency; opaque markets on the up inspire irrational exuberance. We're simply seeing the down from the previous up, but perhaps correctives are sharper and swifter? Should the rules change? I don't think so, not mid-game.

I think we've got to focus more on the psychs of the players. For instance, the Victorians used to make stark distinctions between the deserving and the undeserving poor. What do the policymakers think of the deserving and undeserving banks, their positions and exposures, their labour force, and with what implications for policy and investors? This is not academic: Bernanke and FDIC have to decide on who fails without bailout and why, and how it's portrayed. And whether what they prescribe wroks.

M

Fannie, Freddie Bailout To Wipe Out Equity Holders?

C'mon, openly nationalising brings the outstanding obligations on book. What then happens when $5T is added to the national debt? [Sound of crickets...]. It's not like the ratings agencies can now stand by and do nothing; much burned, much incentive perhaps even to cut early, across ratings classes. So AAA comes off T-bonds and ... you tell me?

Anyhow, it's a mixed picture on Fannie/Freddie. Their stock may have come down 22% and 25% today (acc to Bloomberg), from current low base, but the volumes traded are tiny - less than a tenth of the July 10-13 panic period. I'm not saying there aren't problems or risks, or that low volumes are misrepresentative of price discovery, but barring a new and triggering announcement it looks like a steady worsening of the capital structure rather than a cataclysmic one. That may come, but not on current data, such as it is.

Malkiel and Google Fan, I'd be hiring lawyers, not issuing high ambition claims. But that's just me. I don't think decades of systematic disenfranchisement of minority shareholders is going to bear your suggestions fruit. Reminds me, there's got to be a market opportunity for the thousands of Wall Streeters fired and now advising litigants, no?

M