Wednesday, June 4, 2008

Lehman a Confusing Soap Opera

50 degrees and rainy here today. But it will be around 90 degrees this weekend! Crazy weather swings are a New England norm. I may be venturing out to the "Gray Lady", Quabbin Reservoir this weekend for my first trip out there for the year. Huge smallmouth bass, some very good largemouth bass, a shot at a lake trout, white bass, crappies, and huge yellow perch make a trip out there a great day as there is always something biting!

Off Balance Sheet Tomfoolery to End? Only in Your Dreams!
There was a bunch of mileage across the blogosphere given to this story:

Full disclosure, I have zero understanding of the dynamics of this stuff. I zone out when too many acronyms are involved, and that story sure has a ton of those!

That said, my understanding is that the regulatory powers that be want a better accounting of what the banks they oversee are holding in off balance sheet vehicles. They are throwing out the idea that this stuff come onto the balance sheet of the banks. HAHAHAHAHA! Fat chance of that happening. There is simply NO WAY this is going to happen. People getting excited about this are wasting their time. With the current "teetering on the edge of economic Armageddon" baloney there will be no move to make the banks instantly insolvent and on the prowl for more cash. Simple as that.

Lehman a Confusing Soap Opera
Trying to follow the Lehman Brothers (LEH) action over the past month has been like trying to stay on top of a soap opera and all of its twists and turns. If you are a regular reader you will remember this post: which detailed LEH CEO Richard Fuld's call that the "worst is over" back on April 15th. Well since then there has been plenty of action.

If you believed Mr. Fuld and bought LEH on April 15th at $39 a share, you are looking at a 20% loss at today's prices ($31). Good call, bad call? Short term it looks pretty bad!

So basically LEH is in great shape and does not need to find additional cash going forward. Except they are currently looking for a cool 6-8 Billion, hopefully from Korea. Oh yeah, on top of the 6 Billion they have raised already this quarter. On top of the 2 Billion they raised last quarter. Oh yeah, and they have actively been buying back their own stock. Inquiring minds may want to know if LEH has been doing stock buys on the OPEN MARKET with CASH they got at the FED when they swapped their toxic paper there. I would guess they absolutely did not do anything of the sort. No way.

So why would a company buy back stock at the same time they are looking for big money at bad lending terms? I am gonna guess because they need it. Badly. You would think that with BSC still a fresh memory people would stop getting excited when LEH says they are in great shape. Only time will tell the real story. Until then we can only guess.

Have a good night.

1 comment:

Anonymous said...

There has been a little dip in the metals market. Would this be the summer lows we hear about? Also what's the deal with oil? It was moving on up for the last few weeks and now a stall? Looks like another consolidation / holding pattern. Any takers that things will hold tight until the next election is upon us?

How are the chipmunks.... er I mean squirrels doing?

Just about finished a major project here at the rents house. Moved 28 tons of river rock to the back yard and now it's painting time!!!


PS: Works killing me.....