Sunday, September 14, 2008

Please Watch LEH

I've been saying for some time to expect an ugly October as far as the equity and debt markets are concerned. With the slow collapse of Lehman turning into a landslide, it could turn bad a month early.

Please, if you have any money in a U.S. bank or own a stock, pay close attention to this deal - or non-deal.

Calculated Risk is probably the best resource to follow along with developments.

If LEH goes down in flames, we'll see the big stress test for the derivatives markets that the old Masters of the Universe have silently feared for decades...

UPDATE: from Bloomberg - Wall Street Prepares for Potential Lehman Bankruptcy Filing

UPDATE 2: Mish's take on the the debacle

FYI: For those with financial assets in the U.S. banking and investing systems, consider taking up Elliott Wave International's offer to look at one of their financial prediction documents for free. If you are not signed up with EWI already, it is free and painless. The usual caveat applies - I get a credit as an affiliate if you do sign up. If this bugs you, type in EWI's web address directly in your browser and then sign up - I won't get credit and you will still get access to their free products.

UPDATE 3: We'll know for sure on Monday, but it looks like Lehman will be pronounced dead - suicide by leveraged balance sheet. The quotes coming out about LEH are, in a black humor sort of way, funny. Take this quote from the New York Times, which matches up well with dialogue from the classic comedy movie Fletch. Talk about life imitating art...

Life -

NYT: "...[Lehman's] abrupt failure would send shock waves through the financial world..."
FutureJacked: Abrupt? Lehman's been a dead man walking for months. Even my amateur level of ability to analyze a balance sheet and annual report told me that.

Art -

Dr. Joseph Dolan: You know, it's a shame about Ed.
Fletch: Oh, it was. Yeah, it was really a shame. To go so suddenly like that.
Dr. Joseph Dolan: He was dying for years.
Fletch: Sure, but... the end was very... very sudden.
Dr. Joseph Dolan: He was in intensive care for eight weeks.
Fletch: Yeah, but I mean the very end, when he actually died. That was extremely sudden.

UPDATE 4: Well, we'll see how deep the rathole of exotic derivatives goes now, as Lehman to File for Bankruptcy Protection

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