Chart(s) of the Day: Bear Stearns & Lehman Bros
Uh-oh: The two of these charts -- both have been on a sell signal for weeks -- seem to be trading about a day apart:
>
Lehman scale on left, Bear Stearns scale on right
For the past 6 months, the market has been way behind the curve in terms of Bear Stearn's situation.
Question: Is the market still behind the curve as to Lehman, or overcompensating in light of Bear? (I do not know . . .)
Monday, March 17, 2008 | 03:00 PM | Permalink
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hmm. i have some CD's in Lehman's bank.
Posted by: rob | Mar 17, 2008 2:56:33 PM
I think BSC was used as a sacrifice. Blood needed to be spilled, and blood of mighty bear isht much very strong. Plus JPM gets a nice backstop from the Fed, who probably could use the help.
Something tells me Lehman won't be on the chopping block tomorrow. Besides, can't LEH borrow directly from the discount window now?
Posted by: afferent input | Mar 17, 2008 3:00:08 PM
Hello had you read this DOC,
My point of view it's the end of the begining
"
The mortgage securities outstanding totaled a value of 11000 billion. The price of US real estate is overvalued by 20 to 30%. If one quarter of the value of US households volatilizes, it is 2750 billion of debts that are not likely to be honored and become losses for the financial system.
According to the study signed by Greenlaw, Hatzius, Kashyap and Shin (pdf), the capitalization of banks, government agencies (GSE) and savings banks totaled 1681 billion US.
Their direct exposure to mortgage securities totaled 5591 billion or half of the current. They are therefore potentially face of impairments reaching 1375 billion - nearly all of their capital.
These figures do not take into account potential losses in other sectors of credit consumption, auto credit, commercial real estate."
http://www.chicagogsb.edu/usmpf/docs/usmpf2008confdraft.pdf
Posted by: Ray Eames | Mar 17, 2008 3:05:08 PM
what about lehmans t-bill spdr "bil", I've made 65.00 today on it, bought it today, is a fund like that safe? I'm so freaked out, its in an account at etrade, so even that is freaking me out.
Posted by: andy | Mar 17, 2008 3:08:52 PM
How is it possible that, with Lehman collapsing on this chart, Bear obviously destroyed, Citi faltering, and Goldman set to write down $3 billion tomorrow; with the Nikkei down, the Hang Seng down, the ASX, the DAX, the CAC, the FTSE, and the TSX all bleeding; and with the S&P hit, along with NASDAQ........
THE F***KING DOW IS STILL GOING TO CLOSE IN THE GREEN!?!
Posted by: Greg | Mar 17, 2008 3:11:01 PM
Bout Lehman,
You give me a free pass to the Fed and I promise not to go out of business.
Posted by: Ross | Mar 17, 2008 3:12:29 PM
This morning on the radio, one guy said he couldn't get his money from the money market fund at Wachovia, that he had to use the margin account since the funds were in 7day auctions.
Is this guy dumb, or is Wachovia clearly having trouble with cash? Can they use the money in the money market funds for such purposes ?
Posted by: Ali Saygin | Mar 17, 2008 3:13:56 PM
The system is insolvent. Why the charade?
Posted by: Marcus Aurelius | Mar 17, 2008 3:25:00 PM
Greg,
Forget the Dow, watch tha S&P and other large indexes. The more corporations, the harder it is to manipulate them.
Assume the following:
1) Stock prices are going down for six months.
2) You know what house prices are doing. For the next year or so, cars, boats, paintings, etc. will descend in price.
3) the descent will be more than the nominal amount in dollars because the inflation rate will probably go to a 20% panic rate.
4) The war will run out of money so you can short defense corporations.
Posted by: AGG | Mar 17, 2008 3:25:33 PM
greg - Despite what you read here no preconceptions allowed. The long view is vanity. Tick by tick friend. Wait for it. This is a fantastic market, made to trade.
Posted by: cathompson | Mar 17, 2008 3:25:44 PM
LEH will not go the way of the Bear, but I think it will merge or potentially be acquired (in much better terms) in short order.
http://bigpicture.typepad.com/comments/2008/03/rumor-of-the--1.html#c106945232
Posted by: mhm | Mar 17, 2008 3:29:30 PM
DO you really think that the trading desks are going to let all those puts they sold you expire in the money on Thursday without a fight?
This is a shake out and the powers that be will consolidate their holdings and then back up we go.
Posted by: Vermont Trader | Mar 17, 2008 3:29:51 PM
greg - I buy 1 2 and 4 but not 3.
Posted by: cathompson | Mar 17, 2008 3:31:49 PM
lehman is sound i reckon. $100bn in liquidity, nimble enough to have hedges on any bad assets it owns, and not dumb enough like the commercial banks to just have tons of garbage mortgage securities sitting around.
once the rumour mill gets bored here, it will move on elsewhere.
i'd like to thank whoever sold me lehman stock early at $21 and change. i appreciate it (current live bid $31.30). 50% a day...annualize that!
Posted by: 2and20 | Mar 17, 2008 3:39:12 PM
The Dow closes up nearly 100! Ah, gracious sakes, thank heavens this illiquidity/insolvency/dollar panicky spell is over.
But I'm keeping the farm.
Posted by: Donkei | Mar 17, 2008 3:53:37 PM
the bulls worked very hard today. Lot of heavy lifting. I would have been more impressed if they could have finished on the high of the day.
Posted by: cathompson | Mar 17, 2008 3:54:06 PM
Until the housing market stabilizes I don't believe any iBank is not suspect for going belly up.
Unfortunately, I'm starting to see a breakage of price trends (to the downside) in many areas (Portland, Seattle, SF, NY) that have otherwise held during the past seven months and jobs are increasingly more difficult to find.
I don't give much credence to todays rally (or any of them as of late) because imo, they appear very suspect. Granted I don't have as much history in the game as you ladies & gents do but if it looks like a fish, smells like a fish....call me crazy, but i'm gonna go out on a limb and say, its probably a fish.
Posted by: Portland Refugee | Mar 17, 2008 3:54:57 PM
How much will it go down tomorrow/wed if I'm right and the Fed cuts only 0.5%?
Posted by: Mikkel | Mar 17, 2008 4:02:03 PM
You just cannot kill the cockroaches in this market.
If I had my wish, the Fed cuts 100 bps tomorrow, and the market makes fresh new lows in every indices in the early morning. Then the stock market and commodities market crash concurrently.
Would that be enough to kill the cockroches?
Posted by: Michael C. | Mar 17, 2008 4:09:46 PM
What's up with Interactive Brokers? Lost as much as 25% in early trading.
They also try to prevent leaking money:
We encourage all our clients to read this statement by visiting
http://individuals.interactivebrokers.com/download/IB08-102.pdf
Posted by: Luk | Mar 17, 2008 4:14:43 PM
why should be BSC (and LEH), different form GS, MER, MS?
why should I believe goldman sachs didn't do the same thing BSC did.
I don't believe BSC were the bad guys. they all are member of a single family.
it's like the mafia.
when you arrest the cousin,
the uncle and the brother
were doing the same things...
they will all fall under $10.
Posted by: gmp | Mar 17, 2008 4:24:06 PM
Hmm, my new question is, when the dollar is put in front of a wall tomorrow, does he even get a blindfold and a cigarette before his 100bp execution?
Posted by: Greg | Mar 17, 2008 4:27:04 PM
Ron Insana declared that the BSC-JPM deal was "risk free" for JPM. Could anyone please explain what constitutes "risk free" when you've just set aside 5% (allegedly JPM reserved ~$7Bil for litigation expense) of your market cap at the close to cover future legal liabilities? Am I missing something.
Posted by: bonghiteric | Mar 17, 2008 4:37:35 PM
The government decided this weekend that we are going to have a severe recession because they didn't protect investments. Without investor confidence the banks have nothing. Confidence is not made by selling Bear at $2.
The gov't is going to pay for it in the end anyway and it's going to be much worse now.
There is no reason to buy if the gov't is not going to back. The people nearing retirement are pulling money out of the market, you can guarentee it.
The gov't is telling you are assets are worthless. If they bought them, they would say they are undervalued but they aren't doing that.
Posted by: John Borchers | Mar 17, 2008 4:41:32 PM
Barry - what's the sell signal? From your software?
Posted by: Damian | Mar 17, 2008 4:54:03 PM
Can you lose a lot investing in U.S. Treasuries? I know you can't make a lot, but is there a big downside risk? Are they O.K. until the Fed begins hiking interest rates?
Posted by: Valdan | Mar 17, 2008 4:58:22 PM
I just took another gander at LEH (Aurora) underwriting practices (vintages 2004-2006). Dubious at best. They have the same bogus documentation guidelines as CFC, IMB, National City, some of Citi's ALT-A (however, Citi does not allow exceptions), and parts of WAMU.
So many of the guidelines have loop holes. I remember thinking 'how naive' at the time. But knowing what we know now, it was more than likely intentional.
If they don't take a major hit, I'd be surprised given their underwriting criteria alone.
Posted by: Portland Refugee | Mar 17, 2008 5:01:30 PM
BSC operation,
it's risk free because the FED is a private bank and JPM is part of it, and they print how much money they want, no risk for them.
And since the government has no authority over them, no problem.
banks never lose, they own the system. only people who depends on bank lose.
Posted by: gmp | Mar 17, 2008 5:53:19 PM
valden,
you'll always get your principal back when investing in US Treasuries. The guys you're lending money to are the same folks that print it. But that's the problem--your principal might very well be worthless by the time you get it back, if the money printers don't slow down the presses.
It's called monetization of the debt, and w/ Bear's quasi-rescue over the weekend, the policy is well under way.
Posted by: Donkei | Mar 17, 2008 6:28:57 PM
What I am wondering is this: If I were a BSC employee whose 401K/stock options/stocks got raped by JPM, would I go to work and do my best for my new employer??? Each time I think of this, I think of the rogue trader at Soc.Gen, and he didn't hate his employer!
What do you think?
Posted by: Mich(^IXIC1881) | Mar 17, 2008 8:47:04 PM
I remember seeing a message about this in one of the comments, and since I am very heavy with proshares stuff, was wondering about this.
http://media.proshares.biz/documents/BearStearnsNote.pdf
ProShares Have No Counterparty Risk with Bear Stearns
Bear Stearns is not a counterparty to any of the financial instruments held by ProShares. In addition, ProShares does not use Bear Stearns for execution and clearing services.
Posted by: Mich(^IXIC1881) | Mar 17, 2008 10:04:54 PM
Shock n Awe ... lame duck NOT ... GWB takeover
run for the caves with food & water ... and a sword
(light sabre would be nice)
the 21 century's been a blast
:-) :-o :-( :-|
Posted by: Greg0658 | Mar 18, 2008 7:49:45 AM
spurred on
$2 price and Pottersville
this RGB world is playing the Passion Play
alternate reality
Bohemian Groves murder of Dull Care
Posted by: Greg0658 | Mar 18, 2008 8:41:36 AM
Is Lewis or China? attempting to buy the bear? Price keeps getting bid up?
Posted by: Karl L | Mar 18, 2008 11:29:48 AM
