When we woke up this morning to await the news from Lehman Brothers we fully expected to spend the rest of the day exploring the question: who is next? Candidates such as Merrill Lynch, Wachovia and Washington Mutual would get batted around the same way attention turned to Lehman after Bear Stearns fell.
But we didn't do that. It turns out that Lehman is still next. Talking to traders and money managers today made it all too clear to us that the news today has not extinguished questions about the viability of Lehman. The lack of details about financing and other aspects of the commercial real estate spin off, worries about where profits will come from, the non-plan and non-strategy to raise capital, the long delay in the announcement and suspicions that Lehman may employ some fancy accounting to reduce the size of its losses were all cited by folks we spoke with. Lehman is still the most vulnerable firm on Wall Street.
Everyone is saying that, at best, Lehman may have bought itself some time. But money managers we spoke with today agree that Lehman doesn't have the balance sheet to afford to buy much of anything, not even time.
Posted by guest , Sep 10, 2008 5:12PM
that's it?
Posted by John Carney , Sep 10, 2008 5:19PM
Too long, didn't write.
Posted by redpandot , Sep 10, 2008 5:26PM
HA HA
Posted by Anal_yst , Sep 10, 2008 5:27PM
Too lazy to find the article or check the release, but I believe I read this AM (someone more ambitious confirm?) the loss was reduced in no small part by gains on debt write-ups or something to that effect. Hmmm using fas 157 and other accounting trickery to mask the truth a bit?
Posted by redpandot , Sep 10, 2008 5:29PM
HA HA
Posted by redpandot , Sep 10, 2008 5:29PM
HA HA
Posted by guest , Sep 10, 2008 5:39PM
I liked Carney's note
Posted by Investorcluzo , Sep 10, 2008 5:48PM
@carney - that was funny. to answer your question, it's going to wamu, then wachovia. everyone is saying that a "big bank" is going to fail. that is, the fed will allow a big one to drop. both wm and wb fit the bill: large bank, lots of ca mortgage exposure, yet not relevant enough to make the system collapse...check out the put buying, someone paid $1.17 for a $2.50 strike (for those following at home, that means the stock has to drop to $1.33 before the buyer makes money).
Posted by guest , Sep 10, 2008 6:01PM
Citi
Posted by guest , Sep 10, 2008 6:20PM
i hear sham-wow IPO is being underwritten by Vikram and shittygroup
Posted by guest , Sep 10, 2008 6:22PM
God please let it be Citi.
Posted by guest , Sep 10, 2008 6:23PM
the patriots. Without Tom Brady they're screwed.
Posted by RAW DOG , Sep 10, 2008 6:25PM
@ Cluzo - where are we meeting up for drinks? By the way, you should be proud of your Bloomberg and arithmetic skills... seriously.
Posted by Dan Daoust , Sep 10, 2008 6:27PM
Important question, sure to elicit serious responses from the commentariat. Let's say you have an LOC at, say, WAMU, with some cash still available for withdrawal. Would you write yourself a check on that amount just to insure that you actually get the use of that money, and consequently pay (tax deductible) interest on it? In other words, as a hedge against the risk of WAMU getting seized by the FDIC and that money no longer being available, would you pay the spread between the (taxable) interest you'd earn on that cash sitting in your savings account against the (tax deductible) interest you'd pay for the withdrawal of it?
Posted by guest , Sep 10, 2008 6:31PM
Confusing proposition.
It has bank run written all over it. You are suggesting that you have credit with WAMU, not actual cash deposits. Your deposits are guaranteed with FDIC. WAMU would probably shut that transaction down unless you were a HNW client with a very compelling story.
Posted by guest , Sep 10, 2008 6:32PM
@raw dog-- official drinks are off, but you can stop by my ass around 9
Posted by Investorcluzo , Sep 10, 2008 6:41PM
@burnt cat - bloomberg? nah, yahoo finance and the free calculator for opening a savings account at commerce bank.
@danny - are you suggesting that you can't get an loc somewhere else a little more legitimate? if so, perhaps you should draw the line before it gets pulled from underneath you...
Posted by Dan Daoust , Sep 10, 2008 7:16PM
@Investorcluzo: that's correct, I wouldn't be able to refinance elsewhere and still end up in the same place, because a refinancing would involve a reappraisal of my house, which would come in at a lower value than the valuation that was done for the LOC I now have. So it's either this $ or no $.
@6:31: not sure what you're saying. I'm not talking about losing actual cash deposits. I'm talking about the possibility of losing the availability of a portion of an LOC. In effect, I am a potential creditor of WAMU for the amount that is available to me and that I have yet to withdraw (while they are my creditor for the amounts I have already withdrawn). If WAMU gets seized, they can no longer borrow, i.e., extend to me the usage of the untapped portion of the LOC.
Posted by RAW DOG , Sep 10, 2008 7:29PM
Dan - go back to hockey... stick with what you know.
Posted by Dan Daoust , Sep 10, 2008 7:33PM
RAW DOG, I'm talking about my own finances here!
Posted by RAW DOG , Sep 10, 2008 7:38PM
Exactly - we only talk about other's peoples/institutions finances here. With respect to one's own: just spend it. Spend it all.
Posted by RAW DOG , Sep 10, 2008 7:38PM
Exactly - we only talk about other peoples/institutions finances here. With respect to one's own: just spend it. Spend it all.
Posted by RAW DOG , Sep 10, 2008 7:38PM
Exactly - we only talk about other peoples/institutions finances here. With respect to one's own: just spend it. Spend it all.
Posted by guest , Sep 10, 2008 7:39PM
Cluzo - do you really think Paulson would let a fellow member of the 85 Broad partnership get nuked that way? The ghosts of John and Sidney Weinberg would haunt him like Jacob Marley for the rest of his days if he did that to Steel & WB.
Posted by Dan Daoust , Sep 10, 2008 7:40PM
I can see you're pretty emphatic about that.
Posted by guest , Sep 10, 2008 8:13PM
Shitipoop is next.
-Vikaroni
Posted by guest , Sep 10, 2008 11:04PM
please, if citi fails the whole world is fucked
Posted by guest , Sep 10, 2008 11:29PM
Suddenly the once corrupt Chinese banks look like model financial institutions that all should aspire to become.
Posted by guest , Sep 11, 2008 12:12AM
How does one initiate a run on the bank on WaMu.
I've got massive short positions there brother.
Posted by guest , Sep 11, 2008 12:15AM
DAVID EINHORN JUST BLEW A LOAD ON ERIN CALLAN'S FACE TODAY.
Posted by guest , Sep 11, 2008 12:17AM
WAMU WAMU WAMU WAMU WAMU
Posted by guest , Sep 11, 2008 8:51AM
I know a girl who has bite marks on her back from an evening out with Gasparino
Posted by guest , Sep 11, 2008 9:31AM
By my math, WB and WM are dead men walking.
Securities write downs are forward looking (perhaps to much). i.e. we look forward and estimate defaults etc.
Loan write downs are backward looking. i.e. we wait til they're 90/120 days late before we deal with them.
The holders of the securities are well into this, 7th inning stretch. The holders of loans are in the 2nd inning. WB & WM are undercapitalized and have little hopes of raising capital.
-one guys unlearned opinion
Posted by Tapecracker , Sep 11, 2008 9:48AM
When (not if) Lehman is downgraded (5, 4, 3, 2...) there will be quite a shitstorm; I'm strapping in.
Posted by guest , Sep 11, 2008 9:50AM
WaMu needs to merge with Leh in order to survive.
Posted by guest , Sep 11, 2008 9:56AM
@34 - Some of the more forthright analysts that I pay attention to have made the point you just made.
Take HSBC as an example. Most of their writedowns thus far have been writedowns in actual loans. I am quite certain that they will be making writedowns of their North American mortgage portfolio (mostly from thei Household international division) for many quarters to come.
I am not saying HSBC is intentionally underprovisioning. They are just not writing off as much as other banks or brokerages because most of HSBC's holdings are actual loans and not mortgage CDO securities.
Posted by guest , Sep 11, 2008 10:21AM
If "deserving of a comeuppance" is part of the criteria, then WAMU wins in a mudslide. F*ck 'em I say.
They deserve to die.
So does Wachovia, just that WAMU deserves it more.
Posted by guest , Sep 12, 2008 10:00AM
I've going on a hunch when I say MER.
WM may fail but i'm betting on MER on failing first.