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Message
Lehman Watch Thread
Posted on 8/21/08 at 8:14 am
Posted on 8/21/08 at 8:14 am
NOTE: I have no short positions or personal monetary interest in Lehman of any kind. I'm just watching the stock for fun, and I don't know what's actually going to happen to it.
From CFO.com on 6/12/08, " Lehman's Erin Callan: From Spotlight to Footnote":
The story noted that, "She embraces television, appearing frequently. She receives a slimmer daily financial summary than her predecessors, relying more on data from the trading-floor contacts built during her 13-year Lehman career."
As part of her public relations campaign, she was doing everything she could to get media and magazine coverage of her own personality and appearance, and it worked ( LINK):
That's a bad signal to send in my opinion. Moving on...
From the Monday, 8/18/08, edition of The Wall Street Journal, " Lehman Faces Another Loss,
Adding Salt To Its Wounds":
From Tuesday's article, " Credit crunch may take out large US bank warns former IMF chief":
From CFO.com on 6/12/08, " Lehman's Erin Callan: From Spotlight to Footnote":
quote:
Suddenly, Erin Callan is out as chief financial officer of Lehman Brothers — only a few months after becoming Lehman's main voice in dealing with a raft of troubles, including a very public sparring match with hedge fund activist David Einhorn.
...
A glowing story about her in the Wall Street Journal on May 17 called her "a galvanizing force at Lehman and a finance chief who topples much of the conventional wisdom about CFOs." That "wisdom" appeared to be that CFOs are staid, media-slow, and male. ...
The story noted that, "She embraces television, appearing frequently. She receives a slimmer daily financial summary than her predecessors, relying more on data from the trading-floor contacts built during her 13-year Lehman career."
As part of her public relations campaign, she was doing everything she could to get media and magazine coverage of her own personality and appearance, and it worked ( LINK):
quote:
Indeed, Ms. Callan is as far as possible from the stereotype of the dowdy female Wall Street exec who plays down her feminine appearance by cloaking herself in shapeless pantsuits and eschewing makeup and accessories that draw attention to her gender. Ms. Callan is known as something of a Wall Street fashionista, in fact.
Meredith Whitney, the Oppenheimer analyst who has elsewhere been profiled in these pages for her smart calls on Citibank’s stock and a glass-ceiling breaker in her own right, has called Callan is the "best accessorized" CFO on Wall Street.
That's a bad signal to send in my opinion. Moving on...
From the Monday, 8/18/08, edition of The Wall Street Journal, " Lehman Faces Another Loss,
Adding Salt To Its Wounds":
quote:
...
With the end of the New York company's fiscal third quarter less than two weeks away, some analysts are girding for a loss of $1.8 billion or more, instead of the modest profit they previously expected. If the dour projections come true, Lehman's losses since the start of March would total at least $4.5 billion -- or more than the firm churned out in profit during fiscal 2007.
The likelihood of back-to-back quarterly losses, fueled by widely anticipated write-downs in a portfolio saddled with more than $50 billion in risky real-estate and mortgage assets, puts even more pressure on Lehman Chairman and Chief Executive Richard S. Fuld Jr. to show that the losses won't keep piling up. If they do, Lehman could need to raise additional capital beyond the $6 billion it got in June.
... Lehman is aiming to further winnow its exposure to risky assets by at least 20% a quarter, two Wall Street analysts said last week.
But those moves aren't coming fast enough to offset the misery caused by continuing stress in the housing market, where prices are falling with no end in sight. For example, Lehman holds $10.2 billion of Alt-A mortgages, or loans made to borrowers who didn't fully document their income. The firm has an additional $11.5 billion in exposure to leveraged-buyout financing.
David Trone, an analyst at Fox-Pitt, Kelton, predicts that Lehman will write down its Alt-A portfolio by about $1.7 billion, or 17%, at the end of the current quarter.
J.P. Morgan Chase & Co.'s write-down of $1.5 billion in Alt-A and other mortgages, disclosed in a securities filing last week, also prods Lehman to take its own haircut on home-loan exposure ...
From Tuesday's article, " Credit crunch may take out large US bank warns former IMF chief":
quote:
Professor Kenneth Rogoff, a leading academic economist, said there was yet worse news to come from the worldwide credit crunch and financial turmoil, particularly in the United States, and that a high-profile casualty among American banks was highly likely.
This post was edited on 8/22/08 at 3:55 am
5
Posted on 8/21/08 at 8:14 am to Doc Fenton
Here's a Reuters story from Wednesday that showed up on Yahoo! Finance ( LINK):
From the Thursday, 8/21/08, edition of The Wall Street Journal, " Fed Acted on Lehman Rumor":
Lehman's last 10-K filed with the SEC (dated 1/29/08): LINK.
Lehman's last 10-Q filed with the SEC (dated 7/10/08): LINK.
So that's about $250 billion in assets at Lehman's measure of fair value (note that their consolidated financial statement is marked "unaudited"), over $72 billion of which are categorized as "mortgage and asset-backed securities."
Share Price = $13.73
52-Week High = $67.73
Current Market Cap = $9.53 billion
Verrrry interesting...
quote:
Lehman couldn't secure Korean Funds: report
Wednesday August 20, 5:54 am ET
(Reuters) - Lehman Brothers (NYSE:LEH - News)
Chief Executive Dick Fuld nearly struck a deal to raise almost $5 billion from South Korean wealth funds and institutions but the pact disintegrated, the New York Post said citing sources familiar with the matter.
One source told the paper that Lehman was aiming to raise more capital than the Korean investor was willing to invest at the time.
...
From the Thursday, 8/21/08, edition of The Wall Street Journal, " Fed Acted on Lehman Rumor":
quote:
...
Responding to a July rumor that Credit Suisse Group planned to pull a line of credit to Lehman, Federal Reserve officials called to see if it was in fact true, according to these people. Credit Suisse told Fed officials there was no truth to the rumor ...
...
... Lehman has complained that its problems have been fodder for vicious, unfounded rumormongering by traders who profit when the firm's share price declines.
Lehman has repeatedly denounced negative speculation, even calling individuals believed to be spreading rumors and trading desks said to be skittish about doing business with the investment bank.
...
Fed officials contacted Credit Suisse last month, but it isn't clear if the move occurred before or after the Securities and Exchange Commission subpoenaed dozens of hedge funds and financial firms about four Lehman-related rumors. One person familiar with the rumor said it was circulating in early July.
Last month, the SEC also put limits on short-selling of 19 financial stocks, including Lehman, aiming to crack down on abuses. The temporary rules expired last week.
...
When the Bear Stearns crisis erupted in March, Lehman and other Wall Street firms criticized the SEC for not responding more aggressively to rumors that essentially caused a run on the bank, forcing Bear's emergency sale to J.P. Morgan Chase & Co. At the time, Fed officials called at least two major banks rumored to have stopped trading with Bear and were told that wasn't true.
...
The flurry of rumors about Lehman has died down since the SEC's actions. But the New York firm's results for the fiscal third quarter ending Aug. 29 are expected to be bleak, with some analysts forecasting a net loss of more than $2 billion.
...
Lehman's last 10-K filed with the SEC (dated 1/29/08): LINK.
Lehman's last 10-Q filed with the SEC (dated 7/10/08): LINK.
quote:
Assets at Fair Value as of May 31, 2008 (In Millions)
(Type, Level 1, Level 2, Level 3, Total)
Mortgage and asset-backed securities, $347; $51,517; $20,597; $72,461
Government and agencies, $11,002; $15,986; —; $26,988
Corporate debt and other, $77; $44,332; $5,590; $49,999
Corporate equities, $26,785; $10,606; $10,158; $47,549
Commercial paper and other money market instruments, $4,757; —; —; $4,757
Derivative assets, $2,597; $39,395; $4,999; $46,991
ALL, $45,565; $161,836; $41,344; $248,745
So that's about $250 billion in assets at Lehman's measure of fair value (note that their consolidated financial statement is marked "unaudited"), over $72 billion of which are categorized as "mortgage and asset-backed securities."
Share Price = $13.73
52-Week High = $67.73
Current Market Cap = $9.53 billion
Verrrry interesting...
This post was edited on 8/22/08 at 3:55 am
Posted on 8/21/08 at 8:15 am to Doc Fenton
And why not throw in some Fannie and Freddie news just for good measure?
From an AP story that appeared on Yahoo! Finance on Wednesday, " Fannie Mae, Freddie Mac shares plummet":
From Page One of the Wednesday Wall Street Journal, " Rising Cost of Debt Stokes Fears On Freddie's Prospects":
And from today ( LINK):
From an AP story that appeared on Yahoo! Finance on Wednesday, " Fannie Mae, Freddie Mac shares plummet":
quote:
Fannie Mae, Freddie Mac shares plummet
Wednesday August 20, 5:03 pm ET
By Stephen Bernard and Alan Zibel, AP Business Writers
Shares of Fannie Mae, Freddie Mac fall on accelerating bailout fears
NEW YORK (AP) -- Investors are betting that time is running out for Fannie Mae and Freddie Mac.
Shares of the mortgage finance companies lost more than a fifth of their value on Wednesday as fears mounted that the companies will soon need government support and any bailout would hang stockholders out to dry.
...
From Page One of the Wednesday Wall Street Journal, " Rising Cost of Debt Stokes Fears On Freddie's Prospects":
quote:
...
The company, however, had to pay hefty interest rates. The five-year notes were priced to yield 4.172%, or 1.13 percentage point above yields on safe Treasury notes, the highest "spread" Freddie has ever paid on such debt.
...
Both Treasury and the companies are in somewhat of a bind. The government is reluctant to intervene and had hoped to reassure markets by asking Congress for temporary authority to take an equity stake in the firms or loan them money.
Meanwhile, Freddie's ability to raise capital, and therefore avoid a bailout, is constrained by the uncertainty created by the government's deliberations ...
...
And from today ( LINK):
quote:
CREDIT MARKETS
Fate of Fannie and Freddie
Hinges on $225 Billion
By PRABHA NATARAJAN, ANUSHA SHRIVASTAVA and DEBORAH SOLOMON
August 21, 2008
Mortgage companies Fannie Mae and Freddie Mac are facing a $225 billion question.
That is the amount of debt the companies need to refinance by the end of September. Thus far, they have had little trouble persuading investors to buy debt with maturities of a year or less. But investors say the mood could change as long as details of any potential government bailout remain murky.
...
Posted on 8/21/08 at 8:43 am to Doc Fenton
You are about 6 months late to this party. 
lehman is dead man walking and has only been able to survive since bear stearns collapse through some great talking points, and occasional luck. Hopefully in the various bear market rallies they have been able to unload some assets......but they have a long way to go.
Either they unload some of their key assets (their asset management group) or they get bought. Most likely both.
lehman is dead man walking and has only been able to survive since bear stearns collapse through some great talking points, and occasional luck. Hopefully in the various bear market rallies they have been able to unload some assets......but they have a long way to go.
Either they unload some of their key assets (their asset management group) or they get bought. Most likely both.
Posted on 8/21/08 at 8:45 am to MileHigh
quote:
You are about 6 months late to this party.
Thanks for the invitation.
Posted on 8/21/08 at 8:48 am to MileHigh
it kinda sucks how little meat is left on the bones of these carcasses. Making easy money is fun. This other shite takes work. frick.
Posted on 8/21/08 at 8:51 am to Doc Fenton
quote:
Thanks for the invitation.
You were too busy playing the part of pollyanna to notice the glittering gold card in front of you.
quote:
it kinda sucks how little meat is left on the bones of these carcasses. Making easy money is fun. This other shite takes work. frick.
No shite. WFC still has a relatively high stock price (all things considered). They have a lot less exposure to toxic loans than others, but they are going to feel the pinch on auto and CC defaults.
Posted on 8/21/08 at 9:08 am to MileHigh
isn't WFC partially owned by Buffet? I don't want any part of something that he can throw money at.
Posted on 8/21/08 at 9:15 am to MileHigh
quote:
You were too busy playing the part of pollyanna to notice the glittering gold card in front of you.
I'm more of an economics man, not a market player. Thus, I was too busy trying to shoot down all the ridiculous bullshite that was flying around on the Poli Talk and Money Talk message boards.
I wasn't even paying attention until people started rabidly calling out Alan Greenspan and Ben Bernanke in December, and then I felt compelled to dispel some of the more extravagant myths going around.
Posted on 8/21/08 at 9:18 am to Colonel Hapablap
quote:
isn't WFC partially owned by Buffet?
yes he owns a piece of it. But I don't think that will keep the stock price high. Recapitlization will almost always dilute existing shareholders.
WFC is not going to zero. But it could go to $20. And Buffet is a buy and hold guy, so a 30% drop in price is not going to deter him from hanging onto his holdings.
Posted on 8/21/08 at 9:25 am to Doc Fenton
quote:
I'm more of an economics man, not a market player. Thus, I was too busy trying to shoot down all the ridiculous bullshite that was flying around on the Poli Talk and Money Talk message boards.
This would be a full time job. Especially if you stick your toe onto the rant!
quote:
I wasn't even paying attention until people started rabidly calling out Alan Greenspan and Ben Bernanke in December, and then I felt compelled to dispel some of the more extravagant myths going around.
Well the jury is still out on bernanke. We knew what we were getting with greenspan, but bernanke has been quick to jump into new terrirtories.
Posted on 8/21/08 at 9:26 am to Doc Fenton
What is the typical salary structure of an investment wanker?
Don't these guys make most of their money off of year end bonuses? They have to be hurting...
Don't these guys make most of their money off of year end bonuses? They have to be hurting...
Posted on 8/21/08 at 9:26 am to MileHigh
it doesn't matter what actually would happen with Wells, my problem is the headline risk of "OMG BUFFET IS INVESTING!!!1". That shite will frick you blind with a quickness if you're short. No thanks.
Posted on 8/21/08 at 9:27 am to Chicken
quote:
Don't these guys make most of their money off of year end bonuses?
I think so. Not only that, but the bonus is typically paid for in....wait for it....company stock.
Posted on 8/21/08 at 9:30 am to Colonel Hapablap
quote:
That shite will frick you blind with a quickness if you're short.
Good point. I just have a few puts, and am up about 30% on them so far.
Posted on 8/21/08 at 9:32 am to Chicken
I don't remember exactly, but if you're at top-tier, I think it was usually a little less than a first-year top-tier law firm associate. The law school guys used to make a standard pay of $125k starting out, but that was about 5 years ago. I think they make more now.
I-bankers I think made under $100k as analysts at first, but then stood to make much more after 2 or 3 years as an associate with an MBA (or maybe I'm getting "analysts" and "associates" confused--it's not really my world).
EDIT: All this stuff gets discussed extensively 24/7 at Vault.com, which is basically the gold standard of career related websites for elite grads.
I-bankers I think made under $100k as analysts at first, but then stood to make much more after 2 or 3 years as an associate with an MBA (or maybe I'm getting "analysts" and "associates" confused--it's not really my world).
EDIT: All this stuff gets discussed extensively 24/7 at Vault.com, which is basically the gold standard of career related websites for elite grads.
This post was edited on 8/21/08 at 9:39 am
Posted on 8/21/08 at 9:37 am to Chicken
Also, the blind governor of New York, David Paterson, came out with an usual press conference just this week.
" NY governor gives gloomy outlook on state economy"
But the best part of the article was undoubtedly this...
Feel the force, blind governor!!!
Honestly, though, I really like the guy from I know about him. Or maybe that's just in comparison to the former governor he replaced. You know, the Devil.
EDIT: I love this picture by the way...
" NY governor gives gloomy outlook on state economy"
quote:
ALBANY (Reuters) - New York Gov. David Paterson on Tuesday gave a more dire outlook on the state's economy, saying that Wall Street bonuses could be slashed by 30 percent to 40 percent this year and tax revenues on capital gains could also fall much more than he previously estimated.
...
The governor, who took office in mid-March, has already pruned $630 million from the current budget and he wants the legislature to slice another $600 million. The state's budget totals around $121 billion, and the shortfalls over the next three years top $26 billion.
...
But the best part of the article was undoubtedly this...
quote:
Paterson stressed how he is assessing the economic outlook, which the Assembly Democrats have said is not as dire. "But sometimes you have to feel it. Like in Star Wars, when Luke flies a plane. Well, the plane is telling me that it's going to get much worse," he said.
Feel the force, blind governor!!!
Honestly, though, I really like the guy from I know about him. Or maybe that's just in comparison to the former governor he replaced. You know, the Devil.
EDIT: I love this picture by the way...
This post was edited on 8/21/08 at 9:42 am
Posted on 8/21/08 at 9:50 am to Doc Fenton
I used to spend a lot of time on that site, before you had to pay to access certain features...it was fun, but there was a lot of mis-information on the message boards.
Posted on 8/21/08 at 9:54 am to Colonel Hapablap
quote:
I think so. Not only that, but the bonus is typically paid for in....wait for it....company stock.
Do you mean at Lehman specifically? I don't know that to be true for other I-banks, in general. While there is frequently a deferred portion of the bonus paid in stock, the majority is paid in cash. Typically base salaries for a mid-level banker will be in the $150-200K range, with the bonus being some multiple of that with total comp approaching 750-1,000 per year. Managing Directors, and those with large books of business ($20-50 million in revenue) per year will go on up into eight and rarely nine figures, but that is a relatively small number of people making that kind of money.
Posted on 8/21/08 at 9:57 am to Chicken
Yeah, I think it was pretty much the same way for me. I haven't been on that site for years. (EDIT: And the official articles, job listings, and publications, were always the real attraction, not the foolish message boards they had.)
On average, a pretty immature and despicable lot for sure--at least for the people who actually posted there. A lot of them were high school kids emboldened with an admissions letter to Penn or Princeton, or else college freshmen or sophomores, who just started trying to use the forum as an ego-stroker to try to talk down to other people without really knowing what they were talking about.
When it comes to i-bankers and lawyers behaving badly, for my money no stories can top Carlyle Group's " Chung Is King" and the Heide Iravani CGWBT ("cheerful girl with big tits") saga over at Yale Law School.
On average, a pretty immature and despicable lot for sure--at least for the people who actually posted there. A lot of them were high school kids emboldened with an admissions letter to Penn or Princeton, or else college freshmen or sophomores, who just started trying to use the forum as an ego-stroker to try to talk down to other people without really knowing what they were talking about.
When it comes to i-bankers and lawyers behaving badly, for my money no stories can top Carlyle Group's " Chung Is King" and the Heide Iravani CGWBT ("cheerful girl with big tits") saga over at Yale Law School.
This post was edited on 8/21/08 at 10:01 am
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