Another day, another disaster at the 148 year old firm known as Lehman Brothers:

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>lehman_open_9.11
When the posthumous story on Lehman gets written, I do not see how full blame for the debacle does not fall anywhere but squarely on CEO Dick Fuld, who has presided over a stock decline of 90%+ this year:

• Failed to adequately recognize the danger of the credit crunch, declaring LTCM worse. His quote in April:  “The worst is behind us.

Failed to sell Neuberger & Berman on a timely basis. When your back is against the wall, you do not have the luxury of holding out for top dollar — you should be raising cash.

• At a time when confidence in the firm and its management needed to be shored up, very foolishly played games with leaking non-public information;

• The CEO was far more involved in the day-to-day PR than was advisable.

• Fuld focused obsessively on the Shorts, instead of his company’s deteriorating balance sheet and flailing business;

•Can still redeem himself by pulling a rabbit out of his hat, and getting some decent sale of the firm.

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Special kudos to Citibank, Deutsche Bank and Goldman Sachs, for the timely downgrades of the banks TODAY. Talk about value added, you guys are the best!

It just goes to show how true the cliche is about fundamental analysts: You don’t need them in a bull market, and you don’t want them in a bear market.

Rumors that Goldman is looking to bottom tick the stock, and take them
out (cheap) are rampant. (I have no opinion on whether its true or
not). Earlier this week, the trading desk IM # was $4 a share.

Well, Goldie, here it is. (UPDATE: Goldman Sachs is not buying Lehman – sources)

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No position in any stock mentioned.

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Previously:
Financial Sector: Beware LEH, CIT (June 2008)

http://bigpicture.typepad.com/comments/2008/06/financial-secto.html

Dirty Tricks at Lehman? (June 2008)

http://bigpicture.typepad.com/comments/2008/06/dirty-tricks-at.html

Who is the least trustworthy C.E.O. on Wall Street? (August 09, 2008)

http://bigpicture.typepad.com/comments/2008/08/who-is-the-leas.html

Gasparino vs Einhorn, Kohn & Ritholtz (June 2008)

http://bigpicture.typepad.com/comments/2008/06/gasparino-vs-ei.html

Fuld’s Misquote Contest (June 2008)

http://bigpicture.typepad.com/comments/2008/06/fulds-misquote.html

Category: Corporate Management, Credit, Short Selling, Valuation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

35 Responses to “Lehman = $4; WAMU = $2”

  1. scorpio says:

    i love all the articles saying Fuld shd do this, and Fuld shd have done that. if he could have done anything, i think he might have, but the fact is, nobody in their right mind wants to own his crap at any price. not Neuberger, not his Archstone loan at par, not even the poor Koreans and arabs, who could be counted on just six months ago to step up for another plate of this nonsense.

  2. Jeff M. says:

    Just in time for the weekly weekend bailout. Can’t wait.

    I can’t see how they survive. Even if they do sell Neuberger, they’re selling their most profitable and valuable unit. What’s left if they sell that? It’s like selling your house to save your yard.

  3. Mel says:

    Even good swimmers drowned on the Titanic. It is true that Fuld never saw the iceberg until it was too late, but he did manage to take a lot of money out for himself. In this era, the captain doesn’t go down with the ship, he buys a new one for his personal use.

  4. catman says:

    Barry – Leh is one the first hurricane in line but how about the NYT article today about WaMu and what it could do to the FDIC!

  5. Mort Glickman says:

    This is going to really hurt the tips for the ladies st Rick’s Cabaret.

  6. Jeff M. says:

    Wonder if Cramer still thinks THE bottom is in for the financials?

  7. leftback says:

    I am sure they could have done some kind of deal (at least an asset sale) early on this summer, but the problem has always been what to do with their garbage. LEH has been doomed from the day of the BSC rescue, in my opinion.

    Nice day for the SKF crowd. XLF has been in a trading range between 20-22, sitting on support here at 20, so this is critical and we are on that SPX 1215 level again.

    I am thinking about tomorrow’s retail sales, those stocks are way overvalued. Also wondering about the Fed. Will sub-$100 oil be the trigger for a rate cut? They might think they can risk it now they have the long oil trade under control a bit.

    I am smelling an emergency 50 bps. He shouldn’t, of course, but he might be pushed into doing it now instead of waiting until closer to the election. With that in mind, watching for relative strength in the oil stocks (I bought DIG).

    Gold miners too, I was a bit early on that one but I think the $ turnaround is coming soon, they are selling the Euro like it is a Zimbabwe $. Overdone, I think.

  8. Mitchn says:

    We’re watching the beginning of a global financial system meltdown, and the implications of that are staggering — for equities, for real estate of all kinds, for luxury goods, for globalization itself. By the time this is all over, I think the world is going to be living much more modestly and “closer to home” than it has been for the last 20 years. I feel sorry for those boomers who thought they could amass a lifetime of savings deferred in 5-10 years through equity appreciation. Ain’t gonna happen…

  9. NY stock guy says:

    And Wamu is now down to a dollar and change.

    Ouch!

  10. HOME RUN!

    I am covering my short today, but holding onto to my puts. I found this trade on your site back in June. Lots of doubters, but the chart was compelling.

    Anyone who says they cannot make money off of this blog is has no business trading equities, PERIOD.

    I am clicking over to you Amazon list. Expect a few goodies soon as my way of saying thanks.

  11. Lehman Brothers Holdings Inc.’s Corporate Governance Quotient (CGQ®) as of 1-Sep-08 is better than 41% of S&P 500 companies and 87.6% of Diversified Financials companies.

    Brought to you by Institutional Shareholder Services.

    http://finance.yahoo.com/q/pr?s=LEH

    Legg Mason Partners Aggressive Growth Fd 11,984,300 1.73 $441,142,083 31-May-08
    JANUS TWENTY FUND 9,772,495 1.41 $193,593,125 30-Jun-08
    FIDELITY GROWTH & INCOME PORTFOLIO 7,500,000 1.08 $148,575,000 30-Jun-08
    FIDELITY BALANCED FUND 7,214,327 1.04 $142,915,817 30-Jun-08
    FIDELITY MAGELLAN FUND INC 7,000,000 1.01 $138,670,000 30-Jun-08
    Janus Adviser Forty Fund 5,288,497 .76 $104,765,125 30-Jun-08
    VANGUARD 500 INDEX FUND 5,043,480 .73 $189,836,587 31-Mar-08
    VANGUARD/WINDSOR FUND INC. 3,441,386 .50 $152,246,916 30-Apr-08
    VANGUARD TOTAL STOCK MARKET INDEX FUND 3,201,654 .46 $120,510,256 31-Mar-08
    VANGUARD INSTITUTIONAL INDEX FUND-INSTITUTIONAL INDEX FD 3,093,391 .45 $116,435,237 31-Mar-08
    http://finance.yahoo.com/q/mh?s=LEH

    Are the MutFund/Index/401k dead-enders ever going to wake-up?

  12. Donkei says:

    Today’s version of a bank-run: A crashing stock price.

    The FDIC can insure the depositors and the SEC can try to limit the shorts, but nobody can make people buy shares just because someone wants to sell.

    In the post-Depression, post-FDIC, post-SEC whack-a-mole Fed attempt to prevent the dam from failing, someone forgot to outlaw selling for less than was paid.

    WAMU and Lehman are dead. I’m moving to the farm. With lots of ammo.

  13. cbond says:

    Just wait, Fuld will walk away with millions and live the life that 99% of people dream of – ooops – except the employees and shareholders of LEH.

  14. Long/Short Trader, thanks for the kind words.

    (Be sure to look at the watch section!)

  15. GrizzlyRock says:

    Not sure where the comment on fundamental analysis applies here. The I banks are very difficult to fundamentally understand but I’m not sure if a broad based whack at fundamental analysis is warranted. You have been very successful with technical analysis and are an insightful, well read and versed market commentator. I think they should be used in concert with one another augmenting the strengths / weaknesses

    And yep – Fuld should have peeled off assets rapidly during the last 6 months at least

    -A Fundamental Analyst

  16. natok says:

    Perhaps he figured his seat on the FED was all he needed.

    Also, maybe he was just waiting to be fired by the Lehman board. That way he could collect on his million dollar golden parachute.

    Did Killinger at WAMU get a payout? Because I know the guys at Fannie and Freddie sure did. Wasn’t it near 8 million a piece?

    When the ship they are piloting is consumed by fire, they let them go. If they really wanted the CEO’s to suffer they would have kept them on to the end. But instead, as a means of gratitude for a job so well done, they fire these guys, putting the golden parachute into effect.

    Is this system ridiculous or what?

  17. bizprof says:

    I really think Fuld’s biggest mistake was to relentlessly throw bodies over the side of the ship. It leaves the firm with a dwindling number of internal and external relationships that will take time to rebuild. They don’t have time anymore. And counterparties are edging away at least in part because they’re dealing with strangers now.

  18. Concerned Citizen says:

    Why the Fook isn’t t his market getting it??? Don’t they realize how bad things are? When will the long term view over-take the near term view? Or better yet, when are the institutional investors going to start really pulling their money out of the markets? Can any of you long term pros educate me here? Is there any simularities between this market and the Dot-com fiasco?

  19. leftback says:

    All of these guys have no incentive to save the firm. They are set for life, all these clowns will walk away rich from the smoldering ruins.

    LEH is not the problem here – it’s WaMu. We are all on the hook for that, via FDIC, and risk is about to be passed on from shareholders (who will be wiped out) to the taxpayers. What they decide to do with the pieces of LEH and WM will be interesting – who takes on the bad paper?

  20. GB says:

    MER below 20 today too.

  21. tyaresun says:

    BR,

    Was thinking of shorting LEH for a long time but was afraid. Your blog entry tipped the scale and I shorted. Made a little money. Thanks.

    Any thoughts on MER? Have I missed the boat on that one?

    TIA.

  22. Jeff M. says:

    Time to start blaming the shorts again!

  23. Youngtrader says:

    Odds that SEC steps in with shorting rules again?

    BTW, thanks for words about SKF the other day (forgot who gave them, but thanks). Held on and go out this AM with some pretty green. DRR’s been good to me, too.

  24. Longhorn Joe says:

    @conserned citizen

    This is EXACTLY like the dot.com/telecom meltdown, except it will be at least ten times the magnitude.
    The same players are stealing the rest of the wealth they missed.
    Carly Fiorini for example, has got to be the dumbest b*tch to ever put on a pair of pumps and she is McLoons FINANCE GURU.

    To all you folks who misread the tea leaves and did not buy property in a rural area, you are so screwed.

    Party on Garth.
    Sarah, Sarah, Sarah.

  25. richinar says:

    Dear Senator,
    The federal government seems to have begun a transformation of our free markets. The takeover of the GSE’s FANNIE and FREDDIE has doubled the national debt with the stroke of a pen. Our government is fighting an increasingly expensive and unnecessary war while running unsustainable levels of fiscal deficit.
    There are several other issues with large corporations in the United States. Insolvency seems to be the root of the issue. The taxpayers of this great nation should not be burdened with the costs of the overwhelming failure of corporate America. In free markets corporations must be allowed to fail.
    Unless the government stops interfering with the free markets, foreign governments will no longer perceive our markets to be trustworthy and will begin to withdraw their monetary support of our debt. The ramifications of such a scenario unfolding are staggering.
    Americans have put ourselves in this situation by not ensuring adequate checks and balances were in place to forestall the binge of credit and leverage that occurred during the past 10 years. The federal government has been too lax in policy measures that would have at a minimum stunted the issues.
    All of that aside we are in a position where housing prices nationwide are in a free fall. Unemployment is surging. Commercial real estate is on the precipice of collapse. Credit card debt is in serious default. Banks are beginning to fail at a staggering rate. Our economy is faltering. The domestic automakers are in a failed state. The airline industry is failing.
    I submit to you that additional debt will not solve our problems. I add that transforming our free markets into what sharply resembles a socialist system will not solve our problems. To me the solutions are here within our borders. Our infrastructure is in shambles. We must rebuild here at home and create long lasting jobs via infrastructure projects.
    If we continue to simply sit back and watch the scenario unfold we will be watching a terrible disaster unfold. Not the least of which will be the drastic reduction of tax revenues. The government will lose its power if it can not fund its expenditures at some point. That point draws ever closer each day.
    Unless leadership emerges that addresses the problems from a sober perspective and makes the painful choices to allow the corporations wrought with fraud and greed to fail our society is in peril. We need jobs here at home to finance our government. We need infrastructure renovation. We do not need to give taxpayer money to the corporations responsible for the current situation.
    I challenge you to be the voice of reason. Represent the average American with your actions. Speak out against corporate greed and force insolvent firms to fail. Ensure those responsible for the unprecedented financial disaster to be held accountable rather than giving them taxpayer monies and golden parachutes.
    Our culture is going through a challenging period. Unless our government acts in the interests of the American people we have the potential for anarchy. The overburdened taxpayer simply can not afford higher taxes to pay for the unending socialist reformation of our free markets. Unless the government addresses these issues with serious policy measures it faces insolvency itself. How many Americans do you think support a socialist system?
    There will be pain to be sure. There will be pain if we do not act as well. We must however at some point accept the medicine to cure the disease (greed) that has infected our financial systems and free markets. Debt is not the cure. Foreign investment is waning and will continue to until the foreign governments that finance our debt have leverage and stealth control of our own sovereign society.
    We must force change. I hope you will begin the process by speaking out against the status quo. Change is near and we must form this change to reflect the interests of Americans and not just the corporations and foreign governments. I will be sending a copy of this letter to everyone I know and posting it on every blog I can find. I will no longer sit silently back while our government allows our country to be transformed at the whim of special interests. I implore you to be the first to take serious actions to move our country forward and not allow it to continue on the path to ruins it is currently on.
    I do not need yet another form letter back stating your support of the bailout of private enterprises with taxpayer money. We need you to step out of the typical political mode and call for real change and make a statement to the establishment that Americans will no longer stand for corporate welfare before it is too late.

  26. tom (not Tom) says:

    Nader’s been talking about this since 2000 but nobody has been listening.

  27. Vermont Trader says:

    i think the cliche is about sell side analysts not fundamental analysts….

  28. zackattack says:

    Hope the SEC gets all over this vicious rumormongering between GS and LEH. Oh, wait… 2 legs bad, 4 legs good.

  29. VennData says:

    Banks and financial institutions are dropping like commodities, well, because their products and services ARE commodities.

  30. flipspiceland says:

    What no one is mentioning is that although the firms are deep trouble the leaders and many of their senior employees managed to get to be multimillionaires, financially secure for life and likely their grandchildren as well.

    Would any one of us happily walk away with about $20,000,000 over five years and so what if the firm goes down the tubes when it won’t cost us one red cent? Sure, they’d like to make more millions but let’s not take our eye off the ball. These people got filthy rich borrowing money for their firms . And they get to keep all of it.

  31. Joshua says:

    So let’s see, Dick Fuld was endlessly cheerleading, doing more PR than actual work, proclaiming the worst is behind us, and showed a total lack of competence and understanding as things got worse?

    Sounds to me like he was just auditioning for a job on CNBC.

  32. Dick Fuld says:

    I took it in the shorts!

    And that was my goal!

  33. Paul H says:

    Goldman is standing right behind Lehman-with a gun!

  34. CNBC Sucks says:

    Congratulations, BR, on your calls earlier this year on LEH. Just watching some of the old pro-LEH videos on CNBC, you and people like Einhorn had a fair amount of opposition.

    Republicans, I will not accept a McCain-Palin administration without Dick Fuld as Treasury Secretary! If you are going to have a disaster, make it a complete one.

  35. Longhorn Joe says:

    U.S. Government Assisting in Sale of Lehman Brothers
    http://www.washingtonpost.com/wp-dyn/content/article/2008/09/11/AR2008091102580.html

    The Treasury Department and the Federal Reserve are helping Lehman Brothers put itself up for sale. The details are not finalized, but sources familiar with the matter say the purchase is expected to be completed and announced this weekend before Asian markets open Monday morning. (snip)

    In time for the asian markets Monday.
    The cowman is one for one now, I still expect WaMu to crash next weekend.

    Got bullets?