Posts filed under “Valuation”

Lehman = $4; WAMU = $2

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


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.


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)


No position in any stock mentioned.


Financial Sector: Beware LEH, CIT (June 2008)

Dirty Tricks at Lehman? (June 2008)

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

Gasparino vs Einhorn, Kohn & Ritholtz (June 2008)

Fuld’s Misquote Contest (June 2008)

Category: Corporate Management, Credit, Short Selling, Valuation

Roubini on CNBC

Check out Nouriel on CNBC this morning — he is guest hosting, and makes so much sense it makes the rest of the guest list look almost silly.

My boy Chris Whalen also had a good spot, worth checking out.

Fannie, Freddie & Financials


The rescue
shouldn’t distract investors from the present peril of financials, says Chris
Walen, Institutional Risk Analytics co-founder/managing director

The Financial Development Report   


A look at
the World Economic Forum’s report with U.S. leading the rankings and UK second.
Details with Kevin Steinberg, World Economic Forum COO and Nouriel Roubini,

Category: Credit, Financial Press, Valuation, Video

Lehman Goes Boom

Lehman broke $10 just now, down 40% for the day. > For laugh, check out Charlie Gaspario’s CNBC video at the time – simply inexcusable reporting by CNBC, cheerleading a CEO against credible critics of the firm: “Shorts are full of it, desperate . . . Maybe Dick Fuld is right and Einhorn and Ritholtz…Read More

Category: Corporate Management, Technical Analysis, Valuation

Why the Bear Is Alive and Well: P/E

Category: Earnings, Investing, Markets, Valuation

Soc Gen: Meltdown Imminent

When people try to figure out what was the cause of today’s 344 point whackage, one of the items they will point to will be SocGen’s alert today from Albert Edwards: ***Alert****Economic and equity market meltdown imminent****Alert*** Last week saw the publication of Q2 US whole economy profits data. They were shockingly bad. Core measures…Read More

Category: Earnings, Markets, Trading, Valuation

Which Are the Weakest U.S. Banks ?

I’ve been meaning to point to a fascinating part of Banks & Thrifts Screener. Its a pretty nifty tool that you can use to see if your bank is on the skids or not.  (Note: I don’t know what the basis of the ratings are — they are proprietary)

Excellent tool, and best of all its free.

For example: My neice and nephew live in Chicago, and asked me about a local bank. I popped in Illinois, and screened for all banks rated "D" or below. 

Voila! 137 Banks rated from D+ down to F. (see full list after the jump)

In NY, the same search generates 27 banks; In California, 83 banks. If I search all states, I get 1477 banks rated "D" or worse.



TSC Ratings Finds the Weakest U.S. Banks, 9/2/08

Read More

Category: Corporate Management, Credit, Valuation

Pricey Markets?

Category: Earnings, Markets, Valuation

Market Monopoly

A bonus Friday afternoon guest post via Macro Man
– a portfolio manager at a London-based hedge fund, he trades global
currencies, equities, fixed income, and commodities. Over a long and
varied career, Macro Man has been an international economist, a
sell-side currency strategist, and a currency options market-maker.

His amusing Friday afternoon topic?  Market Monopoly!


With the Olympics and the summer drawing to a close, it’s now time for market participants to get themselves back from the beach, turn off the TV, and focus on making money for the four-and-bit months that remain of 2008.  Yet the Olympic spirit lives on, and many of us would love to channel our inner Usain Bolt or Michael Phelps.

Indeed, over the course of his career Macro Man has met many market people who are just as competitive as Bolt, Phelps, or Tiger Woods, for that matter.   Sadly, while the mind is willing, the flesh is all too often weak (in this case, literally.)   How, then, can desk-driving market  people bring out the Olympian that lurks within us all and keep the competitive fires burning?

Macro Man has hit upon the answer: Monopoly.  The game requires no discernible athletic ability and is predicated upon acquiring assets as cheaply as possible, levering them up,  and separating other players from their cash.  It’s a skill set with which many (but by no means all) market punters are well-acquainted.   

Of course, in Monopoly, as in life, chance can play a significant role in determining winners and losers.   In real life, these slings and arrows of outrageous fortune can come from anywhere, but in Monopoly they derive from the dice and the Chance/Community Chest cards.   Come to think of it, it looks like the game of Market Monopoly has already started, because some of the cards have already been drawn.  Consider who’s already holding the following (vintage) Monopoly cards:

ADIA, CIC, and Temasek holdings.  These SWFs  already own very significant stakes in a number of banks in the US and Europe, in many cases via high-yielding preferred shares.  Though it may be a case of thrice bitten, four times shy, Macro Man can’t help but think that at the end of the dilutive capital-raising process, these guys will be the only ones left with enough equity to get paid any meaningful dividend income.

Counterparties of Merrill Lynch and Lehman Brothers
in the structured credit space appear to have quite a few of these cards up their sleeve.

Holders of 2007 vintage AA-rated ABX.   Unfortunately, to collect the prize, they have to tender $100 of face.  (Since this vintage card was printed, prices have fallen further.  In the modern editions of Monopoly, second prize winners only get $10.)

John Thain.  Mr. Thain’s tenure at the helm of Merrill Lynch has been characterized by three things: large write-downs, a fire sale of assets to clean up the balance sheet, and Merrill itself providing the funding to the buyers in the aforementioned fire sale.  Alternatively, this card could represent Merrill’s settlement of its part of the auction rate securities fiasco.

Read More

Category: Corporate Management, Credit, Earnings, Valuation

SEC Proposal: Abandon US Accounting Rules

What this country really needs is less tranparency in earnings reports, and more wiggle room for corporate reporting:

click for video


We are governed by utter idiots . . .

Similarities and Differences: A comparison of IFRS and US GAAP
Click for PDF



"The Securities and Exchange
Commission signaled the demise of U.S. accounting standards, kicking
off a process Wednesday that could ultimately require all publicly
listed American companies to follow an international model instead.

in two steps, the shift could eventually cut costs for companies and
smooth cross-border investing. At the same time, investors worry it
will create confusion, especially during the transition. Other critics
worry that the international system offers too much wiggle room for
companies, compared with the more precise rules enshrined in U.S.

The SEC’s proposal would allow some large
multinational companies to report earnings according to international
accounting beginning in 2010. The SEC estimates at least 110 U.S.
companies would qualify based on their market capitalization, among
other factors. The agency also laid out a road map by which all U.S.
companies would switch to International Financial Reporting Standards,
or IFRS, beginning in 2014, at the expense of U.S. Generally Accepted
Accounting Principles, the guiding light of accountants for decades.

The proposals will be open for public comment for 60 days and could be finalized later this year."

Anything that artificially boosts earnings is great for America . . .


SEC Moves to Pull Plug On U.S. Accounting Standards
WSJ, August 28, 2008; Page A1

SEC May Let Companies Abandon U.S. Accounting Rules
Jesse Westbrook
Bloomberg, Aug. 27 2008

Download SandD_07.pdf

Category: Corporate Management, Earnings, Taxes and Policy, Valuation, Video

Coming Soon: $100 Billion in Difficult Bank Refis

Category: Corporate Management, Credit, Valuation