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Commentary

It Just Got Worse: LEH down, MER bought out, AIG nearly gone

Ok this is as crazy as it gets. Please wear your seat belts.

  • Lehman at land’s end, will likely file bankruptcy. BoA and Barclays have quit talks to buy. The business may be sliced and sold.
  • AIG is looking at being sold, or going bankrupt. It’s just asked the Fed for $40 billion to help.
  • And the Fed is helping. They are accepting anything as collateral – where anything means equities and any “investment-grade security”. Essentially printing dollars like they’re going out of fashion. And they are.
  • Merrill Lynch is now Bank Of America at $29 per share. Thank you very much.
  • Singapore Nifty quotes at 4085, a couple percent down.

Welcome to Stage 2 of the World Financial Crisis, 2007-10. On the menu are two things – Buy and Sell. There are assets out there that are distressed – I would specifically be interested in low debt companies in low end restaurants or liquor. But then there’s a ton of very high P/E, high debt, low visibility companies that are literally going out the door. At this point cash is king – sell when you can generate the cash. The crisis is likely to hit our markets this week – selling has to be early, and buying has to be late.

  • Siddharth says:

    >http://www.bloomberg.com/apps/news?pid=20601087&sid=aPTIdpST8HJ0&refer=home

    "The filing is by Lehman's holding company and won't include any of its subsidiaries. Lehman's largest unsecured creditors are Citibank N.A. and The Bank of New York Mellon Corp. as trustees for bondholders owed $138 billion. The bank listed $639 billion of assets. "

    Deepak, just noted that the article says LEH's largest creditors are Citibank….. So that means if the liquidation of net assets of LEH goes thru then will or will not the citibank be paid its share of credit it gave to LEH? Worse will be the liquidated funds do not match the debt LEH owed to citibank and same time it was unsecured too.

    Wont be good for Citibank book either.