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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.

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