Money & Investing - Banks.com

There is no doubt that Lehman Brothers Holdings (LEH) has been in trouble over the past few weeks. Indeed, the company has been frantically courting investment banks and other entities all over the world, most notably in Asia. But some of the specs on Lehman have given potential investors pause. Fortune reports on some of Lehman’s issues with regard to market value and holdings:

The market values for most of Lehman’s mortgage-related assets, especially the commercial real estate paper, have been dropping steadily. In turn, this has fueled speculation of yet another quarter of writedowns for the firm, with estimates putting a likely charge anywhere from $2.8 billion to $4 billion. Over the past year, Lehman has taken some $6 billion in writedowns.

However, some are beginning to think that maybe LEH represents an opportunity. Korea Development Bank is serious about offering to buy a 25% stake in the company, and Tokyo Mitsubishi Bank is also mulling the idea of buying a rather large stake in Lehman Brothers.

All of this has been good news for Lehman. LEH stock has been languishing, thanks to heavy losses on mortgage backed securities and other instruments that have been hard hit by the credit market crisis.  If there really is competition over who will help Lehman Brothers out of this mess (HSBC and a Chinese bank are also reported to be in contention), then it could mean that LEH makes a good buy now. After all, the price is low right now, but if someone — somewhere — provides the capital infusion needed to keep Lehman afloat, the stock price could see a good recovery.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Tags: stock market, stock market news, investing blog, Lehman Brothers,
LEH, investments, mortgage backed securities

For almost a year, writedowns related to mortgage backed securities and other debt and credit market related investments has been cutting into earnings for many big time Wall Street brokerages. And, after a brief period of optimism that such large writedowns were over, things seem to be sliding back the other way again. The Wall Street Journal reports this, with regard to Goldman Sachs Group, Lehman Brothers Holdings and Morgan Stanley:

The note is taking a toll in premarket action. Shares of Lehman have been hit the hardest, losing 5.3%, while Goldman is off by 1.4% and Morgan has declined by 1.3%. Mr. Bhatia projects another round of billion-dollar write-downs for all three companies when they report earnings in September.

Of the three, he is most critical of Lehman, which has been dropping more sharply than its rivals in recent days due to liquidity concerns and chatter about asset sales. Mr. Bhatia expects a $2.9 billion write-down at Lehman, and rates the company as a speculative investment, but adds that Lehman’s price “is discounting more erosion in book value than we anticipate.” Still, the firm has the largest amount of what he calls “hard to sell” assets, at $75.6 billion.

It is also worth noting that Lehman has been trying (and failing) to get various infusions of cash. One of the most recent turn-downs was in Asia.

The speculation that more writedowns will be seen at brokerages is adding to some of the declines on the stock market. After yesterday’s stock market rally, financial sector stocks are leading the overall market lower today — with some help from rising oil prices.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

Tags: stock market, stock market news, investing blog, financial sector stocks,
oil prices, Lehman Brothers, writedowns

It was a bit of a crazy week for Wall Street. It was made even crazier by bits of stock market stupidity that appeared. Over at The Street, Simon Constable offers 5 dumb things that happened this past week on Wall Street. Here are 4 of them:

1. Securities and Exchange Commission makes a rule against naked short-selling. First, though, you probably want to know what naked short-selling is. Basically, it’s when you sell shares short (figuring on a loss to the company) without borrowing some shares beforehand. The SEC made a rule against naked short-selling Fannie Mae and Freddie Mac, and indicated that this could become a more widespread rule. Silliest thing about this rule? Short-selling is illegal. The SEC should already by busting naked short-sellers — since it is illegal to begin with.
2. Henry Paulson, and the government sponsored enterprises Fannie Mae and Freddie Mac. This one sort of overlaps to last week. First, Henry Paulson, the Treasury Secretary, adamantly stated that there would be no bail-out for Fannie Mae and Freddie Mac. Then he did an about face and announced measures to help the two companies. Constable points out that idiocy of this whole mess is that the government ordered Fannie and Freddie to take on additional (and risky) debt to help homeowners, thereby causing the trouble in the first place.
3. Blaming Schumer for IndyMac. Government regulators, in an effort to blame someone who isn’t a Republican for some of the economic mess, rushed to say that it’s Charles Schumer’s fault that IndyMac failed. What did he do? Expressed concern about IndyMac. But the fact of the matter was that IndyMac was hemorrhaging well before Schumer’s remarks.
4. Wachovia tries to hide its assets. Wachovia refused to reveal its assets relate to auction-rate securities. As a result, the headquarters was raided. So investors could get information about what was happening with their money.

So, watch out! As things continue on this track, more stock market stupidity is likely to ensue.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions.

Tags: stock market, naked short selling, investing blog, stock market stupidity,
Fannie Mae, Freddie Mac, Schumer IndyMac