Monday, June 9, 2008

That Didn't Take Long...

After a weekend of reading, I usually come to you on a Monday prepared to talk about a variety of things. But, having just recommended shorting Lehman less than a week ago on a day it was busy rising 7%, feel the smugness. A mere month ago, estimates on 2nd quarter earnings were above $1/share. About 2 weeks ago, they were lowered to about 3o cents/share. Today, they pre-announced "earnings," a $3 billion loss that translates into a $5.14/share hit. They have dutifully lowered their leverage to a mere 25X from 31X. They will dilute shareholder value by raising $6 billion more. It's down 11% premarket. Going to get ugly.

"We do not think the brokerage stocks are out of the woods concerning their current exposures to CDOs, mortgages and commercial real estate," Bernstein analyst Brad Hintz said. "As long as the brokers have significant portions of their balance sheets frozen and face risk ... on their hedges, we can expect continuing earnings uncertainty." Make this guy president of all I-banks. Dick Bove, who actually made his clients money last year according to a previously listed article on analyst incompetence, was getting hammered this morning for his continued support of companies like Lehman. He'll be right down to the very bottom I guess.

Will oil tank? I don't think so. As you know by now, I'm drinking some of the iTulip cool aid and the master of that domain, Eric Janszen, lists a 10-pronged argument as to why oil cannot be an asset bubble. Fortune countered with an editorial this weekend on how $4 gas cannot last, and we'll be back to $50/barrel before too long. I don't think so, but both articles are listed below.

Daniel Gross of Newsweek had an interesting article over the weekend, rehashing the futility of the Bernanke driven Fed argument of "wait until the 2nd half of the year" when the economy really gets rolling. As I've said, consumer issues will only continue to deteriorate with credit/auto/home defaults soaring, not abating.

Oh, and for those of you who stil think that your house is the best on the block and are just unlucky in trying to sell against the millions of foreclosures out there, read this please:

Five signs that it is time to trim the asking price on your house (should be free to view by week's end)

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