June 10, 2008 – 11:19 pm

With the overnight shredding to the bone of Bear Stearns still fresh in investors’ minds, Lehman Brothers is finding it more difficult to shake the options players and short sellers.

With twice as many puts trading as calls by closing bell, out-of-the-money put strikes in the front month attracted heavy action from buyers and sellers at strikes as low as 12.50.

After three days of relentless selling, the shares briefly stabilized on June 4 at $31.40 following an obviously bought buy recommendation from Merrill Lynch analyst Guy Moszkowski. Are you ready for his reasoning?

the expectation of a significant second quarter loss was “more than priced in” to the stock.

He added that fears that Lehman could suffer the same fate as Bear Stearns were “unfounded” and said the bank has “ample liquidity” as well as direct access to Federal Reserve borrowing

Back on Earth, however, the company pre-announced a previously unrecognized $2.8B -with a big B Mr. Moszkowski- LOSS.

Shoes keep falling on Lehman shareholders’ heads and Wall Street seemed a bit dazed despite reassurances from management.

On Monday, Lehman Brothers Holdings said it expects to lose $2.8 billion in the current quarter, reflecting roughly $4 billion in write-downs on mortgage and leveraged-buyout debt amassed during the credit boom.

And in case you missed it, Mr. Moszkowski, the bank seems to be searching for another $5B.

Lehman Brothers Holdings Inc., poised to report what may be its first quarterly loss since going public in 1994, is in talks to raise as much as $5 billion by early next week, a person with knowledge of the matter said.

Oh Mr. Moszkowski, about that FED accessability you talked about… the bank directly refutes you and says it will raise cash it does not need.

As it stands now, Lehman cannot directly address the negative reports that have bombarded it this week because it is in a so-called “quiet period” mandated by the Securities and Exchange Commission ahead of the public release of earnings information.

Led by CEO Richard Fuld, Lehman has stated adamantly that it is not in need of new capital and has some $40 billion in cash to weather any credit storm.

If one didn’t know better, one might ask how much they paid you, Mr. Moszkowski.

As the selling continues, the pressure builds until panic sets in and the moves get more and more desperate. Lehmann Brothers is screaming that it wants out of its positions at any price.

Lehman disclosed the second-quarter loss today and simultaneously raised $6 billion by selling shares to the public. To reduce market risks, the company said it unloaded about $130 billion of holdings during the quarter, whittling down assets tied to mortgages and leveraged-buyout loans by as much as 35 percent.

“They’re doing all the right things, such as de-leveraging aggressively, but these are stressful times, and they don’t always get the credit they deserve,” said UBS AG analyst Glenn Schorr, who has a “neutral” rating on Lehman. “Although Lehman is very different than Bear, there’s one similarity, and that’s what could undo all the other positives: perceptions can become reality.”

The reality, Glenn Schorr, is that in these stressful times, the stakes are high for all the brokers, including yours. The bubble has burst and no amount of spit polish from CNBC, fradulent analysts upgrades and spin from CEO’s can fix the financials again in our lifetime.

If you look at the time line of events surrounding the Bear Stearns collapse and subsequent brokers earnings, it is obvious that the lies of the brokers, not only saved them personally, but were pivotal in changing market sentiment and dynamics leading to a multi-month rally led by financial stocks.

Lehman was first scheduled to release earnings following the Bear Stearns implosion in March. If they would have shown a loss, like they did today, it could have meant the end of Lehman.

If Lehman had kicked off Q1 broker’s earnings season with a loss, even with the new Fed laundering facilities, the market and financials would have likely performed much worse then they did.

The lies in the company’s pre-announcement are just desperate moves meant to stave off sellers, but the bears are angry and hungry.

“Lehman is raising $6 billion that they said they didn’t need to replace losses that they said they didn’t have,” said short-selling hedge fund manager David Einhorn at Greenlight Capital.

Once there was a day when lies and fuzzy accounting would have surely saved Lehman Brothers, but all of that ended with the bubble as well. Now the only thing anyone knows for sure is that both bulls and bears will get bloody. It looks like the bears have a bite and can hold on tight.


  1. 2 Responses to “Bear Clawed Again”

  2. Blackstone Group to the rescue ! I don’t believe them. But hey their little bullshit about buying 20 to 30% of this piece of shit is working today.

    By Marc Authier on Jun 13, 2008

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  2. Jun 11, 2008: Bank-Implode! » Lehman Brothers - $7.2B/$6B

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