News from the Doo Doo, and a Lehman revelationNews from the Doo Doo, and a Lehman revelation
Posted by: Reggie Middleton in Investment Banks, Heard on the Street, Current Affairs, Commercial Banks on
Jun 12, 2008
Lehman Brothers have removed their CFO and COO. I have been warning for several quarters on this company.
Keybank a card carrying member of the Doo Doo 32 list, has cut its dividend in half, and is losing that appropriate amount of market value as a result.
UPDATE 1-KeyCorp to raise $1.5 bln, halve dividend: June 12 (Reuters) - KeyCorp, a large U.S. Midwest regional bank, said it plans to raise $1.5 billion in equity capital and cut its dividend in half, following an adverse federal court ruling over the tax treatment of leveraged leases.
The Cleveland-based bank said the ruling will result in a $1.1 billion to $1.2 billion second-quarter charge, covering all leveraged lease transactions it is contesting.
It plans to cut its quarterly dividend per share to 18.75 cents from 37.5 cents, saving $200 million a year, and reflecting what Chief Executive Henry Meyer called "current economic realities." KeyCorp had raised its dividend for 43 straight years.
Shares of KeyCorp fell 7.7 percent to $14.50 in pre-market electronic trading.
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Reggie,
In a post I submitted yesterday, I made a reference to Jon and Pete Najerian and their OptionMonster site. I just gave them your blog site. These guys are not the "typical talking heads" you find in this industry. Even better since both are regulars on CNBC. Maybe the media can start getting some factual data out there.
Kip
In a post I submitted yesterday, I made a reference to Jon and Pete Najerian and their OptionMonster site. I just gave them your blog site. These guys are not the "typical talking heads" you find in this industry. Even better since both are regulars on CNBC. Maybe the media can start getting some factual data out there.
Kip
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June 12, 2008
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Reggie,
It shows on my news wire that the Lehman Rights Issue is closed. Does this mean that they achieved the full price for the full issue, as the lehman statement did not provide clarity. (ie did they get $4 B @ $28.00 per share?)
If they did manage to get this price, how did they do it, and what deals or enticements have been offered privately?
It shows on my news wire that the Lehman Rights Issue is closed. Does this mean that they achieved the full price for the full issue, as the lehman statement did not provide clarity. (ie did they get $4 B @ $28.00 per share?)
If they did manage to get this price, how did they do it, and what deals or enticements have been offered privately?
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June 12, 2008
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I just read an article in Reuters stating that the "sophisticated" investor is buying LEH's bonds and either shorting equity or hedging their long with the bond position.
http://www.reuters.com/article...12?rpc=44
Isn't it just amazing what the MORAL HAZARD has brought us? Now we have folks making big bets on the notion that the FED will step in and actually do a BSC deal!!!! In effect you could have so much short interest driving the end result of failure and a confidence crisis. I'm not suggesting that LEH hasn't lied, cheated, or brought this on themselves by their inability to hedge exactly and make accurate statements, but I am saying that perhaps they are a $20 stock on the road to $10 or zero because folks don't have normal and rational inhibitions of shorting a stock here because they believe there is a backstop called the FED.
On another note, (for everyone - all thoughts are appreciated), you have said that you don't typically short stocks that are sub $10, I am assuming that you put your money where your mouth is on LEH, what end game do you see for selling to close on puts or buying back the stock?
Personally, we've seen this $21 area back in March and today's action today touched it. I was inclinced to sell 80% of my puts in LEH when the stock was at $21.75 today, simply because I don't want to lose the (great) gains I've now booked. Now I'm using the houses money, and will need to examine some of your other picks as a place to research.
I always enter every trade with a trading exit goal, but we've blow through that days ago and I simply kept letting it ride.
I'm torn because I don't think LEH is done going down, but there is now a significant risk to a new equity partner coming in or some other news driven story that will life the stock and reduce my winnings. I started buying Jul Puts, but have sold those am now well ITM on Jan09 puts. Trying to mitigate the pain of a news story, I've opted to go longer out.
http://www.reuters.com/article...12?rpc=44
Isn't it just amazing what the MORAL HAZARD has brought us? Now we have folks making big bets on the notion that the FED will step in and actually do a BSC deal!!!! In effect you could have so much short interest driving the end result of failure and a confidence crisis. I'm not suggesting that LEH hasn't lied, cheated, or brought this on themselves by their inability to hedge exactly and make accurate statements, but I am saying that perhaps they are a $20 stock on the road to $10 or zero because folks don't have normal and rational inhibitions of shorting a stock here because they believe there is a backstop called the FED.
On another note, (for everyone - all thoughts are appreciated), you have said that you don't typically short stocks that are sub $10, I am assuming that you put your money where your mouth is on LEH, what end game do you see for selling to close on puts or buying back the stock?
Personally, we've seen this $21 area back in March and today's action today touched it. I was inclinced to sell 80% of my puts in LEH when the stock was at $21.75 today, simply because I don't want to lose the (great) gains I've now booked. Now I'm using the houses money, and will need to examine some of your other picks as a place to research.
I always enter every trade with a trading exit goal, but we've blow through that days ago and I simply kept letting it ride.
I'm torn because I don't think LEH is done going down, but there is now a significant risk to a new equity partner coming in or some other news driven story that will life the stock and reduce my winnings. I started buying Jul Puts, but have sold those am now well ITM on Jan09 puts. Trying to mitigate the pain of a news story, I've opted to go longer out.
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June 12, 2008
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I am not going to get into the details of my trading methods, but the $10 thing is commons sense. If I ride a stock down from $60 or $70 down to $10, there is limited upside and unlimited downside. Why take the chance for relative pennies when I have already booked so many dollars? MBIA was a different situation, since mgmt made it clear they were not capable of righting their ship in a very serious maelstrom, thus I threw some more of the "houses" money at them.
I would suggest you take a longer term view in your investing and buy insurance to hedge your positions if you feel unsure. If a white knight does come in to buy Lehman, it will be a stingy knight indeed. Look what happened to the last set of knights that came into MBI, BZH, ABK, LEH, C, etc. They should demand a significant discount to market to proof against this happening to them, unless of course they are total idiots...
I would suggest you take a longer term view in your investing and buy insurance to hedge your positions if you feel unsure. If a white knight does come in to buy Lehman, it will be a stingy knight indeed. Look what happened to the last set of knights that came into MBI, BZH, ABK, LEH, C, etc. They should demand a significant discount to market to proof against this happening to them, unless of course they are total idiots...
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June 12, 2008
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Here is a link for quotes of all those 31 bank tickers. (i didnt find first charter though)
You can customize the view if you have yahoo account to see
the differences with 50day moving averages, then it gets pretty
amazing. Where is this going to end? And when?
http://finance.yahoo.com/q/cq? s=KEY,SNV,MI,ASBC,MTB,HBAN,BBT,JPM,USB,BAC,COF,NARA,SAS
R,PNC,HNBC,CVBF,GBCI,FHN,NCC,WM,CFC,RF,C,WB,ZION,TCBK,F
ITB,SOV
You can customize the view if you have yahoo account to see
the differences with 50day moving averages, then it gets pretty
amazing. Where is this going to end? And when?
http://finance.yahoo.com/q/cq? s=KEY,SNV,MI,ASBC,MTB,HBAN,BBT,JPM,USB,BAC,COF,NARA,SAS
R,PNC,HNBC,CVBF,GBCI,FHN,NCC,WM,CFC,RF,C,WB,ZION,TCBK,F
ITB,SOV
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June 13, 2008
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Thanks polkovnik.
BTW, cute name.
BTW, cute name.
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June 13, 2008
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Reggie;
In light of what has transpired lately in the finacial stocks, what are your thoughts on BofA completing the deal to aquire CFC? Have the chances of this deal not going through increased in your opinion.
Thanks.
In light of what has transpired lately in the finacial stocks, what are your thoughts on BofA completing the deal to aquire CFC? Have the chances of this deal not going through increased in your opinion.
Thanks.
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June 13, 2008
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If BofA does acquire CFC without government aid, it will be suicidal. I don't know the inner workings in the C suites over there so I have no idea what is on those guys minds. I thought it was a silly idea from the get go.
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June 13, 2008
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In reply to goatmug I like to sell half of my puts when they get over 100%. It works for me because you have a position that is totally paid for and still retain the ability to make a large profit from your remaining position.
It's a way to make a great return AND sleep well.
It's a way to make a great return AND sleep well.
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June 13, 2008
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Interesting piece at Financial Sense by Rob Kirby http://www.financialsense.com/Market/wrapup.htm on the Lehman financing. Common wisdom says the Fed can print the money, but can't direct where it ends up. Well the Fed can sure direct where it gets spent first. And FRN6 billion buys some time, maybe enough time to work out a consolidation or does the Fed just keep buying stock and maintaining the around $28 level? Somehow I don't see Bernanke being shy about writing checks. And where might this type of transaction be shown on the Fed balance sheet? Or has the Fed created a bunch of off balance sheet entities?
Who you gonna trust: the Fed or your lying eyes? Plus, there's a war on. And truth is always the first casualty.
Mark
Who you gonna trust: the Fed or your lying eyes? Plus, there's a war on. And truth is always the first casualty.
Mark
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June 17, 2008
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With this statement "Lehman has cut its balance sheet by $147 billion, more than previously targeted, and cut mortgage holdings by 20 percent, again more than previously targeted."
There is NO way that they lost 3 billion!!! The assets are worth at least 25% LESS AND PROBABILY WORTH 50% LESS.
LEH MUST HAVE LOST OVER 30 BILLION!!!!!!
I think that they moved the decimal place.
There is NO way that they lost 3 billion!!! The assets are worth at least 25% LESS AND PROBABILY WORTH 50% LESS.
LEH MUST HAVE LOST OVER 30 BILLION!!!!!!
I think that they moved the decimal place.
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June 17, 2008
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Reggie,
According to the LEH latest press report their total assets is $639B, with todays share price, LEH equity is around $15B. If these assumptions are correct, is their leverage over 42x ?
According to the LEH latest press report their total assets is $639B, with todays share price, LEH equity is around $15B. If these assumptions are correct, is their leverage over 42x ?
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June 17, 2008
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I'm with you Gaucho. I don't know who the hell they've been selling these assets to.
@Chris
That is the gross leverage. The banks prefer investors to look at net leverage, that is after netting for various leverage reducing positions. The problem is that Lehman has already shown that you cannot really rely on their reporting.
Personally, I think they are still too leveraged but since I never did a deep dive on them I don't know for a fact.
@Chris
That is the gross leverage. The banks prefer investors to look at net leverage, that is after netting for various leverage reducing positions. The problem is that Lehman has already shown that you cannot really rely on their reporting.
Personally, I think they are still too leveraged but since I never did a deep dive on them I don't know for a fact.
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June 17, 2008
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One more thing on Goldman's earnings. Goldman is now basically a large hedge fund. Outside of M&A, all of their profit came from prop trading, wealth management and prime brokerage services. Thus there is no real difference between them and Citadel, Och-Ziff, etc., except of course there multiple! The risk of prop trading and investment is not reflected in their valuation, particularly when it is practically their sole source of income.
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June 17, 2008
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DB issued news today - they expect another $2billion in ADDITIONAL writedowns for LEH. HMmm..... didn't they just come clean on Monday?
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June 17, 2008
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I don't get this balance sheet. 5b in net tangibles and 16b in goodwill, middle of the pack on the eyles test, russian lawsuit moving forward. It seems like a sneeze could wipe out their equity and it has yet to take a big hit. Is the earning power that strong. what gives?
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June 24, 2008
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