Report comment

Reggie,

First, let me congratulate you on your call on Bear Stearns. You've made several nice calls on various stocks (ABK, MBI, housing stocks, etc.) dating back to last year.

That said, I have to respectfully disagree with some of your comments regarding LEH. I don't mean to say I think the stock is going uo - I don't know - but I think you are being a bit unfair. It seems Lehman is damned if they do, damned they don't. If they don't comment on rumors that are circulating (whomever may have started them) it makes it appear that there is some validity to them (think Alex Rodriguez). If they do, they sound like Bear Stearns, at least according to you. Moreover, I don't agree that its common sense that they are a very risky I-bank simply because the stock goes down on rumors. This has happened to many companies over the years. I remember buying Tyco, for example, after the stock was cut by 75% only to see if fall another 50% from that price due to rumors it was the next Enron. The company kept saying their revenues were not fabricated (btw..should they have kept quiet?) but for the time being enough people didn't believe them to send the stock to single digits. I actually did quite well by buying more. To be sure, the I-banks, banks et al. are cetaintly higher risk compared to two years ago. The weak economy alone suggests that. But during periods when fear is elevated, concerns about viability tend to be amplified, in my view. Like Tyco, LEH deserved to be knocked down from last year's peak. Their balance sheet is riskier than before and the macro-economic picture looks dim. However, like Tyco, unfounded rumors are just that. And what the LEH spokesperson said could very well be true: recent rumors related to viability may have been started for economic gain. I don't see that as a knock against short-sellers. Rather, I see it as one possible explanation for the recent slide in the stock, and if its true it needs to be addressed. Anyway, you may be right about LEH going down further. I don't have a position in LEH although I made some money shorting other financials/housing stocks. However, if the Fed is willing to back LEH and if LEH can weather the current storm (including unsubstantiated rumors), then it may be a buying opportunity. Just a thought. I wish you good luck in your position. You have a great blog and have been right much more than you've been wrong too.