Starting Down again today

[peternap]

The market is still fussing over Lehman and everything on my watch list is DOWN!

Freddie Mac is down to 0.062 now. I pity the people that didn't take their profits and run.
I'm not sure what point this will be delisted but it can't be far away. Imagine that...Freddie Mac on pink sheets

[muldoon]

yep peter, it sure is a mess.

Lehman brothers are circling the drain.  I dont see how they can fail, they just hired Jeb Bush as a financial consultant not two weeks ago.  Yes, that Jeb.  http://www.reuters.com/article/fundsFundsNews/idUSN3046902620070830

Seems to have helped, today we have the us government brokering a sale of them to another unknown entity to keep them from going under this weekend. 
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/11/AR2008091102580.html?hpid=topnews

I didnt see this bailout coming.  I was fairly sure they were going to let LEH go under, if nothing else just to test run for MER and AIG.  I cant see them bailing everyone out. 

Next up, wamu.  Wamu is a big bank, with close to 50b for FDIC to rope up.  Wamu debt insurance is trading at 40% today.  That means for them to issue debt they must pay 40% UPFRONT just in debt insurance.  To float 10 million in corporate bonds, they have to put up 4 million up front and more every year after that for 5 years.  Its death spiral financing, they cannot make a profit large enough to cashflow that.  (Where the hell are they going to "invest" and get 40% back?)  Think of this, I have a cat3-4 hurricane coming to my house in 24 hours, if I called for flood insurance today I might get a better deal on insurance than wamu, that is how bad their situation is.  When/if they fail, that puts fdic in an under capitalized state. 

FDIC bailout coming up for sure.  It will be big. 

On deck after that, ford, gm, aig, mer, c,   ..  when does the madness end?

The market rallied at the end, one thing I have learned this year.  No one panics when things go according to plan.   

I am back in the market this week with a handful of things in the basket, some of them may be the equivalent of lotto tickets.  we pays our money and we takes our chances.   

[desdawg]

Muldoon,
What is your take on Wachovia?

[peternap]

Muldoon,
What is your take on Wachovia?

I'll give you mine for what it's worth Des.
Wachovia was a fairly stable bank several years ago but like most, wanted to be bigger. First Union was a large but questionable bank with a horrible reputation and even worse customer relations problem. Remember when the FBI called BCCI The bank of crooks and criminals international.

When the banks merged, First Union really took control and kept the Wachovia name to get a new start. Same old business practices and the same old growth strategies.

This was all well and good for everybody but the banks customers until the credit crunch hit. I haven't looked at their nuumbers but would venture to say, they have serious problems just because they were on thin ice before this started. Just to clear it up, I have never had an account at either First Union or Wachovia...However, I would not allow our company to take checks drawn on First Union in years past.

[desdawg]

I was curious because I haven't seen much mention of them lately. I know they are another big player.

[desdawg]

I read somewhere that it is estimated that AIG holds $550-600 Million in Fannie and Freddie Preferred stock. I suppose when you measure money in Billions that would seem like chump change. I also imagine that all of the big players have some of that preferred stock on their balance sheets. If that stock goes to zero that would contribute to their demise.