All the news today was not actually news
at all, but speculation. Speculation on what is happening with Lehman.
If one were to gauge the health of Lehman by observing their share
price, then one would deduct that Lehman is in trouble. Selling on
Lehman today was extremely high, near a panic level. There was floor
talk during the market hours that Lehman may have had to go to the
Fed’s for money. Later in the day Lehman came out and said that was not
true.
Lehman Brothers Holdings Inc
- Reportedly Lehman Treasurer denies speculation that it has accessed
Fed borrowing facility; notes last time accessed facility was April 16
- Notes its liquidity position in Q2 is $40B vs $34B at end of Q1
Their treasurer provided liquidity figures for Q2, but did not say
on what date those liquidity numbers were from. As we all know
liquidity can vanish nearly overnight on a bad hedge or other types of
losses. So their statement provided no real insight into what is really
happening inside Lehman.
Let us not forget that Lehman was at the center of an intensive
study by David Einhorn where he exposed potentially severe losses being
hidden by Lehman. His original article can be found HERE.
So are the issues which Mr. Einhorn exposed coming to light? Or is this
just speculation? Whichever it is, the market has voice their opinion
and has cast the vote of "no confidence".
Are we watching another Bear Stearns in the making? We don’t know,
but something is not good at Lehman, and we may never know what it is
if this gets swept under the carpet. Although I doubt it can be at this
point.
Tonight we have this additional information on Lehman…
* Financial Times REPORTS THAT LEHMAN LOST BETWEEN $500M AND $700M IN Q2 ON VARIOUS HEDGES
* WSJ REPORTS THAT LEHMAN REPURCHASED SHARES ON TUESDAY
- The article adds that Lehman may seek to sell shares to a consortium of investors.
- The report also says that Lehman has recently talked with 1 foreign entity.
This morning we had restructuring news from General Motors (GM). CEO
Rick Wagoner said today that the rising fuel costs were "permanent",
inferring that the high cost of oil will not go away. The restructuring
plans by GM are the most aggressive in their modern history. They are
going to spend many millions of dollars in order to change their
product lines, move plant operations, close some plants, and layoff
workers. An effort of this magnitude would not be put into action if
they saw the current oil price as a short term problem. As I have said
in recent posts, oil is on a multi decade bull trend.
