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Random Thoughts: Is Lehman Here on Monday?

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Chatter of a takeover sweeps the Street.

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  • I will again like to highlight the tight correlation between the BKX and S&P. It's imperative that the banks hold or the market will cascade lower. Don't shoot the messenger, just please respect the dynamic.

  • This Citigroup (C) hedge fund closing is an embarrassment to the firm. I worked for Vikram at Mother Morgan and he's a smart guy, as evidenced by the fact that he sold his hedge fund to Citigroup for $800 million and the company dumped it 11 months later.

  • Lehman (LEH) CFO Erin Callan was getting rave reviews for her poise as recently as yesterday and was tossed into the volcano this morning. It just goes to show you on Wall Street, you're only as good as your last trade.

  • I sold my last slug of Goldman (GS) calls. Why? One, it was a pure trade. Two, my sense (no edge, just my eyes) is that Lehman is "gone" by Monday and, as pondered my opener today, Goldman is on a very short list-heck, it may be the list-of players left with the capacity to absorb the company. Gun to head, it goes out as a teen.

  • According to Mike O'Rourke at BTIG, "By our calculations, the Energy Sectors weighting (now 15.2%) moved ahead of the Financial Sector (now 14.95%) in the S&P 500 today."

  • We don't "do" victory laps in the 'Ville but considering the massive, widespread pushback when I first opined that this would happen in 2003, I'm gonna rotate around in my chair and smile quietly to myself.

  • I'm looking hard at GLD $85 as a potential "cut bait" level. That would, of course, get me straight short crude, so I'm having a mental tetherball to that effect. Like my head needs another game right now!

  • Past support is future resistance. In that vein, keep an eye on S&P 1350.

  • While doing the "financial media thing" recently, the universal acceptance of inflation-and the insistence of opinions in that regard as it relates to the obvious trade-vibed my contrarian antennae hard. And I say that with a "long humility--short hubris" pairs trade on in size.

  • Back to the energy complex, it's worthy to note is that there are 37 energy names in the S&P 500 and 90 financial names. As a result, the average market cap for an energy name is $48 billion (obviously skewed by Exxon (XOM)) and the average market cap of the financial is $19 billion.

  • Hey Newton, look at Apple (AAPL), which fell out of a tree, and Research in Motion (RIMM), which has pink eye. That, coupled with S&P 1350--and, oh yeah, Lehman--is the cause for pause in today's fray.

  • Last night I got to thinking about China. Down 50% since October, it's prolly a pretty decent risk reward. "Hey Todd," I said to myself as I got home from Harlem and watched Blow on TV in the comfort of my air conditioned home, "you should revisit that FXI tomorrow morning." "Good idea," I told myself, and I pledged to do so. Of course, this morning, between trading my existing positions and channeling vibes into our media partners, I completely A.D.D.'d the entire thought. Grrr...

  • No looking back. Profits, as we've learned, reside in the ride ahead.

  • Good luck Minyans-be the ball and hit it hard.


R.P.

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