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Freaky Friday Potpourri: Can Lehman Save the Day?

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Takeover talks could give bulls some life.

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"It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another."
--
Gordon Gekko, Wall Street



The Freak that is Friday has arrived and true to form, it caught alotta folks looking the wrong way. The news du jour is that the Korea Development Bank might be eyeing Thy Brothers Lehman (LEH). Given sentiment in the sector and field position of the group, traders seem to be screaming "Ready, Fire, Aim!"

We can file my Lehman position (see below) under "better lucky than smart" as I got involved due to the technicals and price action. I don't profess to know whether this deal gets done and haven't heard price talk. Given that a fool and his money are lucky enough to find each other in the first place, I'll gladly make some sales into the lift.

Hit it to quit it, GG, and give Darien my very best.

Some Random Thoughts:

  • Line-up at the Treasury!

  • Is it possible to plagiarize yourself?

  • The emotional trifecta of denial-migration-panic exists for all time horizons.

  • Indeed, it's possible that we've seen "panic" in a trend (into the July lows), "migration" in the phase (as the credit crisis waffles through the sectors) and "denial" in the broader cycle (as most people still believe we're closer to the end than the beginning).

  • The Homies have quietly rallied 30% since July. I'm not smart enough to know when or if this sector will bottom but as they were in the first phase of the credit crisis-a process that has since migrated through the financials and financials in drag but has yet to fully manifest in retail, tech, credit cards or commodities-it warrants a mention as we find our way to better days.

  • Fannie (FNM) and Freddie (FRE) must finance $233 billion of debt by the end of quarter. Massive amounts of corporate credit (away from the GSE's) will also come due in September. Only so many fingers exist to plug holes in the financial dike, my friends.

  • Can you imagine how silly he looked trying to reel this in?

  • One of the great "nuggets" I picked up last night at my gaggle with Minyan Peter, Eugene Linden, Jeff Macke and others? A few years ago, the declining savings rate was viewed as bearish. Now, as we enter the early stages of deflation, a rising savings rate will be viewed as bearish (hoarding).

  • Well, that and the "fair value" of the S&P given the state of the credit markets is somewhere around a "8-handle." (S&P 800-ish).

  • I offered on July 16th that an upside window existed for the bulls and I continue to sense that although I'm generally keeping a tight risk leash and hitting it to quit it as the disconnect between credit and equity builds.

  • With that in mind…


The Following Buzz appeared yesterday at 2:20 PM…

In the vein of housekeeping, I've trimmed my and slimmed my book today. Recent pears, er, pares include Apple (AAPL) (I don't like the way it trades) and my S&P calls (for a small loss).

Additions? Pep pointed out a DeMark buy signal in The Brothers Lehman (LEH) just as I was watching it boogie and we both took an upside flier via October calls.

As option volatility in the name is particularly fat-and as I have mas respect for what the credit markets are telling us-it's a small position, pure trade and-once again--not advice.

As I've also got some Merrill (MER) upsides with a stop below $23, I'll likely punt my Fannie (FNM) stab that was added on yesterday's close. That boat is a tad crowded and while it could very well tack on a few bones, I don't have a particular edge.

Speaking of edges or lack thereof, I do have some Yahoo (YHOO) calls but don't have a catalyst. As such, I'll trim some risk if this puppy trades below $18.50 (although I'm gonna keep something should the mouse--or anyone else--make a run for the cheese).

Some Final, Parting Thoughts:

  • If you think it's slow now, just wait'll next week! Alotta traders, institutions and hedge funds are pressing for performance and it's very emotional in the marketplace.

  • Keep your wits about your and recognize the environment we're currently in. Capital preservation, debt reduction and financial literacy remain central tenets of any viable investment philosophy.

  • Good luck Minyans and let's end this week with some jingle in our jeans.


R.P.

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Positions in LEH, MER, YHOO
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