LEH is priced to perfection and seriously NOT undervalued, at least according to The Fed Model, or greenspan model, i.e, LEH earnings yield is spot on and in line with what fair value is, however, that is based on old metrics, like trailing earnings and one can almost best with out a doubt that LEH will have continued poor EPS reports, so future value is not priced into the current overvaluation and thus a current value discount needs to be in place ASAP!!

the “nytimes” says that leh just reduced its leverage ratio from 31.7 times to 25times by a “more than $100Billion” asset sale. when did that happen? that’s quite a chunk of change to trade hands on the q.t. and to whom was it sold(besides the amount “nyt” detailed as “A small amount of the sales were to two hedge funds set up by former Lehman executives.”)? one of those clever financial engineering re-packagings they’ve presented to the fed’s hoover(which then should be a repo and not a sale)? lastly, should we presume it was sold at cost or a profit? if so, does that mean they’ve sold off the family silver?

ok, say we believe the party line and then stock is undervalued. so at what price does it become a takeover target? surely it should be around there now? why aren’t the barbarians at the gate?

LEH trying to defend its stock price prior to a massive, fool’s-hazard equity flotation has the look of sheerest desperation, but it’s not wholly irrational. Shorts on BSC were the incoming tide that cut the sand out from under their feet. If LEH can’t get capital now, they, too, are going to go feet first into the zombie maw, so they might as well burn their cash in a mad frenzy to scare off the unclean horde whilst screaming for a rope ladder to make it into the Fed’s castle. This has an ugly look to it, though.

. . . Personally, I’m of the view that the world would be a safer, more level place is ALL of the ibanks were et by raptors. They are too big for the safety of the financial system, add no value, and act for no one but themselves. The US gov can find another way to float it’s debt—and should. Leave speculation for small piggy hedgies, and let the ibanks find the ‘returns’ they have earned. But one at a time: it’s better theater this way. “A Carnivore’s Progress,’ an allegory for Our Times.

My crystal ball sees LEH with operating cash flow of -42.17B and growth decline as far as the eye can see in terms of years, … I imagine The Fed is waiting to bail them out

Bear Stearns Changes in Accounts Receivables exploded 3 fold from 2005 to 2006, then from 2005 to 2007, we see a nice jump from (552,783) up to (17,136,000)

http://uk.finance.yahoo.com/q/cf?s=BSC&annual

By contrast, LEH, between 2005 to 2006 had receivables double, while between 2005 and 2007, we see a bump from (3,700,000) to (16,411,000).

They look like twins!!!!

Who said it? Cramer. When did he say it? 5/28 over at RealMoney, a site to which I occasionally contribute. The article was called: “LEH Has One Play.”

I don’t agree with Cramer’s logic here, because I am risk averse, and a loss of confidence has a way of snowballing, no matter what you do. Better to keep your powder dry, survive, and then buy back when things have turned.

When will investment banks realize that they have taken on too much operating leverage (asset risk), which means they have to decrease their financial leverage?

Now, all this said, Lehman survived LTCM because of a private rescue effort where they offered favorable terms to finance their inventories. It was a desperate gamble, but it worked. I know of a firm that still gets a premium rate to finance Lehman’s prime residential mortgage inventory, because they stood by Lehman in 1998.

Unlike Bear, Lehman has friends. I’m not sure that will be enough to protect them, but it gives them a better chance.

PS — Note to Dick Fuld: yes, lightning can strike twice in the same place. Why were you running your leverage so high during an overheated market?