You are watching the modern version of The Battle of Midway: LEH+FED American vs. Hedge Funds + Mideast Money (911=> Pear Harbor, Hedge Funds sank US carrier BSC on the opening bell...)
I don't work for LEH but they have troubles no doubt. This sucks ass, three people in my department have been asked to step down. I am on of those three. With a 3 month severance, this sucks ass. No I won't say which firm I work for. Vacation time for me.
I doubt LEH will go down like Bear. Merrill came out with an intraday upgrade and raised its price target on the stock. Obvoiuslyy, they're trying to shore up confidence. Bear fell into a self fulfilling prophesy, where it was losing countery party confidence and noone on wall street would do business with them, just when they needed liquidity the most. prime brokerage saw mass exodus on the week before the JP morgan buyout. the parallels are interesting, but, history rhymes, never repeats.
The simple fact is that LEH simply played fast and loose with inherent benefits of the current accounting rules. They were TOO cute and it simply cannot pass the "common sense " test. My gut feeling is that they , and others, have adopted a serious calamity of defaults in commercial real estate which are going to come home to roost in approximately 12/18 months. Deleveraging is fine provided they carry the costs directly to the income statement and basically come clean with their tier 3 holdings. I don't believe they are going out backwards, but simply could not be an owner until ALL banks have cleaned up their act...whenever.
Oh yeah, I'm sure <i>that</i> was their motive for the upgrade. I mean, a big respectable Wall Street house like Merrill would <i>never</i> pull a sleazy stunt like upgrading a stock just because they wished to dump and/or short a few million shares into the ensuing squeeze... right? I think they're called 'Chinese Walls' for a good reason... Don't forget that in Asia they often make their walls out of flimsy paper!
American are launching counter attack: Enemy Carrier the "Greenlight" got hit hard, Mideast sailors are jumping into the water!