The Dow gave back basically all of yesterday's gains as the reality set in. Lehman Bros., the nation's fourth largest investment bank, lost half its value from Monday morning to Tuesday afternoon. The word on the Street is that Lehman is done. At this point it will drift lower until a buyer is found or one is appointed for it by the Fed in another sweetheart deal. Buyout rumors, usually a sure stock booster, failed to stop Lehman from falling 45% today alone.
That's because the Street is expecting another Bear Stearns deal, where the shareholders get nothing. After getting torched on Fannie and Freddie, investors aren't touching this leprous stock. Do you blame them?
Watch tomorrow's hastily called conference call tomorrow by Lehman to try to save the company.
My money's still on another Bear Stearns deal on Sunday. By Friday Lehman will be under $3. Maybe less. Fannie and Freddie are still under a buck. Lehman may be joining them. After that who knows? I'm still watching Wachovia, National City, and Citigroup. National City especially is in bad shape and has been for a long time.
We'll see.
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