Chart(s) of the Day: Bear Stearns & Lehman Bros

Uh-oh: The two of these charts — both have been on a sell signal for weeks — seem to be trading about a day apart:

Lehman scale on left, Bear Stearns scale on right

For the past 6 months, the market has been way behind the curve in terms of Bear Stearn’s situation.

Question: Is the market still behind the curve as to Lehman, or overcompensating in light of Bear? (I do not know . . .)

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What's been said:

Discussions found on the web:
  1. rob commented on Mar 17

    hmm. i have some CD’s in Lehman’s bank.

  2. afferent input commented on Mar 17

    I think BSC was used as a sacrifice. Blood needed to be spilled, and blood of mighty bear isht much very strong. Plus JPM gets a nice backstop from the Fed, who probably could use the help.

    Something tells me Lehman won’t be on the chopping block tomorrow. Besides, can’t LEH borrow directly from the discount window now?

  3. Ray Eames commented on Mar 17

    Hello had you read this DOC,
    My point of view it’s the end of the begining

    The mortgage securities outstanding totaled a value of 11000 billion. The price of US real estate is overvalued by 20 to 30%. If one quarter of the value of US households volatilizes, it is 2750 billion of debts that are not likely to be honored and become losses for the financial system.

    According to the study signed by Greenlaw, Hatzius, Kashyap and Shin (pdf), the capitalization of banks, government agencies (GSE) and savings banks totaled 1681 billion US.

    Their direct exposure to mortgage securities totaled 5591 billion or half of the current. They are therefore potentially face of impairments reaching 1375 billion – nearly all of their capital.

    These figures do not take into account potential losses in other sectors of credit consumption, auto credit, commercial real estate.”

  4. andy commented on Mar 17

    what about lehmans t-bill spdr “bil”, I’ve made 65.00 today on it, bought it today, is a fund like that safe? I’m so freaked out, its in an account at etrade, so even that is freaking me out.

  5. Greg commented on Mar 17

    How is it possible that, with Lehman collapsing on this chart, Bear obviously destroyed, Citi faltering, and Goldman set to write down $3 billion tomorrow; with the Nikkei down, the Hang Seng down, the ASX, the DAX, the CAC, the FTSE, and the TSX all bleeding; and with the S&P hit, along with NASDAQ……..


  6. Ross commented on Mar 17

    Bout Lehman,

    You give me a free pass to the Fed and I promise not to go out of business.

  7. Ali Saygin commented on Mar 17

    This morning on the radio, one guy said he couldn’t get his money from the money market fund at Wachovia, that he had to use the margin account since the funds were in 7day auctions.

    Is this guy dumb, or is Wachovia clearly having trouble with cash? Can they use the money in the money market funds for such purposes ?

  8. AGG commented on Mar 17

    Forget the Dow, watch tha S&P and other large indexes. The more corporations, the harder it is to manipulate them.
    Assume the following:
    1) Stock prices are going down for six months.
    2) You know what house prices are doing. For the next year or so, cars, boats, paintings, etc. will descend in price.
    3) the descent will be more than the nominal amount in dollars because the inflation rate will probably go to a 20% panic rate.
    4) The war will run out of money so you can short defense corporations.

  9. cathompson commented on Mar 17

    greg – Despite what you read here no preconceptions allowed. The long view is vanity. Tick by tick friend. Wait for it. This is a fantastic market, made to trade.

  10. Vermont Trader commented on Mar 17

    DO you really think that the trading desks are going to let all those puts they sold you expire in the money on Thursday without a fight?

    This is a shake out and the powers that be will consolidate their holdings and then back up we go.

  11. cathompson commented on Mar 17

    greg – I buy 1 2 and 4 but not 3.

  12. 2and20 commented on Mar 17

    lehman is sound i reckon. $100bn in liquidity, nimble enough to have hedges on any bad assets it owns, and not dumb enough like the commercial banks to just have tons of garbage mortgage securities sitting around.

    once the rumour mill gets bored here, it will move on elsewhere.

    i’d like to thank whoever sold me lehman stock early at $21 and change. i appreciate it (current live bid $31.30). 50% a day…annualize that!

  13. Donkei commented on Mar 17

    The Dow closes up nearly 100! Ah, gracious sakes, thank heavens this illiquidity/insolvency/dollar panicky spell is over.

    But I’m keeping the farm.

  14. cathompson commented on Mar 17

    the bulls worked very hard today. Lot of heavy lifting. I would have been more impressed if they could have finished on the high of the day.

  15. Portland Refugee commented on Mar 17

    Until the housing market stabilizes I don’t believe any iBank is not suspect for going belly up.

    Unfortunately, I’m starting to see a breakage of price trends (to the downside) in many areas (Portland, Seattle, SF, NY) that have otherwise held during the past seven months and jobs are increasingly more difficult to find.

    I don’t give much credence to todays rally (or any of them as of late) because imo, they appear very suspect. Granted I don’t have as much history in the game as you ladies & gents do but if it looks like a fish, smells like a fish….call me crazy, but i’m gonna go out on a limb and say, its probably a fish.

  16. Mikkel commented on Mar 17

    How much will it go down tomorrow/wed if I’m right and the Fed cuts only 0.5%?

  17. Michael C. commented on Mar 17

    You just cannot kill the cockroaches in this market.

    If I had my wish, the Fed cuts 100 bps tomorrow, and the market makes fresh new lows in every indices in the early morning. Then the stock market and commodities market crash concurrently.

    Would that be enough to kill the cockroches?

  18. gmp commented on Mar 17

    why should be BSC (and LEH), different form GS, MER, MS?

    why should I believe goldman sachs didn’t do the same thing BSC did.

    I don’t believe BSC were the bad guys. they all are member of a single family.

    it’s like the mafia.
    when you arrest the cousin,
    the uncle and the brother
    were doing the same things…

    they will all fall under $10.

  19. Greg commented on Mar 17

    Hmm, my new question is, when the dollar is put in front of a wall tomorrow, does he even get a blindfold and a cigarette before his 100bp execution?

  20. bonghiteric commented on Mar 17

    Ron Insana declared that the BSC-JPM deal was “risk free” for JPM. Could anyone please explain what constitutes “risk free” when you’ve just set aside 5% (allegedly JPM reserved ~$7Bil for litigation expense) of your market cap at the close to cover future legal liabilities? Am I missing something.

  21. John Borchers commented on Mar 17

    The government decided this weekend that we are going to have a severe recession because they didn’t protect investments. Without investor confidence the banks have nothing. Confidence is not made by selling Bear at $2.

    The gov’t is going to pay for it in the end anyway and it’s going to be much worse now.

    There is no reason to buy if the gov’t is not going to back. The people nearing retirement are pulling money out of the market, you can guarentee it.

    The gov’t is telling you are assets are worthless. If they bought them, they would say they are undervalued but they aren’t doing that.

  22. Damian commented on Mar 17

    Barry – what’s the sell signal? From your software?

  23. Valdan commented on Mar 17

    Can you lose a lot investing in U.S. Treasuries? I know you can’t make a lot, but is there a big downside risk? Are they O.K. until the Fed begins hiking interest rates?

  24. Portland Refugee commented on Mar 17

    I just took another gander at LEH (Aurora) underwriting practices (vintages 2004-2006). Dubious at best. They have the same bogus documentation guidelines as CFC, IMB, National City, some of Citi’s ALT-A (however, Citi does not allow exceptions), and parts of WAMU.

    So many of the guidelines have loop holes. I remember thinking ‘how naive’ at the time. But knowing what we know now, it was more than likely intentional.

    If they don’t take a major hit, I’d be surprised given their underwriting criteria alone.

  25. gmp commented on Mar 17

    BSC operation,
    it’s risk free because the FED is a private bank and JPM is part of it, and they print how much money they want, no risk for them.

    And since the government has no authority over them, no problem.

    banks never lose, they own the system. only people who depends on bank lose.

  26. Donkei commented on Mar 17


    you’ll always get your principal back when investing in US Treasuries. The guys you’re lending money to are the same folks that print it. But that’s the problem–your principal might very well be worthless by the time you get it back, if the money printers don’t slow down the presses.

    It’s called monetization of the debt, and w/ Bear’s quasi-rescue over the weekend, the policy is well under way.

  27. Mich(^IXIC1881) commented on Mar 17

    What I am wondering is this: If I were a BSC employee whose 401K/stock options/stocks got raped by JPM, would I go to work and do my best for my new employer??? Each time I think of this, I think of the rogue trader at Soc.Gen, and he didn’t hate his employer!

    What do you think?

  28. Mich(^IXIC1881) commented on Mar 17

    I remember seeing a message about this in one of the comments, and since I am very heavy with proshares stuff, was wondering about this.

    ProShares Have No Counterparty Risk with Bear Stearns
    Bear Stearns is not a counterparty to any of the financial instruments held by ProShares. In addition, ProShares does not use Bear Stearns for execution and clearing services.

  29. Greg0658 commented on Mar 18

    Shock n Awe … lame duck NOT … GWB takeover
    run for the caves with food & water … and a sword
    (light sabre would be nice)
    the 21 century’s been a blast
    :-) :-o :-( :-|

  30. Greg0658 commented on Mar 18

    spurred on
    $2 price and Pottersville
    this RGB world is playing the Passion Play
    alternate reality
    Bohemian Groves murder of Dull Care

  31. Karl L commented on Mar 18

    Is Lewis or China? attempting to buy the bear? Price keeps getting bid up?

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