Financials on the Brink, Housing in the Drin

By Justice Litle

Related Articles

Another day, another round of bad news from the brokers and the banks.

The financials got whacked again yesterday — taking the market down along with it — on news of further debt downgrades from Standard & Poor’s.

On the i-bank side, Lehman, Merrill and Morgan all saw their credit ratings take a hit. On the commercial bank side, Wachovia and Washington Mutual said sayonara to their current leaders. This implies more bad news in the pipeline.

“Free Money” From the Government? Follow the detailed instructions outlined in this letter and you’ll learn how to add $3,750 to $11,450 to your bank account every month, courtesy of the U.S. government. Sound too good to be true?

Read on and learn how you can boost your bank account every month …

About a month ago, your humble editor compared Western banks to an old radio filled with cockroaches. (See Banks a Lot archived on the TPG Web site.) Four weeks later, the roaches are still pouring out.

At various times in the past few months, Taipan Daily has pounded the table for shorts on the broader financials. Those shorts are working well now, with XLF (the financial SPDR) trending lower in stair-step fashion and the Philly Bank Index ($BKX) testing its lows.

But in terms of keeping a finger on the pulse, the new bellwether for financial stocks just might be Lehman Brothers (LEH:NYSE).

Lehman Brothers (LEH:NYSE)

Lehman is the smallest bulge-bracket investment house on the Street now that Bear Stearns is no more. Many thought it would follow in Bear’s footsteps during the heat of the crisis. (That’s where that big downward spike came from in early Feb.)

So far, Lehman has defied its critics — thanks in part to the smart moves of CFO Erin Callan and CEO Dick Fuld. But the sharks are still circling, and some very smart people think Lehman is still teetering on the brink.

The sharks smelled blood in the water this morning, as news arose that Lehman may be forced to raise billions in fresh capital to shore up its balance sheet.

The big question is how much exposure the investment bank still has to toxic mortgage trades and so-called “level 3 assets” — opaque stuff holdings that are extremely hard to value.

Watch LEH and the $BKX. If one or the other cracks, there could be another big downward whoosh for the financials. (“Whoosh,” of course, being a highly technical trading term.)

Buy One, Get One Free

US house prices, % change on previous year

Meanwhile, the housing bust is still in full swing. The above chart was featured in a recent Chart of the Day, but is worth reposting for those of you who didn’t catch it.

Pages: 1 2 3

Liked this article from Taipan Daily? You can receive the same great commentary and insights directly to your email box when you claim your free subscription to the Taipan Daily eletter service. Simply fill in your email address below and hit 'subscribe'.

Subscribe

NO-SPAM PLEDGE: We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from Taipan Daily with a few clicks.

Related Articles

Tags: , , , , , , , , , , , , , , , , , , ,

About the Author

Justice LitleJustice Litle, Executive Editor for the Taipan Publishing Group and of the Free E-letter, Taipan Daily, has a unique background that has served him well in the markets. Originally pursuing a PhD and a life in academia, his career path changed forever after discovering The Investment Biker, Jim Rogers chronicle of macro investing by way of motorcycle.

See All Posts by This Author



Taipan Daily is your free resource for late-breaking investment opportunities to help you beat Wall Street to the profits. Filled with investment analysis and insight from every sector. Taipan Daily delivers just the right blend of safe opportunities with the fast-moving plays, so you have an insider's edge over Wall Street and other investors.

See All Posts from This Publication

Post a Response



Technorati Tags: , , , , , , , , , , , , , , , , , , ,

Receive These Valuable Investing Strategy Resources to Your Inbox Courtesy of Contrarian Profits

    Subscribe
We respect your privacy.
Choose any of the FREE subscription services below that you'd like to receive, enter your email address, and click 'subscribe'.
Contrarian Profits

The Daily Reckoning



Select Edition:
Penny Sleuth

Money Morning

Investor's Daily Edge

Money Morning UK

Investment U

Whiskey and Gunpowder

Taipan Daily

Offshore A-Letter

Today's Financial News

International Living

The Smart Profits Report

Spiritual Wealth