Lehman Rebounds as Market Plunges

Lehman Brothers (LEH), on Wednesday, managed to gain 6.68% at 22.36 while the markets plunged. Of course, the stock is very far from the $80 level printed a year ago and this performance can be seen as a mere rebound.

click to enlarge

However, Lehman's investors had at least some relief. Rumors of an emergency sale brought prices from a high close to $50 to a low of less than $20 in two months in a context of generalized sales of financial stocks. Similar rumors circulated also about Bear Stearns (BSC) in the weeks preceding the bank's collapse. Some say that a well orchestrated campaign of short-sellers has been conducted. At a certain point, rumors were that Lehman might be acquired at a discount by Barclays (BCS). On Monday, Lehman shares lost 11 per cent to $19.81. It appears that the Barclays rumor had no basis. And this explains the rebound of the stock's price.

It remains the fact of a market, which is continuously shaken by bad news. General Motors (GM) is an example. Goldman Sachs and Merrill Lynch expressed very negative views on the Company's future ability to stay on the market. Oil, housing and credit crunch simultaneously hit an economy that for the moment seems to resist and not enter in a recession.

In this situation, financial stocks have been the weakest sector in the past months. I tend to be positive. I think that the financial system of the U.S.A. cannot simply collapse. It is the engine of a surprisingly resilient economy and it will manage to survive also to this severe crisis. Actually, I believe this is a long term opportunity for buyers.

The problem, as usual, is that it is difficult to spot the low.

Disclosure: none

Comments

[motherbird]

Given the Federal Reserve and its "financial wizadry" has been exposed as destroyers of money, It now has to choose between its own survival and the hyena's that fed at its printing presses.

Lehman and many other banks are on a collision course to the ash-heap of history. Time is the only variable.













l