Once Again to the Brink for Lehman?

Lehman Faces Another Loss, Adding Salt To Its Wounds
By RANDALL SMITH and SUSANNE CRAIG
August 18, 2008;
The Wall Street Journal

Lehman Brothers Holdings Inc. has been taking its time as it wrestles with how to escape the problems haunting the investment bank. It probably can't wait much longer.

With the end of the New York company's fiscal third quarter less than two weeks away, some analysts are girding for a loss of $1.8 billion or more, instead of the modest profit they previously expected. If the dour projections come true, Lehman's losses since the start of March would total at least $4.5 billion -- or more than the firm churned out in profit during fiscal 2007.

The likelihood of back-to-back quarterly losses, fueled by widely anticipated write-downs in a portfolio saddled with more than $50 billion in risky real-estate and mortgage assets, puts even more pressure on Lehman Chairman and Chief Executive Richard S. Fuld Jr. to show that the losses won't keep piling up. If they do, Lehman could need to raise additional capital beyond the $6 billion it got in June.

In the past few months, Lehman officials have examined an array of options to bolster the company's financial position, ranging from selling troubled real-estate assets at a discount to divesting a piece of profitable asset-management unit Neuberger Berman, according to people familiar with the matter.

Another stock offering would be hard to pull off without angering existing shareholders, largely because the tidal wave of common shares floated in June has since plunged in value by 42%....

The Case for the Gold Bull Market

We are experiencing a correction in the gold bull market that is within the bounds of our past experience. In 2006 gold had a correction of -22+% in a breathtakingly short period of time, and then consolidated and retested and starting moving higher to the new highs in 2007.

The correction in 2008 while uncomfortable is still very much in line with this bull market. We seem to have violent corrections every few years with major bottoms reached after capitulation lows. More often we experience lesser corrections of 10%.

One possible concern is that this correction will be a sustained central bank intervention, with all the stops out as a move in desperation. Even it is is, it will fail.

This is a possible caution for short term trading, make no mistake. Nothing is certain. But it is just another point along the way for serious long term investors looking for a hedge for their wealth, buying physical metal without significant leverage.

For aggressive traders, we need to be aware of a major opportunity in buying more short term positions in the miners and funds, although this is for the experienced with deep pockets and strong stomachs. A market decline may sink many boats. Deleveraging is still the major market trend.

We can expect violent price swings including moves of even $100 up in less than a few days as the collapse of the dollar hegemony causes a seismic shift as major political constituents migrate to different standards of global valuation.

Here is an essay from Seeking Alpha that contains some interesting charts and data that is useful to review.

The Bedrock Case for the Return of the Gold Bull

More Pain to Come in the Financial Crisis

The real wild card here is continued 'co-operation' amongst the world's central banks, geopolitical events, and of course the length and depth of the recession.

Morgan Stanley sees more finance crisis pain
Sun Aug 17, 2008 9:23am EDT

FRANKFURT (Reuters) - The financial crisis will probably not end until next year or even 2010, Germany's Handelsblatt newspaper quoted Morgan Stanley co-President Walid Chammah as saying in a preview of its Monday edition.

Chammah also expected more banks to fall victim to the crisis, the paper said.

"We will likely see more insolvencies among small U.S. regional banks that have focused on mortgage business," the paper quoted him as saying.

Chammah also said return-on-equity rates of 25 percent were a thing of the past for the investment banking industry, the paper reported.

"I estimate returns in the industry will be more like 15 to 20 percent as a rule," the paper quoted him as saying.

US Dollar Weekly Charts

With the Commitments of Traders as of Tuesday 12 August 2008



With the Moving Averages