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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: ajtj99 who wrote (85017)9/12/2008 8:25:18 AM
From: ajtj991 Recommendation  Read Replies (2) of 116555
 
Thoughts on Lehman's sale.

The actions of the Bank of England today pretty much take out Barclays and HSBC as potential suitors. Both were long shots anyway, IMO.

That leaves Goldman Sachs and Bank of America.

Bank of America is still facing a bond holder fight from classifying the Countrywide Financial buy as a separate entity, allowing the possibility of bankruptcy without hurting Bank of America's balance sheet. For bond holders, it's fool me once, shame on you, fool me twice, shame on me.

That takes Bank of America out of it.

That leaves Goldman Sachs as the lone suitor. What may transpire is they will wait out until Sunday when Lehman is facing collapse and the Treasury and Fed lean on Goldman to step in. Goldman in turn will extract very favorable terms by using its strong position, and everything will be Kum-Buy-Ya on Monday morning for about 15-minutes like it was this past Monday.

Goldman will likely want a low-ball price to compensate for the derivative hits it will take by taking over Lehman. They will also likely want the same Fed window as JPM got when they took over Bear Stearns.

If I'm Goldman, I let the stock drop all day today even if its to $1.00 or less, and then offer $3.00-$4.00/share on Sunday. BSC eventually went for the price it was Friday prior to the sale, and I think that's what they'll be looking at with LEH.
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