Wednesday, September 10, 2008

Lehman- *Sigh*- Again: Are We At The End Yet?

Dick Fuld has almost destroyed all the value Lehman has created in the last 24 years. From a split-adjusted high in the 80s, Fuld's mismanagement and blindness to market realities have resulted in a catastrophic decline in the firm's equity price in the past year.

Looking at the last three months, the firm's equity price has dropped nearly 50%. Yesterday alone it sunk 45% from the prior day's close.

Of course, with so much equity value destruction, it begs the question of when Lehman will finally take the huge capital hit everyone believes it is avoiding. This will result, so the market evidently believes, in inadequate capital levels, prompting a dilemma for regulators regarding the fate of Lehman.

Personally, I am hard put to see how Lehman's failure as a corporation could possibly unravel the global financial system. It's a relatively small, concentrated investment bank. And one so badly run that it really needs to exit the scene.

As I've written in prior posts, most recently this one,

"As I last wrote about Lehman here, last week, Lehman is basically a collection of badly-purchased assets, bad management, and one still-reasonably valuable, separate asset management firm.What's the big mystery about where this is headed?

Neuberger will be spun off, back to management, or sold for cash to another firm. One way or another, further asset value reductions will be realized, shareholder value will be further reduced, thanks to the long term effects of Fuld's ineptitude, and the firm will either shrink or die. Its valuable assets and positions will be taken over by other firms, equity value will take further hits, and the firm will finally leave the competitive field.

You can expect a lot more ink and air time over the precise manner and style of these steps. But you know, as I do, that they are coming- and soon."

Is it this week? Will today's earnings- or lack of them- announcement trigger the denouement of this financial drama?

God, I hope so. It's getting tiresome.

Kill the company, already, will someone? Put it, and those of us witnessing this depressing spectacle, out of our collective miseries.

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