Flat Line

Good bye Lehman Brothers. Good bye Merrill Lynch. Amazing events but neither a real surprise given Wall Street's exposure to the sub-prime trough - Lehman being the most piggy with over $600 billion of exposure. Anybody who owned Lehman stock in June when it traded between $20-25 should have unloaded fer sure . I mean, they tried to borrow money from Korea - hello - if that is not a desperate signal I don't know what is. The good news I suppose is that A) the Fed did not use my money to shore up Lehman's poor judgment; and B) the crisis is a radical de-leveraging of several financial institutions and not systemic. Merrill was less obvious despite its enormous quarterly write-offs; Merrill decided that the Lehman collapse would focus investor attention on their own swiss cheese balance sheet. Liquidity is one-part capital and nine-tenths perception so Merrill consolidated and saved itself an humiliation. And now it is AIG's turn.