Washington Mutual? Lehman Brothers? Merrill Lynch? ?

Question

So I just sold about ~$2200 of GM stock and plan to reinvest that money back in the market tomorrow. There has been a lot of news around the big finance companies and mortgage companies like Lehman Brothers and Washington Mutual, respectively. I know all of these companies are pretty volatile right now, but I think that they could be a gold mind if you pick the right one. They are all relatively cheap to buy right now, but the question is will they collapse or will they survive? If someone buys any of them out, will the buying company do the same thing that JP Morgan did to Bear Stern stock holders (pay them a pathetic $2 per share)?

I want some opinions on investing in these companies and why you think it is a good or bad idea. The most interesting and informative input will get the Best Answer. Thanks

Answer 1

I don't know much about MER but LEH will get a buyout really soon. The sooner the better. BAC is gonna do the buyout but its more like a bailout. I wouldn't invest in LEH 'til it gets to $2. The buyout is gonna be announce on a Friday. WM is likely to hover around $3 to $5 now until LEH finishes. After that we'll have to go through another drop and rebound until JPM buys WM. I think WM might be a good buy but it is very risky. You can down 50% one day and the next day your up 10% so you also have to prepare yourself emotionally too.

Answer 2

Let's break it down: Lehman needs help and fast. Dick Fuld (CEO) has been shopping around to find someone to buy parts of the company instead of the whole thing to keep Lehman still independent; however, with the stock falling over 60% in the last few days, that seems to be less and less likely as investors want them to do something to show everyone that they will be fine. I had heard that Goldman was looking into buying Lehman, but CNBC reported that was not true. Lehman has written down a ton of their assets with even more in debts. Now we saw with Fannie and Freddie that the government could possibly take over Lehman (does anyone else besides me think taking over Fannie and Freddie was a bad move???), which they announced today they didn't want to do because of the cost which in turn is why the Federal Reserve is in talks with private equity firms to help buy Lehman. That is the bad news. Now lets assume the following plays out. Dick Fuld realizes Lehman cannot survive by itself and he must sell the company to somebody. Let's also assume that JPM, GS, or some other bank decides to buy Lehman. Yes their stock price would most likely double and then you can sell off you have a new vacation to Cancun. Now obviously the opposite could just as well happen. Government decideds Lehman is "too important to fail" and they take over Lehman. Now you are left -100% rate of return. Now of course there is always option 3. Someone gives Lehman a lifeline or they find ways to make back their capital. Now Lehman gimps on for a few years before bouncing back and possibly having their stock trading at $20/share.



My advice to you, is that if you are willing to assume a high amount of risk and you don't care if that $2200 disappears for a chance at a big gain, I would say go for it, and I would say Lehman would give you the biggest potential return. I am no expert, but that's what I think. Hope it helps! I also pasted an article about Lehman that was on yahoo finance today you may find informative.

Answer 3

Actually BSC was bought for JPM stock which was for about $10.00 a shre of JPM stock. The $2.00 deal lasted about a minuet, and was raised by pressure by socialists who whined about not getting enough money on a worthless stock.



I can assure you thins won't be happening again. Wall Street hates socialism. It is counter to what the free markets are designed to do.



I think you are taking on huge SPECULATIVE risk if you think that esp LEH is worth anything. Keep in mind that when BAC bought CFC, it was also a "take under" bid at a price below the current price. The $5.00 / sh of BAC stock for CFC was a chap deal but BAC took on over $200 billion in mortgage debt risk.



LEH has huge debt much of it is unknown and they won't say, which in Wall Street terms this means it is "scary debt." All they said the other day is that they have pre-announced $4 Billion in losses, and some $30 Billion in asset write downs.



WM is interesting because they are backed by FSLIC insurance as they are the largest S&L in the USA.

http://finance.yahoo.com/q/pr?s=WM



Your risk here is currently $3.00. if I was going to "gamble" I'd pick WM over LEH. WM still has assets that have value, they have capital, but the market think that their mortgage losses esp in CA, are excessive and ripe for a gov take over.



Going into the weekend keep my last LEH Sept $4.00 PUT.



***** Watch to see if we get a surprise FED rate cut or discount window cut on Sunday, 09-14-08.

Answer 4

I would not buy stock for any of the above. I would invest in there bonds though. In a case of going belly up bond holders get paid off first. Share holders could end up with nothing at all.



I been buying up the following companies stock though:



1) Coachmen Industries (COA)



2) Monanco Coach (MNC)



3)Miller Industries (MLR)



All these companies are selling for way less then they are worth. They have very little debt too.

Answer 5

Northern Rock did no longer bypass bankrupt like Lehman Brothers- it replaced into nationalised like Fanny Mae and Freddie Mac. AIG is getting bailed out too, in assessment to Lehman Brothers. i think of if we could desire to assume who (if all and sundry) is next then the inventory industry might stop being so edgy.

Answer 6

No one knows. There are only two prudent investment alternatives;



A. Don't invest

B. Do an option "Straddle" (this way if there's a pop in either direction...... you make money).



Otherwise... your not investing... you're gambling.

Answer 7

if i were you, i would invest in healthcare e.g wellpoint, unitedhealth etc.

finiancial market is at a crunch and at this point of time, it is nothing but gamble to invest in there.

thannks