Keep an eye on Lehman

Voltron says: Lehman is trying to split into a “good bank” and a “bad bank” (link). If that sounds a bit fishy, that’s because it is. It’s fraudulent conveyance and it’s illegal. Of course, that won’t stop Lehman from doing it because after all their CEO is on the board of the Federal Reserve Bank of New York. If that happens the shareholders will be issued share is in the good bank and the bad bank. Most people will dump the shares of the bad bank and the stock will plummet. Shares in the good bank will most likely rise. If that happens and you are short Lehman (like me) you will be short shares of good Lehman and bad Lehman. If you cover both, you may initially take a loss because after all, Lehman is doing this to increase the overall value (hoping the whole is worth less than the sum of its parts). The trick is to cover the bad Lehman when it plummets and stay short the “good Lehman” until people figure out the scam and it goes down too.

Also the rats have been jumping ship (link, link) which makes selling off parts of the firm less likely.