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What's Going On With Lehman?

Tuesday, 9 Sep 2008 | 6:31 PM ET

STOCKS GIVE UP YESTERDAYS GAIN

The Dow tanked on Tuesday, as concern about Lehman Brothers' ability to raise much-needed capital battered all the financials.

LEHMAN PLUNGES 45%

Lehman Brothers shares fell more than 40 percent on Tuesday to their lowest level in nearly a decade on concern the fourth-largest Wall Street investment bank would be unable to raise needed capital.

Much of the decline came after reports that Lehman's talks with state-owned Korea Development Bank on a possible capital infusion had ended.

Lehman Latest
Lehman remains steady after hours, with CNBC's Charlie Gasparino.

"The market fears that no one will inject capital in the company," said Nick Kalivas, equity market analyst at MF Global Research in Chicago.

“(Also) there was unconfirmed speculation that the Fed might close the window and allow Lehman to go to zero, adds Fox Pitt Kelton Analyst David Trone on Fast Money.

The put buying action in Lehman is quite bearish, reveals Pete Najarian. It suggests the market is quite concerned about Lehman’s ability to raise capital. I hold a put position in Lehman, he says. I think the stock will go lower. However I’m not saying they’re going out of business.


Dick Fuld is on the phone trying to pull something off right now, reveals CNBC’s Charlie Gasparino. And the management is expected to work all night to pull off something. Perhaps it’s a sale. There should be clarity by the morning, Gasparino says.

Tuesday’s trading was pretty much paying tuition to the school of hard knocks, says Jeff Macke. Skepticism that Lehman won’t survive is running rampant. This thing looks dead and smells dead. I wouldn’t touch it with someone else’s money!

Looking at the broader financial services sector, I think the credit issues that have been problematic for Lehman and every other firm will continue to be problematic, says Karen Finerman. As a result, I sold my position in Citigroup , on Tuesday.

The one thing that’s improving are credit spreads, muses Guy Adami. I wouldn’t discount everything in financials although I don’t think investors should run out and buy tomorrow.

I’d keep an eye on the VIX, adds Najarian. When it hits 30 I think that’s the signal to buy the space.

What do you think? Tell us now!









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OIL AT 5 MONTH LOW

Oil prices slid to a 5-month low on Tuesday on expectations that OPEC would leave output targets unchanged and as new hurricane projections suggested Ike would probably not damage the oil rigs in the Gulf of Mexico.

In addition, the overall materials , energy and technology sectors have suffered precipitous declines over the past 3 months.

S&P Sectors 3 Month Performance

Energy - 27%
Materials - 20%
Technology -13%

More hedge funds had huge redemptions on Tuesday, explains Guy Adami. (He thinks hedge funds are behind the moves because they’re taking profits and, as a result, pushing the sectors lower.) I think Freeport McMoRan and US Steel are buys at current levels.

I agree that there’s opportunity here, says Pete Najarian, but you must have a long-term time horizon because there’s no telling how long the unwind is going to take.


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APPLE DOESN'T ROCK

Apple’s new line of iPod Nanos, iPod Touches, and iPhone software updates left investors less than thrilled and they sent the stock lower.

Steve Jobs looked thin and I thought that was more important than anything that Apple unveiled on Tuesday, says Pete Najarian.

I think Apple as a board needs to re-build their credibility as well as their bench strength, adds Jeff Macke. They didn’t tell the world about Jobs' pancreatic cancer until months after his operation. That erodes investor confidence.

For the record, Apple says Steve Jobs is healthy.


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AFTER HOURS: FEDEX

FedEx raised their forecast for the first quarter of next year, citing the pullback in the price of crude.

I don’t think investors should race to buy FedEx tomorrow, but if crude can stay at these valuations I think the headwinds could turn to tailwinds.

Word on the Street
The Fast Money guys take a look at today's top business stories.





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Trader disclosure: On Sept 9, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (MSFT), (WMT), (UUP); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (ETFC); Najarian Owns (AAPL) And (AAPL) Collar; Najarian Owns (LEH) Puts And (LEH) Put Spreads; Najarian Owns (RIMM) Call Spread; Najarian Owns (XLF) And (XLF) Collar; Finerman Owns (GS); Finerman's Firm Owns (GE), (MSFT), (SUN), (TSO), (VLO); Finerman's Firm Is Short (WB), (WFC), (XLF), (IYR), (IJR), (MDY), (SPY), (IWM), (BBT), (COF), (BAC); GE Is The Parent Company Of CNBC; NBC Universal Is The Parent Company Of CNBC

FPK Or Affiliates May Seek Investment Banking Compensation From (GS) During The Next 3 Months; FPK Or Affiliates May Seek Investment Banking Compensation From (LEH) During The Next 3 Months; FPK Or Affiliates May Seek Investment Banking Compensation From (MER) During The Next 3 Months; FPK Or Affiliates May Seek Investment Banking Compensation From (MS) During The Next 3 Months

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DJIA
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C
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FCX
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FDX
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VIX
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X
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SPDR MAT SEL
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SPDR NRG SEL
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SPDR TEC SEL
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AAPL
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  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

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