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Warning: More Write-Downs Ahead

Maybe the financials have bottomed and maybe they haven’t, but either way it looks like more write-downs lie ahead.

Foxx-Pitt Kelton analyst David Trone wrote in a note to clients that he expects Goldman, Lehman and Morgan Stanely together to write-down another $6.1 billion on their "problem assets" across leveraged loans and commercial and residential mortgages.

According to Trone, they face new challenges due to sharp declines in international markets, seasonal customer weakness and settlements with state regulators.

"As a practical matter, we see short-duration mini-rallies coming and going, but we doubt that a definitive, sustained upside breakout is looming," Trone concludes.

What’s the trade, here?

I think at a certain point Goldman Sachs will get oversold, says Joe Terranova.

I’m long Goldman, adds Karen Finerman. But for me it’s not a one-quarter story.

During his interview on Fast Money Trone presented a few interesting scenarios concerning the future of Lehman.

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"Lehman has at least two distinct options in-front of them," Trone says. "One option is to create a new structure for their commercial mortgages. The second option is that if the stock gets weak enough the company could take itself private around $13 / share."

But Lehman management can’t afford to buyout the company and they can’t raise debt. "So they’d had to sell Neuberger Berman to finance the tender offer. And they would come up short about $3 billion. So they’d have to get a private equity firm to invest."

In case you're wondering, the traders find that scenario tough to swallow.



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Trader disclosure: On Aug 28, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (BTU), (GS), (INTC), (MSFT), (NUE); Jon Najarian Owns (C), (JPM); Jon Najarian Owns (AAPL) Calls, (MRVL) Calls, (NKE) Calls, (XLF) Calls, (AFL) Calls, (PMCS) Calls, (TIE) Calls; Jon Najarian Owns (UNG) Call Spreads; Finerman Owns (GS); Finerman's Firm Owns (MSFT), (SUN), (TSO), (VLO); Finerman's Firm And Finerman Own (C) Leaps; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Finerman's Firm Is Short The British Pound; Terranova Owns (AAPL), (RIMM), (EOG), (FCX), (GS), (KOL), (NOV), (POT), (SA), (X), (VLO); Terranova Owns (AIG) Puts; Terranova Is Long Dec. 2008 Reformulated Gasoline Futures; Terranova Is Long Crude Oil Time Spread (Long Oct. 2008 Crude Oil Futures, Short Dec. 2012 Crude Oil Futures)

Terranova Is Chief Alternatives Strategist Of Phoenix Investment Partners, Ltd.; Phoenix Investment Partners Owns More Than 1% Of (ABD), (ARE), (BRE), (CNTY), (CLB), (OFC), (DLR), (ESS), (EXR), (FL), (IAT), (IGE), (LNET), (MAC), (OIIM), (PSPT), (DBC), (DBV), (SLB), (SKT), (BLV)

Terranova Is Co-Portfolio Manager Of The Phoenix Diversifier PHOLIO; Phoenix Diversifier PHOLIO Owns (IGE), (DBC), (DBV)

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