D-Day for Lehman

UPDATE III: AIG is desperately seeking to raise 30-40 billion, in order to avert a credit downgrade. Also, with a few hours left until Asian trading begins, I believe it is fair to say Lehman will be liquidated. We are living in interesting times.

Should BofA go ahead and take out MER, expect the wagons to circle MS.

Whatever the outcome, just know, you will remember the last trading year for the duration of your lives, with great clarity. History books will reference this era and label it and the people in the forefront as “stupid,” “gay” and everything in between.

UPDATE II: Apparently, all buyers have walked away from LEH. And, to muddy the waters a little further, [[BAC]] may buy MER for $25-30 per share. How will the street digest the collapse of LEH, while another major investment bank catches a 100% premium bid? I have no idea.

One thing is certain, a BofA buyout of MER is a defensive one. They (banking fools) are trying to eliminate future headline risk.

UPDATE: Just to recap this weekends developments:

Paulson and Co. refused to bailout the buyer of Lehman Brothers Holdings Inc. [[LEH]] , whomever it may be. As a result, Barclays PLC (ADR) [[BCS]] has walked away from talks. And, rumor has it, so will Bank of America Corporation [[BAC]] .

The closer we get to Asian trading, the greater the likelihood Lehman may fortune cookie its way into a bankruptcy filing.

Video UPDATE: Cramer’s real position on housing, a few years back. I am sure he would like this video pulled.

Poof. Your stupid gasoline supplies are gone.

-Merlin

NOTE: Crack spreads are now north of $70!!!

[youtube:http://www.youtube.com/watch?v=nPaLuzmhxTk]

Great Depression music. We will all listen to this crap, when poor.

Enjoy.

I’m out of here. I have no desire to watch this unorganized mush of a tape today. Everybody is trying to out position/out smart one another, with vacuous bets. There is no need for me to watch the minute by minute ticks, when I know what the eventual outcome will be.

Which reminds me, I need to start shorting TheStreet.com, Inc. [[TSCM]] again. A friend of mine, who is a HUGE Cramer fan, has lost 100’s of thousands by listening to the old bald one this year, following his egregious financial advice. Don’t ask me stupid questions, like “hey, why do you let your friend do that?”

The short answer is: “The Fly” does not try to alter other peoples opinions, unless properly motivated.

Frankly, thestreet.com and realmoney.com are broken business models, that have become the laughing stock of the blogger community and a curse to their followers/subscribers. Only a handful of people, like Rev Shark, make any sense, on a day to day basis. I would expect TSCM to go substantially lower, as his (Cramer) habitual reflexive CNBC moments further tarnish his clownish reputation.

As for today’s trade:

Utter garbage. There are people out there who do not care about pending disaster at American International Group, Inc. [[AIG]] , Merrill Lynch & Co., Inc. [[MER]] , Lehman Brothers Holdings Inc. [[LEH]] or Washington Mutual, Inc. [[WM]] . All they know: U.S. Bancorp [[USB]] , Bank of America Corporation [[BAC]] and Wells Fargo & Company [[WFC]] are great buys. Boo-yah.

This is ridiculous. Go take a look at their earnings. They are not immune.

If there is one thing that I would like to see, more than anything else, I’d like the stock Gods to bestow death to the axis of evil: USB-BAC-WFC. It’s the trinity of bovine thinking.

In closing, my top picks include: [[SKF]] , Western Refining, Inc. [[WNR]] , Freeport-McMoRan Copper & Gold Inc. [[FCX]] , [[DIG]] and short Legg Mason, Inc. [[LM]] .

I bought 10,000 Western Refining, Inc. [[WNR]] @ $11.17.

Disclaimer: If you buy WNR because of this post, your only son will come home sporting a hitler mustache. And, you may lose money.

I sold short 5,000 PacWest Bancorp [[PACW]] @ $29.72.

Disclaimer: If you sell short PACW because of this post, your friends will label you an albatross. And, you may lose money.

I know that term applies to many of you drug addict types. However, I am talking about the spread between gasoline and crude. At the present, the crack spread is above $15. Keep in mind, when Valero Energy Corporation [[VLO]] , Tesoro Corporation [[TSO]] and co. were hitting all time highs, the spreads were not much more than $20.

Needless to say, the refiners must be bought.

Once again, courtesy of “The PPT,” here is a list of refiners, sorted by percentage of shares sold short:

In other news, I now hate people who incessantly buy Wells Fargo & Company [[WFC]] and U.S. Bancorp [[USB]] . I am telling you now: I will track them down and have their mustaches punched off.

By the way, natural gas may spike hard here too, due the fury of Ike. My weather reports say Ike will bring a bigger storm surge than Katrina. If you think that can happen, get long [[UNG]] , Natural Gas Services Group, Inc. [[NGS]] , Arena Resources, Inc. [[ARD]] , GMX Resources Inc. [[GMXR]] , TXCO Resources Inc. [[TXCO]] , NGAS Resources, Inc. [[NGAS]] and Ultra Petroleum Corp. [[UPL]] .

Also, considering the amount of damage that may be done, take a look at BlueLinx Holdings Inc. [[BXC]] , Builders FirstSource, Inc. [[BLDR]] , Pike Electric Corporation [[PEC]] and The Shaw Group Inc. [[SGR]] —just to name a few.

Top pick: Western Refining, Inc. [[WNR]]

What’s wrong with these people? I mean, they seem to be living in a drug induced world of euphoria, where everything is priced in. Are you imbeciles even looking at American International Group, Inc. [[AIG]] and Merrill Lynch & Co., Inc. [[MER]] ? Forget about Lehman Brothers Holdings Inc. [[LEH]] and Washington Mutual, Inc. [[WM]] ; they’re already dead.

Do you think those stupid charts of yours, pointing to a “breakout” in Wells Fargo & Company [[WFC]] , will stand the test of financial Armageddon?

Just in case you didn’t know, the market is not smart. It’s as dumb as a bag of shoes. I live for these type of tapes, when people with zero market knowledge step into dung, trying to play Gordon Gekko.

Listen to me: the market is NOT going up.

Instead of looking for “possible reversals,” you should be structuring your bank accounts to fall within FDIC protection. It’s not a joke or just a theory anymore. The banks have soiled themselves and they will not be getting up.

Hey, what do I know? I’m just a guy with a 155 IQ, who drives around in a diamond encrusted time machines (spinning rims), while drinking monster energy soda from his chalice.

The dollar is getting pounded today, which helps commodities. As you know, I am heavily long [[DIG]] , [[IEO]] and Western Refining, Inc. [[WNR]] .

I like the refiners best, as a play on Hurricane Ike.

Also, Freeport-McMoRan Copper & Gold Inc. [[FCX]] is lifting off. It may be time to revisit Southern Copper Corporation (USA) [[PCU]] too.

Finally, Bill Miller is just a goat herder. That man is unqualified to manage money, regardless of his track record. If anyone from Legg Mason, Inc. [[LM]] is reading, feel free to contact “The Fly.” He will be more than happy to take over Bill Miller’s fund and help save the company!

Until then, I will be shorting LM with great vigor, and tenacity.

NOTE: The solar burritos are, officially, dead: Chipotle Mexican Grill, Inc. [[CMG]]

Federal Reserve and U.S. Treasury brokering talks to rip out Lehman’s spine.

Praise be to Premier Paulson of the USSA.

Merrill’s next.

NOTE: How are my predictions for 2008 working out, so far? Back to my diamond encrusted time machine.

UPDATE: Here are the notable bagholders of Lehman Brothers Holdings Inc. [[LEH]] stock, sorted by shares held.

AXA (ADR) [[AXA]] : 65.7 mill.

Fidelity: 39.5 mill.

Cleanbridge: 39.1 mill.

Barclays PLC (ADR) [[BCS]] : 27.1 mill.

Wellington: 25.5 mill.

Janus Capital Group Inc. [[JNS]] : 22.4 mill.

State Street Corporation [[STT]] : 21.7 mill.

Vanguard: 20 mill.

Norges: 17.5 mill.

Pzena Investment Management, Inc. [[PZN]] : 11.6 mill.

Capguard Trust: 10.6 mill.

Soros: 9.4 mill.

T. Rowe Price Group, Inc. [[TROW]] : 8.3 mill.

JPMorgan Chase & Co. JPMorgan Chase & Co. JPMorgan Chase & Co. [[JPM]] : 6.7 mill.

Oh, in case you are wondering, one of Legg Mason’s funds started a new position in Lehman last quarter: 2 million shares, likely north of $15.

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