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Avoid Lehman (LEH)
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As I write this on June 3, Lehman Brothers (LEH) is heading straight down. People may ask, "Why now?" I only know rumors started after the Bear Stearns collapse that suggested Lehman would start to fail. Remember, on March 17, LEH hit a low of 20.25, about ten points lower than where it sits today. Clearly, this company has problems--some known, some unknown to the general public. As Dr. Phil says, "For every rat you see, there's ten you don't." The Bear collapse should at the very least make us wary of investing in companies that appear to be infested. For my money, financials are plague-ridden and to be avoided at all costs. The actions of the Fed have resulted in a quarantine of sorts. One could argue this quarantine prevented the disease of the credit crisis from spreading too quickly. As March panic turned into May complacency, volatility went way down and the cries of "The worst is over!" went way up. Oil took center stage and the financials moved down near their lows. The fall of LEH should get our attention. A quarantine is not the same as a cure. As an investor, I can't rely on a strategy dependent on Fedbailouts. Nor can I rely on company statements that their "books remain liquid." I've heard that one before. Therefore, with hundreds of stocks to choose from, I see no reason to play LEH on the long side. Unless you know something I don't, all indications are that LEH is sick and could create more problems for the sector. A better bet, in my opinion, is to give your portfolio a vaccination with the Ultrashort Financial ETF (SKF). Or, stay in cash and out of financials entirely. Disclosure: Position in SKF. | ||
