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Macro Economic Trends and Risks
Lehman Brothers Bag-Holders

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By RodgerRafter
September 15, 2008

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The holding company is going bankrupt, but the subsidiaries will keep operating. I don't think this will cause much chaos in the markets. Sure, the indices are all trading above some important support levels and we could see a sharp sell-off today if those levels give way. But I don't see the markets completely unraveling over this.

So Goldman Sachs picks up a couple cheap Lehman subsidiaries and Barclays grabs another, and JP Morgan gobbles a few. No big deal. counterparties stay whole and yet more wealth is transferred to the most powerful banks because the assets are mainly stored in the subsidiaries. Meanwhile the bag-holders are the large retirement funds loaded up with Lehman Brothers Holdings securities that become worthless. Here's a list of registered securities from the last Lehman 10-K:

Common Stock, $.10 par value
Depositary Shares representing 5.94% Cumulative Preferred Stock, Series C
Depositary Shares representing 5.67% Cumulative Preferred Stock, Series D
Depositary Shares representing 6.50% Cumulative Preferred Stock, Series F
Depositary Shares representing Floating Rate Cumulative Preferred Stock, Series G
5.857% Mandatory Capital Advantaged Preferred Securities of Subsidiary Trust (and Registrant's guarantee thereof)
Floating Rate Mandatory Capital Advantaged Preferred Securities of Subsidiary Trust (and Registrant's guarantee thereof)
6.375% Trust Preferred Securities, Series K, of Subsidiary Trust (and Registrant's guarantee thereof)
6.375% Trust Preferred Securities, Series L, of Subsidiary Trust (and Registrant's guarantee thereof)
6.00% Trust Preferred Securities, Series M, of Subsidiary Trust (and Registrant's guarantee thereof)
6.24% Trust Preferred Securities, Series N, of Subsidiary Trust (and Registrant's guarantee thereof)
2.00% Medium Term Notes, Series H, Due March 3, 2009 Performance Linked to the Common Stock of Morgan Stanley (MS)
0.25% Medium Term Notes, Series I, Due February 16, 2012 Performance Linked to a Basket of Two Stocks
0.00% Medium Term Notes, Series I, Due May 15, 2010 Performance Linked to the Common Stock of General Electric Company (GE)
Absolute Buffer Notes Due July 29, 2008, Linked to the Dow Jones EURO STOXX 50 ® Index (SX5E)
Absolute Buffer Notes Due July 7, 2008, Linked to the Dow Jones EURO STOXX 50 ® Index (SX5E)
Currency Basket Warrants Expiring February 13, 2008
Dow Jones Global Titans 50 Index SM SUNS ® Stock Upside Note Securities Due February 9, 2010
Dow Jones Industrial Average SUNS ® Stock Upside Note Securities Due April 29, 2010
Index-Plus Notes Due December 23, 2009, Performance Linked to the Russell 2000 ® INDEX (RTY)
Index-Plus Notes Due March 3, 2010, Linked to the S&P 500 ® Index (SPX)
Index-Plus Notes Due November 15, 2009, Linked to the Dow Jones STOXX 50 ® Index (SX5P)
Index-Plus Notes Due September 28, 2009, Performance Linked to S&P 500 ® Index (SPX)
Japanese Yen Linked Warrants Expiring June 20, 2008
Nasdaq-100 ® Index RANGERS SM Rebound Risk AdjustiNG Equity Range Securities Notes Due June 7, 2008
Nikkei 225 SM Index SUNS ® Stock Upside Note Securities Due June 10, 2010
S&P 500 ® Index Callable SUNS ® Stock Upside Note Securities Due November 6, 2009
S&P 500 ® Index SUNS ® Stock Upside Note Securities Due August 5, 2008

Meanwhile, some interesting support levels could be tested this morning:

S&P 500:
1200 level
1200.44 July low
1211.54 September low

Dow:
11,000 level
10,998.77 September low
10,908.64 July Low

Nasdaq:
2200 level
2209.81 September low
2167.29 July low
2212.87 July closing low
2209.81 September closing low

I wouldn't be surprised to see the Fed take action on Tuesday with a rate cut if the markets fall far enough today.