Lehman Brothers A Survivor, says Bove

Dick Bove has been relatively quiet of late, but cannot bear to see Meredith Whitney or David Einhorn get the headlines, and is back with a rather tepid endorsement of the brokers.

His latest musings have something for everyone, including longs, shorts and the indifferent:

Lehman Brothers Holdings Inc. and other securities firms will have further losses because of dwindling revenue and their ``incompetence'' at risk management, Ladenburg Thalmann & Co. analyst Richard Bove said.

Business is evaporating in the markets for mortgages, credit derivatives, private equity, prime brokerage and international transactions, Bove said in an interview yesterday. New York-based Lehman, the fourth-largest U.S. securities firm, may have a loss of as much as $2 billion on hedges in the current quarter, he said. Bloomberg

The recent disclosure of Bear Stearns "chaos" hedge, detailed by Kate Kelly in the WSJ, seems to confirm that many of these hedges are poorly designed. When in doubt, short Countrywide as a proxy?

While Bove might not have peeked in Erin Callan's kimono recently, he still expect Lehman to survive, and pays them a compliment to boot:

``I don’t expect to see anybody go out of business,’’ said Bove, who cut his stock ratings and price estimates on Merrill Lynch & Co., Lehman and Goldman Sachs Group Inc. on May 22. ``Two to three years from now these guys will be up running again,’’ Bove said.

``I actually think that Lehman has one of the best managements I’ve ever seen and I actually think it’s a well-run company,’’ Bove said.

David Einhorn’s claims that Lehman needs to raise upwards of $70 billion in capital would seem to be wildly exaggerated, but with regulatory issues and shorts hounding Lehman, they will likely embrace the compliment. Monetizing goodwill from Bove might prove to be difficult, however.  And if Erin Callan had a penny for eveyone’s thoughts she would not need to raise another dime.

Greenlight Capital wanted a battle and has gotten it. How many bullets do they have left? Your move, Mr. Einhorn.

Brokerages Are `Incompetent’ at Risk Management, Bove Says
Bloomberg
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position

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