Lehman Brothers (LEH) again dragged down the entire market for the great majority of the day. The stock closed last night’s afterhours at $7.25, and was trading below $5 by today’s 8am premarket. By 8:30, the stock was below $4 and by the opening bell, the stock was already down 38%.
But in the last half hour of today’s trading, Bank of America stepped in to stop the hemorrhage. This large bank, who earlier in the year bought Countrywide, announced a possible purchase of Lehman Brothers. The announcement did little to the common share price of LEH, maybe because no one believed them, and the stock closed down 41% to $4.22. Later in the night, the Federal Reserve announced that they would step in and help Lehman sell itself, and Bank of America started to sound like it was having second thoughts.
The Bank of America announcement seemed to kick Washington Mutual from red to green and the Dow to skyrocket. Both WM and the Dow took a sharp turn north right afterwards. In premarket trading, WM stock had slipped below $2, but turned around in the last half hour of the trading day to close at a 22% gain to $2.83.
After the closing bell, Washington Mutual released an updated third quarter expectations report, which included a focus to build reserves, an unchanged long-term credit outlook, a stable $50 billion of liquidity, and an updated projection of loan losses in the third quarter- from $5.9 billion to $4.5 billion.
But then a few minutes later, Fitch Ratings threw a wrench in the works, as they seem to enjoy doing, and “downgraded” the company. Fitch is the fingernail in the birthday cake. Fitch is the hair in the risotto. A few hours later, Moody’s Investors Service, another ratings company, jumped on the bandwagon and downgraded WaMu too. Who are these people? I’d like to see what their stock would do, if they had any. A MarketWatch article that my friend sent me earlier in the day, before all the stories and ratings hit, stated that Washington Mutual is currently trading at just 17% of its book value, so I’m hanging on. If WM crawls back, I think it will pull my other financial stocks back up with it.
In today’s afterhours, WM broke $3 a share. Sure I’m seeing the glass half empty, but in this bear market, there are only two possible scenarios: go bust or get up. I’m betting on my stocks getting up.
In much graver news than losing money, Hurricane Ike is headed straight to Galveston, Texas. This island was completely wiped out on September 8, 1900 by an unnamed hurricane that killed an estimated 10,000 to 12,000 people, and which made the storm the deadliest natural disaster the Unites States has ever seen. Today, the mayor of Galveston ordered a mandatory evacuation of the island. The National Weather Service stated that staying in Galveston would bring “certain death” as a storm surge of 20 feet is expected to blanket the island and the hurricane is expected to morph into a category 3 by the time it makes landfall tomorrow night.
Despite the impending storm, which some are already predicting to be “catastrophic”, crude oil lost $1.71 to close at $100.87, nearly breaking the $100/barrel psychological barrier. The Dow gained 164 points, all of which were tacked on between 3:30PM and 4PM, and closed the day at $11,433. The dollar hit a year-high; it would now take just $1.39 to get one euro. Thanks to WaMu, I closed the day up $37.
