Lehman Brothers - Should I buy?

Now I hardly ever write about just one stock because I usually don't get caught up in one story. For instance if you ask me what's on my Wall Street playlist I could list a number of chart bangers like long ESIO, short BIG, long RSYS, long STV, long CLCT, long PBR, long BNI, long CSX, long FDX and a host of other names in a few minutes.

But I wanted to take some time out to comment on Lehman (LEH). Lehman is in a very tough position as it stock keeps plummeting to all time lows (down roughly 95%). They have well respected business lines like the investment banking and money management divisions. However, the trouble lies in their real estate and mortgage portfolio where they are unearthing a large portfolio of risky investments.

Now let's fast forward to my interest in LEH. I am attempting to make a calculated bet here knowing all the pieces that have fallen into place in the last year. Bear Stearns, Fannie, Freddie, and numerous banks allow me to come to my own ODD conclusions of how this may play out. Well I do know a little about the financial industry and Bear Stearns, Fannie and Freddie were all to important for someone to just sit around and let go under. But the problem is that Wall Street and our government preach FREE MARKET CAPITALISM and this doctrine is supposed to allow the market of investors to decide the fates of these firms without interferences. Now here comes the glitch, the markets spoke and nearly drove all these firms to a state of BANKRUPTCY!!! So our government went against the FREE MARKET PRINCIPLE and stepped in and negotiated the Bear Stearns deals which lead to JP Morgan Chase buying that company out at a ridiculous price and more importantly the government assumed the liability of the risky assets that did Bear Stearns in. Then you have the Freddie and Fannie debacle, which are public companies but they are also government sponsored entities. If this doesn't make any damn sense to you either then raise your hand. Freddie and Fannie are owned by stockholders and when the stock began free falling the FREE MARKETS were telling us that there was lots of doubt around the financial health of these firms. Once again, going against FREE MARKET PRINCIPLE the government bailed out these firms by basically injecting the firm with loads of cash...and leaving the stockholders left holding an empty bag. Now many argue and I will agree that Fannie and Freddie couldn't be allowed to fail because they are too vital to our economy...backing roughly 1/2 of the country mortgage investments. I agree with these critics but then question why you would ever let a government entity of such importance ever trade PUBLICLY!!!

Knowing this lets move to Lehman. Lehman is just as important as Bear Stearns and signals to our country, economy and the global markets that our financial system is in BIG Trouble. The only problem is after bailout of Bear Stearns, Freddie and Fannie...the government can't afford to use MORE TAXPAYER money to rescue bad investments like it did with the other three firms. This point is very critical because it is what many believe is stopping Lehman from being acquired. Now bring the Federal Government back into the equation...because of the importance of Lehman (and what it means both locally and globally) the WANT a deal done to acquire Lehman. And WHAT THE FED WANTS THE FED GETS.

After analyzing this crazy turn of events I am taking a huge speculative bet and going LONG on Lehman's shares. Yup, I would take a little bit out of the piggy bank and buy Lehman because of the following reasons:

1. The Fed wants a deal done b/c Lehman signals financial disaster
2. The Fed will not use taxpayer money to buy bad Lehman assets (this will not cause the stock to become worthless like Freddie and Fannie)
3. Some parts of Lehman's business are actually worth buying

My shrewd calculations tell me that a deal gets done b/c the Fed says so and the stock with not become worthless b/c the government will not be injecting the cash. Very important b/c this is what left Freddie and Fannie shareholders crying. With some actual value still left in the company like Neuberger Berman, the headquarters it has to have some intrinsic value. My last support of evidence is the Bear Stearns collapse. The deal was initially negotiated by the Federal Government for $2 a share, which was the equivalent of handing a Lamborghini with a tiny scratch to a potential buyer for say $5,000...and the buyer was JP Morgan. Long story short, the government was forced to raise the value of the deal to roughly $10 a share. Now all things being the same...could Lehman go for $10 a share!!! I am willing to make that bet, however the only thing I struggle discounting is that RISKY BAD DEBT that the government won't buy...what's going to happen to it and who's left holding that worthless piece of investment (note: its looks like the Fed is strong-arming all major investment banking firms to pitch in and buy the bad debt). All that being said it I think an acquisition gets done, it may not be $10 but it should be higher than $4...right?!?