Another doomsday email:
Dear Subscriber,
We warned you this was going to happen. Now it’s here: Lehman Brothers’ shares are crashing.
The stock closed at 16.20 on Friday. As we write this alert, it’s trading at $9.80, signaling a major new collapse could be on the immediate horizon. If we’re right, this debacle is going to be several times worse than the Bear Stearns disaster of last March.
In a last act of desperation, cash-strapped Lehman was in meetings with the state-owned Korea Development Bank trying to sell its profitable Neuberger asset management unit. But those meetings have now broken down. Its last hope for survival seems to be down the tubes.
But Lehman isn’t alone ...
Washington Mutual to its CEO: “Pack up your desk. You’re FIRED!” Kerry Killinger, the CEO responsible for nearly bankrupting the bank was canned yesterday. At almost the same time, WaMu took the first step towards failure, filing a memorandum of understanding with the U.S. Office of Thrift Supervision.
Unsurprisingly, Washington Mutual stock plunged, bringing its total losses for the year to 70% of its market value.
Wachovia admits to bigger woes in its $122 billion options ARMs portfolio. In a shocking revelation, Wachovia announced that 23,600 of its loans are going bad, and a whopping two-thirds of borrowers with options ARMs are opting not to pay the interest and principal due each month.
To survive, lenders are rejecting loan applications
like there’s no tomorrow — and killing sales
at thousands of companies nationwide
In response to the hammering they’re taking, U.S. banks are raising interest rates, pulling credit lines, and slashing credit limits for even well-heeled credit card customers.
As a result, borrowing by U.S. consumers is falling off a cliff. The rate of credit growth in America just cratered 92% in a single month — from 6.1% in June to a mere .5% in July.
A major problem area: Auto loans. The number of new auto loans granted to consumers cratered 17% in the second quarter. CapitalOne lost $150 million on auto loan defaults in the last quarter alone. Sovereign Bancorp and HSBC have closed their auto lending operations altogether.
Now, with auto sales at their lowest levels since 1992 — 16 long years ago — GM, Ford and Chrysler have gone to Congress, hats in hand, begging for $50 billion to survive this crisis.
That’s more than 33 times the $1.5 billion Washington spent to bail out Chrysler in the 1970s.
Meanwhile, the credit drought is also causing earnings to dry up in other industries that rely on credit cards, revolving charges and standard loans to finance customers’ purchases.
The airlines and the entire travel industry is bleeding. Home improvement, furniture and appliance retailers are being squeezed without mercy. High-end department stores, electronics retailers — and every company that manufactures, transports and wholesales these products — are watching sales and profits evaporate.
Put simply, the plague of financial disasters we’ve seen so far is now becoming a pandemic — infecting sector after sector, company after company.
It’s setting many of Wall Street’s most widely held stocks up for the same kinds of massive losses that, until now, have been limited to financial stocks.
Our analysis: The next phase of this great credit contagion is now upon us. It is absolutely crucial that you take action now to protect yourself. And my team and I are ready to help ...