At an investment symposium I attended last night, someone asked me whether I thought Lehman Brothers ( LEH) was going under. I said, no, no I didn't think so. It's got a great franchise with a good cash position, reduced leverage, much better management than Bear ( BSC) and a buyback that's kicking in that wouldn't if things were as bad as the bears make it out to be. So, the individual asked, would I buy the stock? I said, "Why the heck would I do that? To catch a 2- or 3-point rally? There is no earnings power at Lehman." I explained that some stocks are neither longs nor shorts -- that, to me, is Lehman. There's no reason to short it, because I don't think it is going under but many are betting that way, and there is no reason to go long it, because the place is set up for a period of big fees from fixed-income products, from structured products, but clients have at last figured out that they will lose their jobs if they keep buying this nonsense.
Cramer: No Reason to Own Lehman
And that's really the rub. These places have oodles of high-priced salespeople, tons of them, and they are all being paid fortunes to sell products that don't work. They sell broken vacuum cleaners with no warranties. It is that stark. I know that anyone in brokerage is always reluctant to admit that structured products really have no value or are too risky, that they're just a way to figure out how to take a little extra per million -- a fraction, but they do add up. But that's what happened to a lot of these great firms that got fixed-income-heavy. There isn't enough money to be made selling regular commodity fixed-income products, so you have to talk people into buying things they shouldn't that they don't understand.