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March 31, 2008

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InEquity

DCF valuation for a bank....MY FAVORITE!

Oh how I love the bank analysts that throw these figures around like they mean something. By the way, did they do a cost of goods sold analysis as well? If so, how does LameMan stack up in the Shitibank report? ;-)

ROE? Well a little closer. But ROE doesn't change no matter what the stock's price is...now does it.

P/B? A little better. This actually matters...IF we can trust the book value. A big IF with financials these days. WSJ claims Lehman has $32 BILLION (big ones) in residential mortgage exposure and $31 Big Ones in commercial real estate. Not far from the % exposure Bear had I believe.

Financials are the buy of a lifetime right? Only problem is the earnings they claimed will not be around again anytime soon (and were probably myth to start with in some respects), and just about every business area of the banks is suffering except maybe brokerage commissions. Keep tradin it up Equity Guy, they need all the help they can get. If earnings are down 50-75% (and we aint seen the worst yet) and book value is down huge, why are financials bargains just because they are down big from their alltime highs?

So did they say anything in the report that really matters...like delinquency trends for the real estate backed assets, margin trends, allowance adequacies, anything other than buy because it's down?

Disclosure: In case it's not clear, I make up a tiny portion of the massive short interest in LEH, and short numerous other financials.

- InEquity

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