Watch Out for WaMu

While everyone's focused on Lehman Brothers, WaMu is on it's fourth down day in a row. They're currently trading at $2.13.

As for Lehman, they're toast. Actually, they're charred to a crisp. B of A is reporting 20% of its commercial real estate loans are currently non-paying, or in default. Lehman has $30 bil of this toxic waste. It's probably worth 60 cents on the dollar. I believe that the reason talks broke down with the KDB is that Lehman needs more than Neuberger Berman is worth to survive. Why give someone else a good deal if you're going to be left hanging anyway? Might as well say, "Fuck Off!" and pray for a bailout.

Speaking of which, anything can happen over the next couple of days to a week. But credit is still tightening, and deflation destroys equity values. The 30-year Treasury bounced off its resistance at 4.17% on Tuesday, and I expect will soon break through. When it does, the stock markets will plunge appropriately. We may even have to wait until the end of the month for this to happen, but it will.