Vegas Odds: Another Large Financial Firm Will Fail (LEH)(WB)(WM)

Bear Stearns was not the end of it. Institutional investors think at least one more large firm will fail, probably over the next six months. Although those surveyed did not name a company, at this point those mentioned most frequently in the press are Lehman (LEH), Washington Mutual (WM) and Wachovia (WB)

According to the FT, "Nearly 60 per cent of US and European institutional investors surveyed by Greenwich Associates believe there will be such a failure within the next six months. Another 15 per cent think it will happen in six-12 months"

Recent estimates of the total damage that will be done by the mortgage-paper disaster put the final amount of write-offs at between $1 trillion and $2 trillion. Perhaps $500 billion of that amount has already been booked.

Sentiment within the industry has moved heavily toward worst-case thinking. There is not much of a defense for the opposite side of the argument being true.

Douglas A. McIntyre