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9:00 AM EST, Monday, September 15, 2008: As 2008 began, Richard S. Fuld, Jr., Lehman chairman and CEO, had 10.9 million shares of Lehman, worth $708 million. This morning his shares will be worth virtually nothing! Yes, you read correctly. Zilch. Nada. He hasn't sold a single share.

Only one board member, Henry Kaufman, an economist, sold any. All the other board members -- and most of the people who worked at Lehman Bros -- did not sell. All have suffered gigantic losses.

Fuld was a bond trader, a high stakes gambler. Even at its bankruptcy this morning, Lehman's leverage was 24 to 1. For every dollar in equity, the firm had $24 in loans. If the value of firm's assets dropped by just 4%, the firm's equity would be wiped out, and hence broke. Once the perception of this got through to Wall Street, no one on Wall Street wanted to trade with Lehman, since they felt Lehman wouldn't have the resources to back up the trades. And since trading is Lehman's business, that was the end of their business. Lehman actually was the fourth-largest securities firm in the U.S. until the past week, Lehman has thousands of "trades" (also called gambles) outstanding in credit, equity, commodity, interest rates and currency derivatives.

To me, the overarching conclusion from the Lehman mess, the Bear Stearns mess, the auction rate securities mess, the sub-prime mess and the present mess on Wall Street is: If they can't manage their own money, how can they manage yours?

Wall Street has consistently substituted optimism for reality. For example, on April 8, Mr. Fuld told us that the worst of the credit crisis was behind us. Who knows what he was smoking.

How widespread are Wall Street's problems? As I've written before, we know two things:

1. This is the worst financial crisis since the Great Depression of the 1930s.

2. No one knows how much toxicity is out there. But we do know that it's more than most people are willing to admit (or capable of admitting).

According to Nouriel Roubini, an eminent professor of Economics at New York University, Bear Stearns and Lehman had the highest mortgage toxic waste ("residual balance") exposure as percent of adjusted equity on balance sheet: BSC = 54.5%; LEH = 53.3%; GS = 21%; MER = 17.8%; MS = 8.3%. LEH is the biggest mortgage underwriter and commercial paper dealer. Roubini (and others) think the next to go will be Morgan Stanley.

Roubini writes,

What we are facing now if the beginning of the unraveling and collapse of the entire shadow financial system, a system of institutions (broker dealers, hedge funds, private equity funds, SIVs, conduits, etc.) that look like banks (as they borrow short, are highly leveraged and lend and invest long and in illiquid ways) and thus are highly vulnerable to bank like runs; but unlike banks they are not properly regulated and supervised, they don't have access to deposit insurance and don't have access to the lender of last resort support of the central bank (with now only a small group of them having access to the limited and conditional and thus fragile support of the Fed). So no wonder that this shadow banking system is now collapsing.

This is indeed the most severe financial crisis since the Great Depression and occurring at a time when the US is falling in a now severe consumer led recession. The vicious interaction between a systemic financial and banking crisis and a severe economic contraction will get much worse before there is any bottom to it. We are only in the third inning of a nine innings economic and financial crisis. And the only light at the end of the tunnel is the one of the incoming train wreck.

As I've said before (too many times),

Cash is King.

When in doubt, stay out.

I pray you shorted some of the financials I've mentioned in recent weeks, including Lehman and Merrill.

Don't leave a GPS unit attached to your windshield: My daughter did on the weekend. A thief smashed her driver side window, grabbed the GPS unit and fled. According to the police, stealing them is popular.

The Spencertown Academy Festival of Books. A totally brilliant idea. Our local museum/concert hall holds an annual ...

Everyone donates books. They go on sale for a couple of weekends and raise money for charity, including much-appreciated arts education at local schools. The festival receives about 10,000 books. It's huge fun to rummage through the books. I always buy a bunch. My favorite this weekend was this one. I admit I bought it solely for the cover. The author also wrote a book called "Deliciously Wicked."

My friend George Jahn bought two books at the Festival. He brought them home and burbled to his wife, Karen, about his excitement with his great "find." She looked at him quizzically and said, "Schmuck, they're your books. You have read them. You donated them to the Festival."

What goes around comes around.

Favorite religious traffic sign.

Lone Ranger and Tonto - - 3
The Lone Ranger and Tonto were riding in the hills. The Lone Ranger goes to take a piss against a rock, and suddenly a rattle snake jumps out from behind the rock and bites him on the penis.

He immediately sends the Tonto to get help, to find a doctor to find out what to do.

Tonto rides as fast as he can to the next town to find a doctor. The doctor tells him that the way to treat a snakebite is to take his knife and make a small x on the bite marks, and suck out the poison.

Tonto rides back to the lone ranger as fast as he can.

When he arrives, the The Lone Ranger asks "What did the doctor say?"

Tonto replies "Doctor says you going to die."

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.