Followed Fast then Followed Faster

With JP Morgan picking at the bones of Bear Stearn’s still warm corpse it’s now Lehman Brothers running from the same “unmerciful disaster”. Yesterday’s $2 billion infusion dresses up the balance book, but out on the Street it smells like blood.

The same thing that drove Bear Stearns into the gutter is now Lehman’s worst enemy: Fear. The speed and severity of Bear’s collapse is throwing gasoline on the firestorm of panic now consuming the debt market.

Down in the pits fear morphs into greed as the same ominous options activity is taking place now on Lehman’s put contracts.

Options traders are making big bets that Lehman stock will drop an additional 24% by Thursday, when March options expire, Dow Jones Newswires reported. Traders also are betting that the shares will continue to plummet over the next month.

Lehman is caught in the same frenzy of credit capture and denial as Bear Stearns was in last week.

In an effort to quell concerns, Lehman CEO Ricard Fuld said, “The Federal Reserves decision to create a lending facility for primary dealers and permit a broad range of investment-grade securities to serve as collateral improves the liquidity picture, and from my perspective, takes the liquidity issues for the entire industry off the table.”

And it would if credit equaled earnings or earnings where anywhere to be found. If Lehman thinks it can borrow it’s way away from the credit crunch it had better pick up the pace, for that same “unmerciful disaster” which ran down Bear Stearns, it “Followed Fast then Followed Faster”.

Lehman reports tomorrow before the bell.