Lehman Brothers - RIP 2008?

It certainly looks like Lehman Brothers is going under...The govt is drawing a line in the sand, no backstopping of Lehman debt.

Barclays Walks from Lehman Deal
In Frantic Day, Wall Street Teeters

Special Resk Reduction Trading Session Called by ISDA Re Lehman Bankruptcy
ISDA confirms a risk reduction trading session is taking place between 2 pm and 4 pm New York time today (September 14) for OTC derivatives. Product classes involved are credit, equity, rates, FX and commodity derivatives. The purpose of this session is to reduce risk associated with a potential Lehman Brothers Holding Inc. bankruptcy filing. Trades are contingent on a bankruptcy filing at or before 11:59 pm New York time, Sunday, September 14, 2008. If there is no filing, the trades cease to exist. These trades are subject to a protocol which is being distributed by ISDA (International Swaps and Derivatives Association). Traders should execute the protocol and email a copy of the signature page to Mark New at ISDA (mnew@isda.org) with LEHMAN PROTOCOL in the subject line. Click here for Protocol Text. An explanatory statement regarding the Protocol can be found here.
MARKET PARTICIPANTS HAVE INDICATED THAT THEY ARE WILLING TO TRADE UNTIL AT LEAST 6:00 NEW YORK TIME. PARTIES SHOULD COMMUNICATE WITH EACH OTHER AS TO THEIR WILLINGNESS TO TRADE LATER THAN 6:00.
International Swaps and Derivatives Association - Lehman Risk Reduction Trading Session Protocol

Bank of America walked away from Lehman, and is in talks with Merrill Lynch.
Bank of America In Talks To Buy Merrill Lynch

This news is going to hit all markets.

In my opinion, the reason that the stock market has not gone down more, until now, has been the belief that the government was going to backstop nearly every financial failure. That assumption has been taken away. First with the Fannie/Freddie deal, and now with the apparent Lehman failure, the government safety net for equity holders is gone.

We spoke a couple of weeks ago about the Elliot Wave formation calling for an upcoming stock market collapse. The last two weeks we've seen some deterioration, but, imo, the collapse begins in earnest this week (tomorrow). It could get very, very ugly.