HBJ Capital Says, "Bear Stearns, Freddie Mac/Fannie Mae, and Lehman: All three had to be taken care of to prevent a possible chain reaction"

A post Lehman rally or selloff ? - Biggest question in the mind of every traders!!!

The Feds greatest fear right now should be what happens to all of the guarantors of LEH CDS. I would not even hazard a guess as to the value of the enourmous volume of swaps undertaken in recent weeks. As an entity, LEH has failed, and the CDS holders will be knocking at the sellers doors tomorrow morning bright and early to collect their money.

AIG sold a great deal of this paper, and it now appears that they are to be the next in a long series of dominoes. Even amid hopes of a resolution for Lehman Brothers, fresh worries emerged that insurance giant AIG. "With what's going with AIG, that may be the next big thing dominating headlines next week". "At $12 a share, is the firm going to be able to survive another week?"

After a Lehman buyout, "we might get another one-day bounce". "But I think there's a bigger picture problem looming out there.

Contrary to the near-bankruptcy and subsequent bailout of investment firm Bear Stearns, which had led to a two-and-a-half-month rally, the market this time remains weary about the continued fall-out of the credit crisis.

Still, some analysts hope that by taking out the big players, whose failure would threaten a collapse of the financial system, smaller victims will go out more quietly and the market will eventually look beyond its current problems.

The direction of the market next week will be determined by Lehman's fate this weekend?

I assume this is until either Washington Mutual, AIG, or Wachovia go under or the FDIC itself has to be bailed out. A Lehman rescue doesn't resolve anything. Moreover, it points out the financial system is crumbling and there is a lot more to come.

The direction of U.S. stocks next week will largely depend on the fate of Lehman Brothers amid widespread speculation that the beleaguered 158-year-old investment firm may be bought out or bailed out before the weekend is over.

American International Group Inc. (AIG:American International Group, Inc is expected to hold an analysts' call on Monday to announce a series of measures including a possible asset sale, citing a source familiar to the matter.