Lehman Bankruptcy: Boot And Rally

Lehman Bankruptcy: Boot And Rally
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Lehman Bankruptcy: Boot And Rally by Jared Dillian, Mauldin Economics

There I was. In the financial crisis.

In my new office, that I had just rented, after starting my own newsletter business: The Daily Dirtnap.

You see, I had just walked away from a job at Barclays Capital, which had bought the Lehman broker-dealer out of bankruptcy. They had offered me a seat trading ETFs, just like I’d been doing at Lehman. I turned it down. I loved working at Lehman Brothers, but I could not see myself trading ETFs for even one more day.

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I also turned down what likely would have been a sizable retention bonus. I walked away from a job—and a lot of money—right in the middle of the crisis.


I’m a Writer

I was an above-average trader. Not great. Just above average. I was working on being great, but stuff like that takes a while. I had talent for trading, but not as much as some of the people I worked with.

But I knew I could write. As early as 2003, I had entertained the idea of starting a financial newsletter. It was a good thing I didn’t do it then. I needed more seasoning.

So I formed an LLC and rented office space and got a website and a computer. You should have seen my office. Maybe 60 square feet, no windows. It was a bit claustrophobic at times.

Especially when I went to work every day and watched the market melt down 6% at a time, and I was staring down the barrel of no subscriptions and no revenue, after having turned down a massive opportunity at Barclays.  It was starting to look like I’d made a huge mistake.

So every day I would go into work, and the first thing I would do was to puke in the trash can. I puked in the trash can every morning for a couple of months.

How could you not? Do you remember how bad it got?

GE was trading at 6.

Bank of America was trading at 3.

Citigroup was trading at 99 cents!

Everyone thought the world was coming to an end. I thought to myself, is every bank going to fail? Can the FDIC cover this?

You have to remember that from the time of the Lehman bankruptcy to the day the market bottomed was a little less than six months.

Six months of hell.

The VIX got to about 90. I will probably never see anything like that again. A multi-generational crisis.

But you know what? It worked out.

My first big trade idea was gold. It had hit $1,000/ounce when Bear Stearns collapsed but had sold off 30% to $700.

I was so bullish, I had veins popping out of my neck. The quantitative easing (that I also predicted) was going to cause inflation, hence, good for gold.

QE never did cause inflation, but it caused the fear of inflation, and that was enough.

The Daily Dirtnap was creating a surprising amount of buzz, and I ended up having a great year in 2009, my first year.

Lucky, good, doesn’t matter. I was happy to be alive.


I’ve traded through two of the four big bear markets in the last 100 years. I’m not in the business of catching falling knives, but we’re close to a bottom right now—in commodities. In mining and energy in particular, the pain is just as bad as it was in the financial markets in 2002. Maybe even worse.

Barron’s said the same thing over the weekend. Of course, all the wiseguy hedge fund dudes I hang out with said that Barron’s is the contra-indicator, that they’re always wrong.

Actually, they’re not.

They were royally wrong about Facebook, but they have a pretty good track record in calling the bottom of things. See the stock market post-9/11.

A few weeks ago in The 10th Man, I wrote about distressed commodities, and I’ve written a lot more about it in The Daily Dirtnap, my service for sophisticated investors. Whoever gets this trade right is going to make a lot of money.

Trade Ideas for Smart Investors

The Daily Dirtnap (TDD) has been continuously published since 2008. It comes out nearly every business day, which works out to just about 225 days a year.

It is focused on long-term investable trends—with a daily play-by-play from an experienced trader. I cover a lot of ground over the course of a few days or weeks, from Silicon Valley to economics to equities to interest rates to credit. Even commodities. But nobody, nobody does market psychology better than me.

I don’t have a model portfolio, and I don’t give entry and exit points. The Daily Dirtnap is not that kind of newsletter, which is to say, it’s not for people who are looking to outsource their risk management. That’s why only sophisticated investors should read it.

Then why read it at all?

People rely on TDD for the ideas, the visionary, outside-the-box thinking. And even though I was only an above-average trader, I’ve always been the “idea guy.” I also have a reputation for being irreverent and funny, though I’ve never thought of myself as funny.

Now, for the first time, Mauldin Economics is making The Daily Dirtnap available to its subscribers. It costs $600/year, which sounds high, but I’ve been told repeatedly that my price is too low.

The vast majority of my subscribers are true professional investors: portfolio managers, analysts, market-makers, wealth advisors. So I would only recommend this to people who have a fair amount of experience investing or some formal training in the subject. I cover very complex topics, and I don’t take the time to explain things. I just assume everyone’s on the same page.

TDD is my creation. The people who subscribe all have something in common—they are bright, skeptical, creative thinkers. There are people in this business who are not thinkers. They tend not to be TDD subscribers.

If this interests you, click here to find out more about The Daily Dirtnap and, if you so choose, to sign up for a roller coaster ride of a year in the world of trading.

Jared Dillian

Editor, The 10th Man

Jared’s premium investment service, Bull’s Eye Investor, is available now. Click here for our introductory offer. For Jared, no asset class or type of investment is off limits. From an iconic sports outfitter to a particularly liquid frontier-market ETF—Jared picks the best vehicles for his subscribers to profit from tomorrow’s trends today. Put Jared’s ingenious mix of market analysis and trader’s intuition to work in your portfolio today. Follow Jared on Twitter at @dailydirtnap.


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