Is Wachovia out of whack?

As if it was not enough for us to pull money out of Wachovia, I also shorted its stock @ $17.05. On one hand I was surprised that the short sale went through, as I thought SEC has protected big banks from the short sellers. On the other hand, I was disappointed to see that my shorting level was not perfect – the stock went up to $18.32, before being pulled down by the market to $17.27 closing price. Today it got even worse, with WB touching $19.11 high (so far). Both days I had a way out with some profit ($16.30 & $16.60 lows, accordingly), but the nightmare of getting out of a similar Lehman Brothers position a few months earlier prevented me from disposing this short.

It took LEH about 2 months to start falling toward a “panic level” of March 17th – $20.25 from the $45+ it rebounded to almost immediately afterwards. Slow, yet stable decline from May 16th to July 15th, brought Lehman Brothers stock to $12.02.

Wachovia panic level was $7.80. It rebounded to $19.55 almost immediately.

Two questions remain unanswered:

- Would Wachovia follow Lehman Brothers pass? If yes,

- How long would it take Wachovia to start moving toward the “panic level”?

After all, just look at the flyer I used to get in my Long Realty’s mail box every week until a few days ago:

How much in bad loans would Wachovia write-off in the third-quarter?

LEH – Lehman Brothers Holdings Inc.

WB – Wachovia Corporation.