The S&A Digest: See I.O.U.S.A. tonight

See I.O.U.S.A. tonight... Lehman's full plate of slop... Lehman and Merrill calling on Asia... Hell and bankruptcy... Clark's secret... What to read... Voting and dogs...

Our colleagues at Agora Financial have spent the last two years producing a documentary exposing our nation's massive debt problem. The film, called I.O.U.S.A., drew support from some of the biggest names in the industry, including Warren Buffett and Blackstone founder Pete Peterson (and they're even talking Oscars).

The movie premieres tonight at theaters across the country. (Click here to watch the trailer.) Afterward, an interview with Buffett and Peterson airs live. If you can't make the premiere tonight, be sure to check out Squawk Box on CNBC tomorrow morning at 6 a.m. Becky Quick will interview both Buffett and Peterson about the film.

What was that I just heard? Was that a "we're not going to devalue the currency" moment this morning at Lehman Brothers? Apparently, a rumor was circulating that Credit Suisse was going to cancel a line of credit to Lehman. The Federal Reserve got wind of it, and it must have smelled like leftover Bear Stearns reheating in the microwave. The Fed called Credit Suisse, which immediately denied the rumor.

As soon as I heard the emphatic denial, my gut told me to expect the opposite... the same as when politicians tell you they're not going to devalue their currency. It's reached the point where the event is likely enough to require a denial.

Adding one more damn thing to Lehman's full plate of slop: The Financial Times reports Lehman failed to get Chinese and South Korean firms to buy its equity. Lehman held parallel talks with CITIC Securities, China's biggest brokerage, and government-owned Korea Development Bank in early August. The Asians walked away because Lehman was asking too much for its equity: 50% above book value.

It can't sell shares. It's not clear yet whether it can sell its best business, Neuberger Berman. Even if it does sell Neuberger, what would be left that would inspire any investor to put capital at risk?

I guess there's always the Fed. Maybe it'll backstop another deal, like with Bear Stearns. Or maybe Barclay's will take Lehman Brothers private. The British bank said recently it's looking to acquire an asset manager in the United States and would consider buying an investment bank.

Or maybe Lehman just isn't shopping itself to the right foreign investors. Temasek Holdings, the Singaporean wealth fund and largest shareholder in Merrill Lynch, may buy more of the troubled bank. "If there's an opportunity, we would like to look at it," said S. Dhanabalan, chairman of the fund. "Whether we do it depends on our assessment and risk diversification."

Good thing Temasek demanded a reset clause before it put $5 billion into Merrill. That investment is down 55% since December. The reset clause compensates Temasek if Merrill sells more shares below Temasek's buy price, which is what it looks like Merrill is trying to do...

If Singapore doesn't want to give Merrill a few billion more, South Korea might. Dow Jones reports Merrill Lynch CEO John Thain is meeting with South Korea's sovereign wealth fund and government officials in the first week of September. The meeting is supposedly "just a courtesy call" and "not out of the ordinary." Maybe he'll do better there than Lehman did.

This is scary... The SEC is investigating activist hedge fund Third Point just for talking to other fund managers. In his quarterly letter, founder Dan Loeb wrote, "As you may recall, the SEC conducted an audit of Third Point last year after we registered as an investment adviser. During the course of the audit, the examination staff noted that we regularly communicate with portfolio managers at other hedge funds about investment and trading ideas. The SEC later informed us that it had commenced a formal investigation of Third Point primarily relating to these types of communications."

Loeb argues the conversations help it make better-informed investment decisions and are beneficial for investors. His fund's legal counsel said the conversations were perfectly legal. In his usual biting manner, Loeb wrote, "A chorus of 'blame the shorts' is generally an excellent indicator of significant underlying problems. As a friend said to me, 'Capitalism without bankruptcy is like Christianity without Hell.'"

An exciting new development for Jeff Clark. On September 1, he'll be giving away his old brokerage firm's No. 1 income secret in an online video seminar. It's a way of collecting $2,500 or more, overnight, on any stock in the market.

The seminar won't cost you a thing to watch – but it's taken a small fortune to put together. Included in Jeff's video... his top current pick, how this strategy can add thousands to your savings account every single month, and why Jeff has spent 22 years perfecting it for his wealthy California clients. Spots are filling quickly... To learn more, click here.

New highs: none.

In the mailbag today... Would you like a side with that Schipperke? Let us know here: feedback@stansberryresearch.com.

"Hello, I'm a subscriber to several of your publications and enjoy reading them, as well as the banter on your daily newsletters. Several months ago, Porter published a list of the 10 investment books he'd recommend. I saved the list, but of course now that I actually have some time to read, I can't find it. Would you please republish the list?" – Paid-up subscriber Mary Miller

Ferris comment: Sure thing, Mary. You can find the list in our archives by searching for "top 10 books." Or click here to go directly to Porter's essay.

"Jeff Clark is the BEST." – Paid-up subscriber Craig P.

Ferris comment: Yes, he is. And to read exactly why that's true, click here.

"Count A. DeToqueville in Democracy In America observed that the way you get elected in a Democracy is to promise more than your opponent. But he also wondered what do you do when there is nothing left to promise? Given all the unfunded liabilities we have on the books, we may be approaching that fateful point. After OBAMA! Le Deluge." – Paid-up subscriber Jim

Ferris comment: I don't think it'll make a big difference who gets elected. Voting in America is like sitting down in a restaurant and having the waiter ask you which breed of dog crap you'll have...

"Good afternoon, sir. Will you have the air cured Belgian Schipperke, or the fresh Norwegian Elkhound today?" You can't say he didn't offer you a choice, nor can you say they weren't very different choices.

Regards,

Dan Ferris

Medford Oregon

August 21, 2008

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