A lot of readers have been thinking similar thoughts to someone who commented on my recent post: Chasing Value: Watch BNI -- the heck with Citigroup.

• Donald wrote, "Why the hell would I take advice from a company, that as a whole, its Net income was US$ −27.684 billion for 2008.

While this is an obvious question from a skeptical investor, and we all have good reason to be skeptical, it obscures a more important issue. Is there a relationship between the financial standing of the bank and the value of an individual analyst or adviser? The answer is, absent any conflicts of interest, that there is not.

Lehman Brothers Holdings Inc. (NYSE: LEH) is poised to lose $2.6 billion and it's trying to dump $40 billion worth of real estate from its books. The Wall Street Journal reports that Guy Moszkowski, a Merrill Lynch & Co., Inc. (NYSE: MER) analyst thinks Lehman could lose $2.6 billion -- while others expect a mere $1.8 billion loss. Lehman normally reports in mid-September but it may pre-announce earnings this month.

I always find it interesting when analysts -- particularly those who work for banks with their own problems -- offer bearish earnings outlooks for their competitors. But I have met Moszkowski and I found him to be both very smart and a straight shooter. The Journal reports that he "more than doubled his loss projection to $2.6 billion and predicts that Lehman will take a $4.5 billion hit from write-downs." It quotes him as saying that an additional markdown up to 20% related to Lehman's remaining $64 billion in mortgage and commercial real-estate exposure "seems like a lot but can't be ruled out." If that were to happen, Lehman might need to raise more capital.

Speaking of that real estate, FT.com reports that Lehman is in talks to dump $40 billion worth of commercial real estate assets and securities. FT.com reports that there is a wide gap in what the potential buyers -- Blackstone Group (NYSE: BX) and BlackRock (NYSE: BLK) -- and Lehman think those assets are worth. It also reports that the assets in question consist of mortgages and mortgage-backed securities that Lehman valued at $29.4 billion at the end of May and real estate assets then valued at $10.4 billion.

After reading an interview in the New York Times with Merrill Lynch & Co. (NYSE: MER) CEO John Thain, I began to wonder whether Wall Street, as it currently exists, needs to change.

What's wrong with Wall Street? Here are five things:

• Rewards employees, not shareholders - It pays as much as 76% of its revenues to the people who work there (e.g., in 2006 Merrill paid $17 billion in compensation and its revenue totaled $22.4 billion). That pay is linked to revenue, not how much money their deals make for customers. This encourages them to close big deals fast rather than paying attention to quality.
• Puts its own interests ahead of its clients' - One need look no further than how firms pushed their toxic Auction Rate Securities (ARS) off their books and into the accounts of individual investors.
• Absorbs talent that could solve more important problems - That money sucks up the world's brightest minds. Those MIT PhDs could have been inventing ways to lessen our dependence on oil and gas instead of Collateralized Debt Obligations (CDOs).

Does America really need an economy that depends on creating new bubbles to get us out of the mess caused by the bursting of old ones? Is it possible to replace this with an economic system that generates growth without bubbles? I think the answers to these questions are No and Yes.

The most recent example of this bubble economy is the way the dot-com frenzy's aftermath was replaced by a debt bubble, which was focused heavily on a now-imploding mortgage-backed securities (MBS) industry. The dot-com bubble expanded thanks to the public's insatiable appetite for dot-com IPOs, regardless of whether the issuer was or could become profitable. The MBS bubble grew thanks to rock-bottom interest rates, rising housing prices and institutional investor demand for higher "risk-free" yields, all of which ignored the cost of a market reversal.

But the MBS part of the current bubble may not be the last to burst. There are also the leveraged loans that fueled a boom in private equity -- a market which has lost 70% of its business in the last year. Thankfully, massive defaults in such loans have yet to occur. The New York Times reports that capital-starved banks are starting to limit commercial and industrial loans that fuel normal business expansion. It reports that such loans have dropped 3% since 2007, from $3.36 trillion to $3.27 trillion.

In a quarterly dance routine that's becoming quite familiar -- call it the write-down, capital raising dance -- the Wall Street Journal reports that Merrill Lynch & Co. (NYSE: MER) is planning to sell a $5 billion stake in Bloomberg, the media company, and to cash out of its 49% stake, estimated at $12 billion, in Blackrock (NYSE: BLK).

Why is Merrill doing this? As we've seen over and over again in the last year, banks must maintain specific levels of capital to assets in order to meet regulatory requirements. When a bank reduces the value of its assets, as accounting rules require, the bank writes off the decline in asset values against its capital. In order to maintain a sufficiently high ratio of capital to assets, banks seek to raise capital equal to the amount of the write-down.

Merrill anticipates taking $6 billion in write-downs for the quarter. These could come from its $41 billion in Level 3 assets -- assets valued based on computer models since there is no active market that prices them. Merrill is fortunate to have these stakes available to sell because it will be able to raise capital without diluting current shareholders. Unfortunately, once it sells these stakes, Merrill shareholders will no longer get the earnings stream they generated.

Bloomberg News reports that Lehman Brothers Holdings (NYSE: LEH) wants to sell $4 billion in equity. But it already raised $6 billion so why does it need more? It should be no surprise -- but thanks to a chorus of statements by financial leaders that "the worst is over" -- including Lehman's CEO Richard Fuld, Jamie Dimon, Hank Paulson, and Barton Biggs some are surprised that there are still problems.

Since the crisis began -- last August when the Fed began cutting rates from 5.25% to 2% -- banks have been trying to reduce their ratio of debt to equity below the hugely risky 32:1. But it's hard when they hold $500 billion worth of Level 3 assets -- which don't trade and therefore have no objectively set market value. To maintain or improve their capital ratios, banks have been writing down the value of the securities on their books -- $276 billion worth so far -- and simultaneously raising capital. Citigroup (NYSE: C) has raised the most -- $44 billion.

S&P downgraded Lehman, Morgan Stanley (NYSE: MS) and Merrill Lynch (NYSE: MER) saying they may disclose more write-downs for devalued assets. And hedge fund manager David Einhorn -- who's short Lehman -- got into a verbal debate with Lehman CFO Erin Callan arguing that Lehman had failed to disclose $6 billion worth of such Level 3 assets -- known as Collateralized Debt Obligations (CDOs) and it needed to raise capital. Today's announcement suggests that Einhorn was right.

Just because executives act like cheerleaders, it doesn't mean investors should take them at their word.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup shares and has no financial interest in the other securities mentioned

News that the European Commission is planning to adopt proposals next week that will ask sovereign wealth funds to accept a code of conduct to govern their investment activities, raises the question if the U.S. government should take a look at the impact these funds may have on U.S. security.

Peter Mandelson, the European trade commissioner, said the code will outline standards of governance and transparency for such funds.

"The emphasis in their investments should be on commercial motivations, not national or strategic considerations. I think such a code is possible to draw up and would get acceptance from the wealth funds," the report quoted Mandelson as saying.

German companies, for example, are worried that China will steal their intellectual property or that Russian President Vladimir Putin wants to use such investments "as a political instrument," according to European Member of Parliament Wolf Klinz.

We have two IPO's priced for opening this morning. Susser Holdings (SUSS) and LeMaitre Vascular (LMAT) will debut in trading.

LeMaitre Vascular (LMAT) priced its 6 million share IPo at $7.00, under the $8.00 to $10.00 range. Goldman Sachs led the group and co-managers were listed as CIBC, Cowen, and Thomas Weisel. The company was founded in 1983 and makes medical device catheters to treat peripheral vascular disease, so it competes against Foxhollow (FOXH) in some capacity. It posted 2005 revenues of about $31 million and reported nearly break-even results.

Now the biggest trick will be pronouncing the name.

Susser Holdings Corporation (SUSS) priced its 6,500,000 share IPO of its common stock at a price to the public of $16.50 per share. This was at the lower-end of the $16.00 to $18.00 range, but the offering was only set at 6 million shares originally. All of the shares are being sold by Susser Holdings, and the proceeds will be used to redeem a portion of its outstanding senior notes, repay outstanding revolving credit facilities and for general corporate purposes.

Susser Holdings operates 320 convenience stores in Texas and Oklahoma and 340 branded dealers via its wholesale fuel division.

The offering is led by Merrill Lynch as sole book runner; and co-managers are J.P. Morgan, Jefferies, and Morgan Keegan.

Jon Ogg is a partner in 24/7 Wall St., LLC; he does not own secuties in the companies he covers.

Merrill Lynch analysts believe there will be a dip in iPod sales in Apple's third quarter. Last year saw a similar call by financial experts who expected a 'cooling' in iPod sales that never came. But the third quarter is usually a slow time for electronics sales. And the iPod nano hasn't been quite the hit expected, thanks to the screen-scratching mojo that dogged it right out of the gate.

But there's a silver lining. The Merrill analysts think the general Apple lineup of laptops and desktops will make up for the dip in iPod sales. And other analysts point out that iPod video sales, shuffles, and the low end nano, are all marching along just peachy.

And, judging by last year's track record for iPod sales, Apple may surprise the perpetual 'iPod sales cooling off' crowd just yet.

[Disclosure: I own Apple stock at the date of this post]