Good Monday Afternoon - Comments From The Local
Guys!

We're back!
We are also lost for words to describe our thoughts about last weeks attack.

We may have more to say over time. At this stage, we would like to refer our
readers to the Lehman Brothers website for a message from Richard Fuld, the
Chairman & Chief Executive Officer of Lehman Brothers.

http://www.lehman.com/

			Lehman's Research.



IMPACT CALLS

Portfolio Strategy Jeffrey Applegate
After September 11, 2001
The dreadful events of this week will probably push the U.S. economy and
profits further down to a
'V' bottom; the profits recession will now also be deeper than our forecast
of -12% with a trough in
third quarter.
The dreadful events of this week will probably push the U.S. economy and
profits further down to a 'V'
bottom; the profits recession will now also be deeper than our forecast of
-12% with a trough in third
quarter.
 But the vicious nature of the attack has prompted a vigorous monetary and
fiscal policy response at a time
when the S&P 500 is more than 30% below fair value; we expect that the stock
market will rally on
primarily cyclical leadership.



Banks Update
The expectation of aggressive rate cuts by the Federal Reserve Board and SEC
actions to ease
share repurchase restrictions should help many large cap bank stocks. We
highlight BAC, C, FITB,
FBF, JPM and WFC.
Following Tuesday's tragedy, the U.S. government took steps to increase
liquidity to the financial system
and provide additional sources of support for stocks. The Federal Reserve
provided liquidity and is
expected to reduce rates aggressively, while the SEC took actions "to
Facilitate Reopening of Fair and
Orderly Equities Markets".
The ramifications of these actions should include wider net interest
margins, increased mortgage refinance
activity, and an acceleration of share repurchase activity.
Some of the companies that would seem to benefit immediately from these
actions include BAC, C, FBF,
FITB, JPM and WFC.
q Our strategist, Jeff Applegate, recommends almost a double weighting of
financial stocks - 32% vs. a
market weighting of 18%.

Mid Cap Banks
We expect the Fed to aggressively lower interest rates during the remainder
of year. We view NFB
and SOTR, both of which are down 17% over the last two trading weeks, as
liability sensitive plays.
FTN, MTB and BBT should benefit from large mortgage banking operations.
The recent weakness in bank stocks and the easing of restrictions should
cause companies to increase
share repurchase activity. Companies in this camp include CBSS, FMBI, HBAN,
NFB, and TCB.
Our 1 rated stocks are CYN, CBSS, CFR, NFB, TCB and ZION. We view MTB and
SOTR as trading buys
at current levels.
Mid-cap banks tend to do well in a low inflation, low interest rate
environment which our forecast calls for.
The wildcard however continues to be the economy.

Electric Utilities
CT DPUC Draft Draws a Blank
CT DPUC releases draft decision that denies FCEL 26MW project entirely.
Reducing shares of
FCEL to Market Perform from Strong Buy due to lack of material catalysts and
potential downside
to $8/share.
Late Wednesday, the CT DPUC issued a draft decision that denied funding to
an ENE/CRRA proposal that
would have resulted in a 26MW order for FuelCell Energy.
While the draft decision could be adjusted to provide funding in a final
decision (early October), the
wording of the order appears to point the companies towards additional state
funding vehicles, which
would likely take multiple months to tap and would be speculative at this
point.
We believe the disappointing CT DPUC draft decision leaves shares vulnerable
to the downside ($8/share)
and likely caught in a lower trading range until sub MW and MW "launch size"
order flow can be generated.
That said, FCEL's $7/share of fully diluted cash and leadership in carbonate
technology should limit
downside even in the current market environment.


Electric Utilities
Gray Growing Weaker in Round 10
The CA Senate failed to reach agreement on a revised SB78XX and therefore
failed to call a vote at
the end of the legislative session. We maintain our Market Perform rating on
shares of EIX.
The CA Senate failed to reach a compromise on a bill to avert bankruptcy for
EIX's utility (SCE) in the wee
hours of the session. Although the major terms of a revised deal were
intact, the Senate lacked the votes
to bring a successful vote.
Gov Davis has called for a third extraordinary session in early October to
try to force a compromise bill
through both the Assembly and Senate. As anticipated, consumer opposition
remained the sticking point
but surprisingly Gov Davis lacked the political might to force the measure
through the Senate.
We maintain our Market Perform rating on shares of EIX as we continue to
believe the near-term earnings
and valuation are limited even if a bill ultimately passes.


Major Pharmaceuticals Charles Butler
Timing of Xigris Panel ? Restrictions ?
We are raising our peak sales estimate for Lilly's sepsis drug Xigris to
$2.6 billion from $2.0 billion.
The Lilly sepsis drug Xigris was scheduled to be reviewed at an FDA panel
last Wednesday. Due to the
tragedies in both New York and Washington the panel did not convene.
However, documents were made available on the FDA website regarding Lilly's
presentation and the
FDA's interpretation.
Some have interpretated from the FDA documents that while Xigris will be
approved, it may have a more
restricted label, thus reducing potential demand.
q We spoke with two members of the Xigris team on Friday and have concluded
that we do not believe a
restricted label for the product will occur.

Leisure Felicia Rae Kantor
A Mixed Bag
We fully expect the leisure segment to be under pressure in the first few
days of trading. Fears of
travel coupled with economic concerns do not bode well for the industry in
general. In this note, we
offer, sub-sector by sub-sector, a rational and logical snapshot of our
universe with the hopes of
helping investors reassemble the pieces of the puzzle after the terrible
tragedy that occurred on
9/11.

PC Software Neil Herman
Software sector in light of last week
The events of last week increase the risk that potential customers will
delay software purchases
near-term , but should help longer-term as companies increase software
spending, particularly as
they likely increase their focus on disaster recovery as well as reliable,
scalable, and redundant
systems.
q Veritas likely biggest beneficiary as about of its revenue is associated
with data backup and recovery.
Advent's dependence on the financial community puts it at risk near-term.
q Inability to travel last week likely negatively impacted consultants'
billing time.

Enterprise Software/Internet Software Neil Herman
Details of the Quarter
On Thursday afternoon, Oracle reported EPS of $0.09, slightly exceeding our
EPS estimate of $0.08
and $0.08 reported in the first quarter of the previous year. The company
reported total revenue of
$2.242 billion, which fell 0.9% from $2.261.9 million in the same quarter a
year ago. Oracle was able
to deliver from an operating margin perspective, with the operating margin
rising to an amazing
33.3% from 29.1% in the fiscal first quarter of 2001.

Autos & Auto Parts Nicholas Lobaccaro
Auto Stocks Likely Among Hardest Hit
GM and Ford Could Drop at least 25 to 30% based on DaimlerChrysler's stock
price reaction, which
fell by 23.5% last week.
Industry fundamentals, already weak, will likely deteriorate significantly
in the near term, with sales and
production likely to be disrupted.
GM and Ford, hampered by low level of profitability and weak balance sheets
before the tragic events of
last week, are vulnerable from a financial standpoint with access to credit
likely to be more difficult than
anticipated.
Aggressive monetary and fiscal policy, as well as military action, could set
the stage for an eventual
economic recovery, perhaps as soon as late 2002. In the mean time, business
is likely to be extremely
difficult.
Based on the stock price action during the Gulf War, we expect a significant
near term drop in stock prices
with the prices not bottoming out for some time, perhaps as long as 18
months.

Wireless Services John Bensche
Cell Phones In Unwanted Spotlight
Wireless services networks were stressed to the limit by last week's
WTC-Pentagon disaster by
enormous traffic levels. While some facilities were damaged, companies
predicted no material
impact to overall business conditions as a direct result.
The utility of wireless service showed itself in a very dramatic fashion in
multiple situations, and we may
see some above average activation levels in the short run.
The impact of a sustained war on consumer spending and air travel is likely
to be the largest factor for
carriers over the longer term.

NOTES FROM TODAY
Paper & Forest Products Peter Ruschmeier
Impact of Terrorist Attacks on Paper Ind
Last week's tragic events put a cloud over near-term relative performance of
paper/forest product
stocks but long term prospects remain favorable. Within our universe, we
maintain confidence in
our Strong Buy ratings on WY, MEA, and SPP. Leveraged producers such as GP
and SSCC may be
vulnerable. We would add to several Buy-rated stocks that should benefit
from a flight to quality,
especially BOW, IP, and W.
The prospect of war combined with a likely drop in consumer confidence and a
potentially deep recession
will likely lead to near-term underperformance of shares of paper companies.
Longer term, we believe
numerous positive factors as highlighted in this note will allow shares to
outperform.
We expect a "flight to quality" within the group. Companies with the highest
EBITDA margins (TGP, BOW,
WLL, SPP), the cleanest balance sheets (MEA, WLL, WY, SPP), the greatest
exposure to timberlands
(TGP, WY, WLL, TIN), and the lowest valuations based on EV/mid-cycle EBITDA
(SPP, BOW, LPX, BCC)
should benefit.

Entertainment Stuart Linde
Some Initial Thoughts
The Entertainment industry may remain volatile in the wake of the most
significant catastrophe in
US history. Advertising will undoubtedly be affected as will travel to
destination parks. Neither
should be more than a reaction to this unprecedented tragedy and do not
represent long term
secular changes.
The Entertainment industry remains in strong financial shape with all large
diversified entities having
investment grade balance sheets. Regulatory changes from the FCC are
forthcoming which could further
accelerate consolidation long-term.
Changes in programming have been put in place due to the events of last week
such as the timing of
certain sporting events, a delay for TV season premieres and also for
certain film releases. Networks and
TV stations have also continued commercial free news to assist their viewers
in learning of continuous
updates which will impact 3Q results.
In times of crisis, certain segments of the Entertainment industry will
outperform such as regional and in
home entertainment. Movie and home video rental/sales as well as TV
viewership will permit an escape
from the crisis at hand.

Banks Jason Goldberg
North Fork Bk Return to share Repurchase
We rate NFB 1-Strong Buy. With over 85% of its revenues derived from spread
income and
projected aggressive Fed actions in the nearterm, we expect solid results to
continue, despite
disruption in the Manhattan marketplace.
We expect NFB to increase its share repurchase program by 5MM shares,
bringing its authorized
repurchase to 8MM shares. This represents 5% of its outstanding shares and
14 days of average trading
volumes
 We also expect NFB to continue growing de novo in Manhattan and anticipate
the Commercial Bank of
New York acquisition to close in 4Q01. Pro forma, 3 of its 20 Manhattan
branches are below 14th Street,
one of which maybe consolidated after the acquisition closes.
 NFB should benefit from its diverse lending portfolio.
We do not expect systems issues to hamper customer service or hurt results.

Satellite Communications William Kidd
Sector - Economic Exposure is Moderate
In light of a looming global recession, we wanted to stress our expectation
for the satellite equity
group to hold up relatively well.
In the group, DBS companies are likely hardest hit by a weakening economy,
while FSS companies should
be relatively insulated.
DARS: XM is still waiting for an FCC decision on its repeater license.
However, XM equipment and service
are now being sold.

Internet Infrastructure Services Harry Blount
Update from Attack
This past Tuesday, Akamai experienced a tragic loss and announced a major
new agreement.
 Co-founder and CTO Danny Lewin was lost in the WTC tragedy. Earlier that
morning, Akamai had
announced the establishment of a significant new agreement with Compaq.
Akamai co-founder and CTO, Danny Lewin was lost in the first airplane that
crashed into the World Trade
Center.
We continue to rate Akamai 2-Buy.


David C. Morris
Sr. VP Lehman Brothers
713-652-7112/800-227-4537
dcmorris@lehman.com

Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the
past three years a public offering of securities for
this company. B-An employee of Lehman Brothers Inc. is a director of this
company. C-Lehman Brothers Inc. makes a market in
the securities of this company.
Key to Investment Rankings: This is a guide to expected total return (price
performance plus dividend) relative to the total return of
the stock's local market over the next 12 months. 1 = Strong Buy (expected
to outperform the market by 15 or more percentage
points); 2=Buy (expected to outperform the market by 5-15 percentage
points); 3=Market Perform (expected to perform in line with
the market, plus or minus 5 percentage points); 4=Market Underperform
(expected to underperform the market by 5-15 percentage
points); 5=Sell (expected to underperform the market by 15 or more
percentage points).
This material has been prepared and/or issued by Lehman Brothers Inc.,
member SIPC, and/or one of its affiliates ("Lehman
Brothers") and has been approved by Lehman Brothers International (Europe),
regulated by the Securities and Futures Authority, in
connection with its distribution in the European Economic Area. This
material is distributed in Japan by Lehman Brothers Japan
Inc., and in Hong Kong by Lehman Brothers Asia. This document is for
information purposes only and it should not be regarded as
an offer to sell or as a solicitation of an offer to buy the securities or
other instruments mentioned in it. No part of this document
may be reproduced in any manner without the written permission of Lehman
Brothers. We do not represent that this information is
accurate or complete and it should not be relied upon as such. It is
provided with the understanding that Lehman Brothers is not
acting in a fiduciary capacity. Opinions expressed herein are subject to
change without notice. The products mentioned in this
document may not be eligible for sale in some states or countries, and they
may not be suitable for all types of investors. If an
investor has any doubts about product suitability, he should consult his
Lehman Brothers' representative. The value and the
income produced by products may fluctuate, so that an investor may get back
less than he invested. Value and income may also be
adversely affected by exchange rates, interest rates, or other factors. Past
performance is not necessarily indicative of future
results. When an investment is denominated in a foreign currency,
fluctuations in exchange rates may have an adverse effect on
the value, price of, or income derived from the investment. If a product is
income producing, part of the capital invested may be
used to pay that income. Lehman Brothers may make a market or deal as
principal in the securities mentioned in this document or
in options, futures, or other derivatives based thereon. In addition, Lehman
Brothers, its shareholders, directors, officers and/or
employees, may from time to time have long or short positions in such
securities or in options, futures, or other derivative
instruments based thereon. One or more directors, officers, and/or employees
of Lehman Brothers may be a director of the issuer
of the securities mentioned in this document. Lehman Brothers may have
managed or co-managed a public offering of securities
for any issuer mentioned in this document within the last three years, or
may, from time to time perform investment banking or other
services for, or solicit investment banking or other business from any
company mentioned in this document. Unless otherwise
permitted by law, you must contact a Lehman Brothers entity in your home
jurisdiction if you want to use our services in effecting a
transaction in any security mentioned in this document. ? 2001 Lehman
Brothers. All rights reserved.


------------------------------------------------------------------------------
This message is intended only for the personal and confidential use of the designated recipient(s) named above.  If you are not the intended recipient of this message you are hereby notified that any review, dissemination, distribution or copying of this message is strictly prohibited.  This communication is for information purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy any financial product, an official confirmation of any transaction, or as an official statement of Lehman Brothers.  Email transmission cannot be guaranteed to be secure or error-free.  Therefore, we do not represent that this information is complete or accurate and it should not be relied upon as such.  All information is subject to change without notice.