The latest rumor was that the world's largest bond fund PIMCO, the hedge fund giant SAC and other institutions were bailing out on Lehman, which then promptly rolled over and crashed 18%. The all important question is - Why is Lehman, and not any other firm, the target for all these rumors and the speculation. What makes it so susceptible to these rumors?

Lehman Brothers, the fourth-largest U.S. securities firm, reduced its mortgage holdings in the second quarter by 20% to curb further losses from the credit-market collapse.

Lehman reported a loss of $2.8 billion, or $5.14 per share, in line with preliminary figures the company released last week. Leveraged buyout loans were cut 37% to $18 billion.

Shorting the stock doesn’t seem all that attractive an option here. If Lehman proves that their assurances actually have some merit, the stock could snap right back to the 40-45 level. Instead, we want to take advantage of the monstrous volatility that has been priced into the near-dated options...

Allegations are surfacing that rumors about BSC and LEH a few weeks ago were started by short sellers trying to crack the stocks. Was it just collective panic induced by fear of volatile markets and frozen credit lines? Or, was there more malicious intent out there? Maybe it's just Bear Stearns execs crying because they've just had their net worths burned to the ground.

Wall Street rallied Tuesday, the first day of the second quarter, on news that two banks slammed by the credit crisis are working to raise cash and that U.S. manufacturing is faring better than expected. The Dow Jones industrial average soared more than 220 points.