In the wake of the collapse of Bear Stearns, the overseas selloff and price indications on other major investment banks suggest that it certainly isn’t going to be any time soon. The chatter now focuses on “who is next,” and despite assurances that their balance sheet is fine, traders are betting heavily against Lehman Brothers, which looks set to open sharply lower at the open today.

Lehman’s stock was indicated at $28.19 in premarket action, down 29% from Friday’s close, according to Archipelago. Merrill Lynch shares were off by 16%; Goldman Sachs was down 8.3%, Citigroup lost 7.6%, and UBS was down 10%. In a note today, Oppenheimer analyst Meredith Whitney says banks could stand to lose 50% of their value, saying what will result “is a major negative revaluation of financials.”

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The Dow Jones World (ex-US) Index slumped overnight.

Credit-default swaps, a measure of protection against default on a company’s debt, showed investors getting bigger premiums against this risk. Lehman Brothers CDS widened to 500 basis points from 450 basis points Friday, or $500,000 to protect $10 million in bonds against default over the next five years, according to Phoenix Partners Group. J.P. Morgan Chase’s CDS rose to 240 basis points from 190 basis points.

Stocks were hammered overnight and bonds rallied sharply. The Dow Jones World Ex-U.S. Index fell 2.5%, with big losses in Hong Kong (-5%), Germany (-3.8%) and Japan (-3.7%).

“If the Fed thinks that allowing BSC to be purchased at $2 per share will calm global financial markets, then they are not learning as fast as we had hoped,” writes Christopher Whalen of Institutional Risk Analytics.

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Hong Kong has reached lows not seen since the summer.

Some, however, are talking about capitulation, at least in terms of the equity market. With Dow futures indicating a decline of more than 200 points at the open, and S&P 500 futures showing the index will fall through the January lows, Tony Crescenzi of Miller Tabak believes this could be that watershed event, particularly as the Bear deal, along with the Fed’s newest lending facility, shows that the central bank is back-stopping all of the investment banks.

“Given the size of the Fed’s facilities, there is now in place more than enough Federal Reserve credit to more than cover the Street’s financing needs,” he writes.