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Rhino: Breaking: Not worth a dime!!!

That is what the Lehman debt is pricing at on the market. Less than $.10 on the dollar. Right now it is just under a dime on the dollar, but this is just on $5 billion of the $500 billion debt. It is projected to go lower than this. Of course it can only go to zero.

What does this mean?

Well, most think that those pesky CDS (credit default swaps) have a market built in price of about $.50 on the dollar.

A CDS is basically insurance on debt.

These insurance instruments were purchased as part of the agreement on the debt.

In other words, if Lehman defaults, and it did, then the companies that issued the CDS on Lehman’s debt are on the hook for the difference.

The problem is that the CDS was probably issued at premiums based on a 95% payback rate or better. Therefore the premiums will not be able cover this loss.

Get ready for the CDS issuers to go belly up.

Who are the issuers?

Insurance companies and financial institutions.

This means there are more write-downs and losses to come.

Bottom line:

More pain to come.

Now on Bloomberg:

Oct. 10 (Bloomberg) -- Sellers of credit-default protection on bankrupt Lehman Brothers Holdings Inc. would be forced to pay holders 90.25 cents on the dollar under initial results of an auction, setting up the biggest-ever payout in the $55 trillion market.

Preliminary results of the auction to determine the size of the settlement on Lehman credit-default swaps set an initial value of 9.75 cents on the dollar for the debt, according to Creditfixings.com, a Web site run by auction administrators Creditex Group Inc. and Markit Group Ltd. A final price is scheduled to be announced at 2 p.m. New York time.

Based on the results, sellers of protection may need to make cash payments of about $270 billion, BNP Paribas SA strategist Andrea Cicione in London said. The potential payout is higher than investors anticipated, based on trading in Lehman debt, and caused the bonds to fall. The bonds fell to about 9.5 cents on the dollar today. They traded at an average 13 cents yesterday, indicating a payout of 87 cents was expected. ...

http://www.bloomberg.com/apps/news?pid=20601087&sid=aSzNLpQQ...

UDATE: Initial price at 8.62 cents. The auction will be the big do or die. If skeptism continues, the gov. will be buying most of this at well under a dime on the dollar.

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Updated bump.

Check the bottom of the OP for the update.

WAHOR!!
http://www.dailypaul.com/node/48994

The pain is felt globally

The pension fund of the city of Cologne lost 6 Mio € and a corporated church in North Germany half her fortune due to the Lehmann insolvency. And the news about an old lady in Berlin having lost all her 10.000 € savings by an investment in Lehmann bonds (ill-advised by her Citibank financial adviser) was recently cause for much anger against bankers.
And you are right, rhino: Insurance companies and financial institutions face a lot of write-downs. Guess a couple of insurance companies will disappear from the market soon.

Freedom brings People together

Ron Paul was right

Why is this going to crash us?

We're talking about futher write downs (deflationary)
Coupled with further bailouts (inflationary)

Net 0

We're also talking about further mergers and acquisitions, quickening the healing process of this industry.

Whatever the regulators decide with Lehmen's books, it will help because at least we'll all know where everyone stands. Some are going to benefit from Lehmen, some will hurt, but knowing will help...the market hates uncertainty.

Did I miss something?

Did I say this would "crash us"?

I am just trying to figure out when the bear market bounce will occur.

I thought it would start this afternoon.

But the market was surprised by the value, surprised on the low side.

It will be a few more days.

Having said that ...

Total collapse has entered into the window realm of possibilities.

WAHOR!!
http://www.dailypaul.com/node/48994

Rhino! this thing is far

Rhino! this thing is far from a bottom! having said that you will see a dead cat bounce! nothing goes straight up or down! best to be out! let the smoke settle. seriously... what a bottom around 2000 to 3000 over a 1 to 2 year period.. just think about these bond insurers and insurance companies about to take a hit because of what you posted! what about the people who those companies owe etc.. chit rolls down hill!

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

To put all your eggs in one basket is not a smart ...

strategy.

Play the bounce,

Play the bottom,

Play the next bottom if that was a false bottom,

and so on.

Otherwise the market will define you as a pig, and we know what happens to pigs at harvest time. They get slaughtered.

WAHOR!!
http://www.dailypaul.com/node/48994

especially those pigs who do

especially those pigs who do not understand what is going on and think the bottom is in when it is not! I would rather be a little late coming in at the absolute bottom then to come in to early and get slaughtered becuase the pig played to many false bottoms.. we have a ways still to go! there will be huge opportunities but not now and not at dow 7000.

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

I wasn't necessarily responding to you

More the comments below.

If you want to know, the bear market rally will be sometime in the week of 10/20. Lehmen's books should be released in full on 10/23, so the 24th should be a very good day, then we'll have the weekend to stew in some good news for a change.

Total collapse is possible, but not beause of what we've done, more how we react to the problem.

lol who reacts? the problem

lol who reacts? the problem is the problem! reaction is not going to see this this problem fixed! actually the reaction is making it worse! lmao! you don't seem to understand that the morons in the fed, and the government and the idiots running the companies going broke ARE THE PROBLEM..
anything they do will make it worse! they are the ones who got us where we are today.. so you are going to rely on them to fix the problem they created! that is hillarious!

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

Sierra & JZ...

Mybe you and JZ should negotiate a truce and go your separate ways.

Oruval and I did this.

We rarely cross paths now, and when we do it is on much more friendly terms.

Just a thought.

Do as you wish.

WAHOR!!
http://www.dailypaul.com/node/48994

LOL ...

I did not mean to stop bumping my thread all together.

WAHOR!!
http://www.dailypaul.com/node/48994

I think it will be priced in before then ...

but it will not be too late to get in on that week.

I would start buying the dips on Monday.

Today, was a good educated bet, but it was wrong.

WAHOR!!
http://www.dailypaul.com/node/48994

let Jim Rodgers tell you

let Jim Rodgers tell you why!

http://www.cnbc.com/id/27097823

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

There are more than 2 paths to travel here

It's not 2 paths, it's managing this crisis somewhere in the middle

You can let everyone take their medicine and chug along unaware, which will create a deflationary depression.

or

You can bail everyone out and pretend nothing happened, which will create a inflationary depression.

But there is a third option.

You can work case by case, keep pumping liquidity to replace write downs, and survive the mess with the dollar intact.

They bailed out AIG, and let Lehmen fall. They didn't do this on a whim, they looked at the balance sheets and decided what was necessary to avoid either of the two situations above.

Not saying that micromanaging the economy is a good idea, but you don't stop micromanaging right in the middle of a crisis.

This is one of the biggest causes of the great depression...you pump money like crazy in the 1920's, and all of the sudden when it comes back at you in the form of a liquidity dry-up, you stop printing?

You correct these problems in the best of times, so you don't have to re-visit the worst of times. The time to implement a honest money system was 1995, not today.

so your solution is to just

so your solution is to just keep going along the same way! printing money to begin with is what got us to where we are! the whole system has to collapse in order to start over! wether those idiots in government or business want it to or not, it will do what it will do because economics is governed by laws.. to micromanage OR a better word.. MANIPULATION has to end!

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

Everything you said is correct except ...

"The time to implement a honest money system was 1995, not today."

The only chance to implement (granted a slim chance at that) a drastic change as this, is in times of crisis.

WAHOR!!
http://www.dailypaul.com/node/48994

Now is when we prove it

Now is when we show the world what we're doing wrong...how we got here, how we can avoid doing it again.

Trying to change it now would represent a knee jerk reaction and will surely fail, and they'll be able to blame the free market.

The time to educate is now, the time to plan for the change is now, but to act now would be foolish.

You let the crisis play out, pull ourselves out of the bottom of the economic cycle, and begin an incremental process of fixing it once the economy is healthy again.

You don't begin a crash diet for a 500lb man the day after a quadruple bypass...you get him healthy and strong, then you get him on a diet.

Maybe that is the difference between you and me ...

I think change for the better will only happen in times of crisis after we have prepared.

You think that crisis is the time to wake people up for later change.

There is precident for both, but I think the former is the only way to achieve freedom and you think the ladder is the only course for freedom.

Peace..

Make sure you post on your $70 thread when we get there.

I want a full assessment from you as to how we got there from $147. You teach me more than you know.

WAHOR!!
http://www.dailypaul.com/node/48994

Why is it that Bloomberg is reporting this way?



I guess they are making a lot of money. I suppose at some point they and their investors are going to buy up everything cheaply.

Ron Paul's Convention Speech

Remember that CNN report

Remember that CNN report that there are over 55 Trillion worth of CDS out there. House of cards.

Remember ...

This is the market value on defaulted debt.

This is not a price for all CDS.

WAHOR!!
http://www.dailypaul.com/node/48994

actually this is terrible!

actually this is terrible! systemic collapse!

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

thanks Rhino! man this is

thanks Rhino! man this is not good!

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain