Apparently, something is going around about “a huge liquidation. Like $400 billion huge.”
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- Use the Bloomberg command
NH BLG_DEALBREAKER <GO>
to access Dealbreaker
XOM
Gasbagga’s underwear?
Last I heard, it was Rectech
XOM? C’mon…those are the only guys making money nowadays!
Too liquid, couldn’t read.
NOT GONNNA TO CRY
NOT GONNNA TO CRY
NOT GONNNA TO CRY
http://artfiles.art.com/images/-/Ewing-Galloway/Portrait-of-Baby-Crying-Photographic-Print-C12140105.jpeg
SPODE
KrapThing Bank in Iceland.
The Guy from Delaware
Cramer mentioned a liquidation of this size on his how yesterday but I wasn’t paying enough attention.
Something big is happening. MetLife?
$400 billion is about the total market cap of the S&P 500 right about now.
400xxxlarge would be along the lines of MS unwinding. Any news on that deal?
There are a couple of 2-3xxxlarge hedgies going under this month soon though but dont think they are that leveraged.
I’ll see what I can dig up (hopefully not another William “Wild Bill” Cutolo)
smile,
-C
$400B LEH CDS unwind due 10/10…people are buying default swaps on MS, GS & JPM since they have most derivative exposure to LEH and can’t break the contracts can only offset by buying CDS on potential counterparties
Blackstone Group.
The Guy from Delaware
p.s. Maybe DealBreaker?
it’s lehman. tomorrow the bonds settle out a about 10 cents. 400bn in CDS’s on lehman debt. someone is getting a $360bn beating. coincidence that suddenly AIG needs another 37bn, doubt it. MS, MS, and the whole insurance complex likely victims. piles of hedge funds as well.
S&P just put GM on Credit Watch NEG…
13, can you please explain?
could result in >$100B in losses on the LEH CDS unwind tomorrow…..
Harvard Business School.
The Guy from Delaware
p.s. @#12 is a shiteater.
Which reminds me anything murmurs GMAC/Rescap?
-C
would it be cheaper to just make the debt whole?
I dont understand, just because your insurance policy lapses, doesn’t mean you house is going to burn down.
@20: you bet!
GM is at $5 a share and only liquid through 2008… GMAC/RFC is walking dead
#23, the law of large numbers says if you lapse your policy your house will burn down.
@23
other way around. Leh already burned down, the insurers now have to pay up tomorrow…
What the hell do they need to see? What a dumb question. They need all the cards on the table now, everything, every secret, and all of it has to be completely transparent. Heck, start a website, assign numbers and everyone can remain anonymous yet get all their cards on the table. Sheehs…this is getting nuts.
@#13…
When are you going to realize that “can’t break the CDS contracts” isn’t true any more?
WhoTF is going to pay CDS claims? It’s not like those f’n things are in a senior position to all else in the event of insolvency of the firm on the hook.
Why buy the f’n things? They won’t be worth shit. Save the premium dollars.
Those contracts soon won’t be worth the price of the paper on which they’re printed.
The Guy from Delaware
first time Guy from Delaware makes sense. These are unsecured claims, everyone is just going to walk away and take the writeoffs.
Except that they’re nearly all collateralized.
Then what is wrong #28 with just buying all the mortgages and giving out new 30 year mortgages at 5.5% and moving on?
Wouldn’t that be an easy solution to a huge headache?
Idiot@#26…
CDS’s are not insurance because if the were called “insurance”, they would be regulated by state insurance commissioners.
“”Leh already burned down, the insurers now have to pay up tomorrow…”"”
HAVE to pay up tomorrow? You’re in f’n fantasyland. Read my post @#28.
The Guy from Delaware
So this is about CDS on Lehman debt, not CDS that Lehman wrote. ?
delaware, you’re way off. if the LEH CDS seller banks don’t deliver, there would be a run on them.
@32–you’re so gay, I could eat you up!
Do you wear pink colored leather speedos?
If there’s any shred of truth to this rumor, it’s gotta be GM.
tgfd-
i didn’t start the ‘insurance’ metaphor, i was just trying to get 23 in the right direction. whether the really do have to pay up or not, that’s above my pay grade
-26
tgfd-
i didn’t start the ‘insurance’ metaphor, i was just trying to get 23′s metaphor at least turned around in the right direction. whether they really do have to pay up or not, as BO says, that’s above my pay grade…
-26
How big of a component is GMAC in GM?
You are all wrong and I know what I’m talking about because I went to all cash yesterday.
The Guy From Dellawhere
I predict we nationalize our banking system.
And now I’m wondering about GE capital.
hey TGFD, price me protection on GS welching on LEH CDS payout
@40– Having $120.57 in cash isnt really a big deal in NY, maybe in Delaware though.
I just went to the ATM machine. Instead of cash it spit out something called a MBS Participation Certificate.
Should I worry?
Only major unwind going on today is GLG, and that’s single figure billions I think.
WTF is going on at Wells Fargo right now? WTF?
@48
The big O is flogging people’s nuts with a damp gym towel
48 My guess is that since it now seems to be moving in tandem with C, there’s something bad going on within WB. Earlier, when C and WFC were fighting the presumed victor was rising and the presumer loser falling. Your thoughts?
Who were all those f*#ks out there that said I was stupid for saying Lehman was too interconnected to the financial system to allow to fail. If this havoc is from LEH, think about what would happen if the fed let AIG, BSC, WB, Fannie/Freddie, etc fail. This is the end of US capitalism as we know it.
@ 15 “CDS’s” — that’s cute. You should be on CNBC.
@#33 & @#34…
A run on the CDS seller banks? They have to pay?
Start thinking outside the box. A run on the bank by whom? The bank’s depositors? The clown with a handful of CDS paper? Do you think seller banks really care about a lawsuit collection action that could take decades to resolve when they’re currently trying to just stay afloat until next week?
Just remember, no one HAS to do anything. Consider this. How long does it take to get evicted once you stop making mortgage payments on your house. Clue: a long time.
These are new and terrifying times. A lot of promises, contracts, agreements, commitments, standards, etc. will be abrogated. No one knows what will happen, nobody.
@#40…
I went to all cash Tuesday, not yesterday. The Dow was 9,447 then. Where is it today? 8,579?
Glad I made the move.
The Guy from Delaware
@46, instant fucking classic…
My questions while hedged as questions usually have a degree of truth.
I think we are finally seeing the biggest elephant in the room. What happens if the whole system is broken? i.e. in a more fundamental manner that concerns contractual enforcement. What happens if the counterparties say, ‘well, er, um sorry but we simply dont have the cash to pay?’ Short of hiring mercenaries to recoup their money not sure what can be done(aside from GS which probably has buy-in from treasury to use the National Guard). This is a problem on the macro and micro level.
There are already reports of municipalities that are no longer enforcing evictions. We are near a tipping point where an avg. sheriff may say am I going to evict old man Johnson that I’ve known for years or screw-it, let the mortgage bankers come do their own dirty work?
So the issue becomes one more fundmental, its pretty clear we need to look bottom-up not top-down for solutions.
Ok I’m off my soap box, flame away.
-C
btw any word on the interest rate mug giveaway? (I need somewhere for my RamenPride)
@54 agreed-@46-i spit my soda through my nose-good one
is delaware missing an idiot?
@55 – excellent perspective
@47 GLG at close of Q2 $2.8B down from $3B end of Q1
TGFD – I think what 33 is saying is that if the banks welch, no counterparty will do business with them anymore, so they are gone anyway..
FACTBOX-Lehman CDS settlement auction timeline
Wed Oct 8, 2008 4:16pm EDT
NEW YORK, Oct 8 (Reuters) – The value of credit default swaps backed by defaulted Lehman Brothers bonds will be set on Friday, with protection sellers expected to face massive losses of around 90 percent of the insurance they sold.
Bondholders have seen their investments virtually wiped out by Lehman’s bankruptcy filing on September 15, with most of the defaulted bonds which will be used to settle the swaps trading in the area of 12-to-13 cents on the dollar, according to MarketAxess.
The auction to settle credit default swaps on this debt will likely be the second-largest settlement of the contracts in the $55 trillion market, following an auction to settle swaps on Fannie Mae and Freddie Mae on Monday.
Twenty-two dealers will participate in the auctions, which will determine how much protection sellers will recover after paying out the insurance. The timeline for the auctions follows, according to JPMorgan.
9:45 a.m.-10 a.m. Auction participants will submit bids and offers for the debt backing the credit default swaps, which will be used to determine the initial recovery rate of the swaps.
10:30 a.m. Auction administrators Creditex and Markit will publish the initial recovery price and the open interest for the contracts will be published. The open interest reflects the amount of bids and offers that have been made, and will show if there are more buyers than sellers, or vice versa.
12:45 p.m. -1 p.m. Participating dealers will submit limit orders for the debt on behalf of themselves and their clients to fill the open interest
2 p.m. The final price of the auction will be published. (Reporting by Karen Brettell; Editing by Chizu Nomiyama)
Re 55.
Martial law by Nov 09. Maybe as soon as Jan, depending on who “wins” the “election”. After all, in the midst of a financial crisis do you REALLY want to switch governments in mid-stream? Naaa. Don’t think so.
Not a chance this is about LEH.
62 So then McCain/Snowpants really would be a Bush third term? Gotcha
Can someone explain how the auction described in 61 is going to go down. The “debt backing the default swaps” is that LEH debt?
Paulson is such a F***ing idiot for allowing LEH to file.
@65 The CDS are written ON Lehman debt, so, if you owned LEH debt, you would maybe buy CDS from maybe a hedge fund, or an insurance company, basically insuring you against a default by LEH. There is supposed to be some sort of collateralizing going on, but CDS aren’t exchange traded….basically the Wild West.
FNM/FRE settled at like $.90 on the dollar, while LEH are expected to settle at $.10 or so….massive losses on the estimated $400b of notional.
can someone explain how much of a multiplier effect there is in Lehman CDS? In other words, was there 100B in Lehman bonds and 400B in CDS payouts if the bonds defaulted? Iow, what is the relationship between Lehman bond issues and the expected CDS payout size?
If the govvie could pay off the bondholders would it reverse the default and halt the CDS payouts? Would it be cheaper than dealing with the counterparty defaults and overall mess we have now?
I think, much like the options market, you could have any number of LEH CDS out there. All you need is two counterparties. You don’t have to be a LEH bondholder to buy CDS on LEH….you could do it on a trade. Wasn’t Ackman being fairly public about buying CDS on the financial guarantors?
The big difference from the options market is that (listed) options are on an exchange and so the settlement each party has with the exchange is the net of all their positions in that option. In CDS, if bank A buys from bank B which has bought from bank C, A doesn’t get the money direct from C but has to wait. What a friggin mess.
Everyone knew this was going to happen, and the US stock market tanked at the day end to pay for writedowns so, stop worrying.
.10 cents is .10 cents – I bet they play with the bids and it ends up at .20 and the index shoots to the moon.
PS – Has a great day – everything up and some fun with a board of director take over NOT-V. It’s not all doom and gloom.
http://www.upzero.com
Incredible market commentary — hysterical.
@66,
You are so right, they are definitely solvent.
@#68…
Considering your example,
LEH Debt = $100B. CDS Payouts = $400B. WTF? No wonder the f’n system is broken. Almost laughable. Does anyone seriously think anybody will get paid more than a pittance? Pathetic assholes looking to get well say, “A deal is a deal, you know”. Haha. Douchebags all.
Have no fear @#60, Bank A doesn’t care anymore if counterparty B will no longer do business with it. If enough banks “welch”, the precious counterparties will have a tough time finding any bank who will want to deal with THEM.
@#67…HowTF does someone ‘lose’? $400B on $100B actual debt, notational or otherwise, when most CDS holders invested only pennies per $Hundred? $300B will vanish instantly, so the auctions will begin at 25c per dollar of CDS and go down rapidly from there. Get real. Nobody except the counterparty idiots waving their CDS papers around take this f’n cartoon seriously.
Wait until this f’n debacle eventually ends. Credit Default Swaps? They’ll be something people only read about in financial history books, in the chapter titled, “Lessons Learned – What Not to Do” or in the “Failed Experiments” chapter.
The Guy from Delaware.
p.s. TGFD thanks 55,60,61,67-70 for your excellent and enlightening comments.
TGFD throws a f’n turd at #35.
@74– If the turd is from you baby, I love you! Now, go back to your Mommy’s basement and keep watching porn with her.
gotta love the internet – instant platform for idiots who know nothing to get their stupid ideas out there for the rest of us to laugh at. to be clear, TGFD, you are in the former camp.
CDS is a zero sum game. each contract has a buyer and a seller – so if $400 BN of LEH CDS is outstanding and recovery is 10% the people who wrote CDS will lose $360 BN and the people who purchased CDS will make $360 BN. the net loss will be on the amount of debt LEH actually had outstanding (including counterparties who were owed $$ from LEH on other derivatives). so if LEH had $150 BN of senior bonds and counterparty exposure outstanding the net loss from LEH filing BK would be $135 BN. of course this ignores the effect of LEH liquidating hedgie prime broker balances and resulting collateral effects.
CDS is a zero sum game. each contract has a buyer and a seller – so if $400 BN of LEH CDS is outstanding and recovery is 10% the people who wrote CDS will lose $360 BN and the people who purchased CDS will make $360 BN. the net loss will be on the amount of debt LEH actually had outstanding (including counterparties who were owed $$ from LEH on other derivatives). so if LEH had $150 BN of senior bonds and counterparty exposure outstanding the net loss from LEH filing BK would be $135 BN. of course this ignores the effect of LEH liquidating hedgie prime broker balances and resulting collateral effects.
CDS is a zero sum game. each contract has a buyer and a seller – so if $400 BN of LEH CDS is outstanding and recovery is 10% the people who wrote CDS will lose $360 BN and the people who purchased CDS will make $360 BN. the net loss will be on the amount of debt LEH actually had outstanding (including counterparties who were owed $$ from LEH on other derivatives). so if LEH had $150 BN of senior bonds and counterparty exposure outstanding the net loss from LEH filing BK would be $135 BN. of course this ignores the effect of LEH liquidating hedgie prime broker balances and resulting collateral effects.
hHcd3q Thanks so much for the article.Really looking forward to read more. Really Great.