[Cabrone]

Could this be the day the system goes supernova?

$this->bbcode_second_pass_quote('', 'O')ne serious anxiety concerns the auction today to settle liabilities on insurance - or credit default swaps - on debt of the collapsed investment bank, Lehman Brothers.
As I noted a couple of weeks ago, there are estimates that claims under insurance contracts will total $400bn. Sandy Chen of Panmure was one of the first to highlight the scale of this looming problem.
If demands for payment are as big as $400bn, there will be pain for banks, insurers, hedge funds and other financial institutions.
Here's why.
For every winner in a claim, there is a loser, the underwriter who has to divvy up. And if the underwriter lacks the resources to pay - which may turn out to be the case in this under-regulated market - that creates two losers: viz the bust underwriter and the claimant which doesn't get the money on which it was counting.
And if that claimant had been calculating its own financial strength on the basis that it had insurance against its Lehman debt, well then failure to receive payment could shatter the integrity of its balance sheet. Which in turn would create potential losers among its creditors.
So this day of reckoning on Lehman credit default swaps is momentous - and it could not come at a worse time for fragile bank shares.

[Armageddon]

The PPT will pump in everything they have today.

[jasonraymondson]

I actually think stocks will go up today. I think we will end this week on a positive note, if not, then it will be a very bad note and possibly a 10% drop

[Bas]

dow futures are about 4% lower at 8250...we'll see in five minutes what that means....

Bloomberg futures

[Cid_Yama]

9.75 cents on the dollar. per CNBC this is initial price, final price could be lower.

[Tyler_JC]

Source?

Analysis?

Anything?

This is a discussion forum, not a facebook wall.

[hope_full]

This was on CNBC's SQUAWK BOX with Mark Haines this morning (about 10:45 am). I heard it as well. After his female co-host talked about this Mark said, "And I suppose this is good news?"

Mark Haines is THE man.

[RdSnt]

Turning $400 billion into something under $4 billion is never a good thing.
Check this out:
http://seekingalpha.com/article/99286-s ... ises-ahead

The big event though is that this is the first opportunity for a large group of cds's to be "marked to market". What follows then is we have a better idea of what all CDS's are worth. As I've mentioned before, in the current market all CDS's essentially are worthless.

Now we get to see the scramble, and lawsuits, as everyone attempts to avoid paying the defaults that the CDS's have just failed to cover.

[Cid_Yama]

Agreed. This is the thing they were all trying to avoid; a market price on these things.

Silver Lining: They got priced before Treasury was able to pay .50 on the dollar with taxpayer money.

[Niagara]

$this->bbcode_second_pass_quote('hope_full', 'T')his was on CNBC's SQUAWK BOX with Mark Haines this morning (about 10:45 am). I heard it as well. After his female co-host talked about this Mark said, "And I suppose this is good news?"

Mark Haines is THE man.

[seahorse2]

What price was expected on the auction?

[gnm]

So potentially trillions in financial assets could decline 90%?

Well no sweat then.... And here we were all worried...


-G

[RdSnt]

Not "could", "are".
It's actually much worse than that, if you can believe it. Because the derivatives have been packaged in extremely complex tranches it is impossible to unravel the liabilities. No one actually knows who is "supposed to" pay.
Yet, the expected revenues from them have been borrowed against and heavily leveraged to buy other assets.
Because the tranches are so huge (~$700 trillion) and complex there is no possibility of unravelling them, simply because we don't have the staff or the time to do it.

So in practical terms the tranches are worthless. This is why there has been so much effort put into propping up what is essentaily a dead system. How do you write off assets that are nominally worth 10 times the global gdp?

$this->bbcode_second_pass_quote('gnm', 'S')o potentially trillions in financial assets could decline 90%?

Well no sweat then.... And here we were all worried...


-G

[gnm]

$this->bbcode_second_pass_quote('RdSnt', 'S')o in practical terms the tranches are worthless. This is why there has been so much effort put into propping up what is essentaily a dead system. How do you write off assets that are nominally worth 10 times the global gdp?

[RdSnt]

HAHA sorry no, that won't work. Actually it wouldn't change anything but add zeros to the figures. You have to inflate the fiat currencies without inflating the obligations.

$this->bbcode_second_pass_quote('gnm', '')$this->bbcode_second_pass_quote('RdSnt', 'S')o in practical terms the tranches are worthless. This is why there has been so much effort put into propping up what is essentaily a dead system. How do you write off assets that are nominally worth 10 times the global gdp?

[Newfie]

Exposing the depths of my ignorance here.....

What would happen if we simply declared all CDS contracts null and void? Vaporize them?

Sounds to me like it is all just a bunch of boys playing dress up with Monopoly Money anyway?

How does it effect the real world? How would it effect me?

Serious, though potentially stupid, question.

[Jotapay]

$this->bbcode_second_pass_quote('Newfie', 'E')xposing the depths of my ignorance here.....

What would happen if we simply declared all CDS contracts null and void? Vaporize them?

Sounds to me like it is all just a bunch of boys playing dress up with Monopoly Money anyway?

How does it effect the real world? How would it effect me?

Serious, though potentially stupid, question.

[MOCKBA]

$this->bbcode_second_pass_quote('Newfie', 'H')ow does it effect the real world? How would it effect me?

[skeptik]

$this->bbcode_second_pass_quote('MOCKBA', '')$this->bbcode_second_pass_quote('Newfie', 'H')ow does it effect the real world? How would it effect me?

[Cid_Yama]

per CNBC now down to 8.625 cents on the dollar.