Lehmans

chucky

sabretoothtigger wrote: »

So is this why the market just melted down for no apparent reason.
At the same time 10 pages worth of 'companies announcing lehman losses' came on the news feed, the sp500 dropped 7%

no idea - just checked a few sites and no mention of this connection with Lehmans
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDRetp2GpqeI&refer=home

chucky

neverdespairgirl wrote: »

I hope you don't mind my asking, but you seem to know about this stuff.

When you say portfolios / books, do you mean loans they have made and investments they hold? So other banks sniff round them, and work out what they think they are worth, and then they are all auctioned?

Then the money goes to the Lehman creditors?

nothing would go to the Lehman creditors from here - this is just a nominal calculation by the dealers that take part in the auction to value the bonds so they can settle the trades using the ISDA Protocol not as part of the liquidation process.

there are parts of the Lehman company that are profitable - you're right i wouldn't be surprised that one of these banks would be sniffing around here to see what they could buy up these profitable areas for.

posh*spice

posh*spice wrote: »

Many analysts and commentators now seem to be of the opinion that it was a mistake to have let Lehman's go bust.

Tomorrow they need to settle hundreds of billions of default swaps and this could be yet another day of disaster in the city.....another interesting day in the city

Day Of Reckoning
http://www.bbc.co.uk/blogs/thereporters/robertpeston/

Robert Peston's take on todays default swaps.

Sir_Humphrey

.tHi

A bit of a mea culpa here. When I thought that letting Lehman's go bust was okay because they have no retail deposits.

I was wrong because I underestimated the counterparty risk.

posh*spice

Sir_Humphrey wrote: »

Hi

A bit of a mea cupla here. When I thought that letting Lehman's go bust was okay because they have no retail deposits.

I was wrong because I underestimated the counterparty risk.

There are still plenty of people who around who think it was the right thing to do...I suppose we will be debating this for years?

chucky

Sir_Humphrey wrote: »

Hi

A bit of a mea cupla here. When I thought that letting Lehman's go bust was okay because they have no retail deposits.

I was wrong because I underestimated the counterparty risk.

the counterparty risk is all dependant on what comes out over the next few weeks dependant on the structure of these trades and their settlements.

if counterparties have to settle cash and they are not very liquid then this is an issue.

if counterparties have to settle physically then it's not that much of a problem as they just have to deliver another bond of equal value which is much easier to do.

until this kind of information is released nobody really knows the answer even the people closest to it don't know it 100%, so this $400million figure is a complete guess that all trades were cash settlements and just looking for a shock reaction or a headline news story.

there are too many factors for us to consider here Sir Humphrey and we have no chance really of knowing the answers.

Generali

chucky wrote: »

the counterparty risk is all dependant on what comes out over the next few weeks dependant on the structure of these trades and their settlements.

if counterparties have to settle cash and they are not very liquid then this is an issue.

if counterparties have to settle physically then it's not that much of a problem as they just have to deliver another bond of equal value which is much easier to do.

until this kind of information is released nobody really knows the answer even the people closest to it don't know it 100%, so this $400million figure is a complete guess that all trades were cash settlements and just looking for a shock reaction or a headline news story.

there are too many factors for us to consider here Sir Humphrey and we have no chance really of knowing the answers.

FWIW, FT Alphaville this morning was talking about a figure of 75-85% so that's $60,000,000,000-$100,000,000,000.

They were also saying that there's been a big spike in the failure rate on repo trades as banks look to hoard cash ahead of this settlement and WaMu next week.

The equity markets are looking like they have either hit capitulation or a death spiral. Hopefully it's the former. FT Alphaville reckon that 2.5% of mutual funds in the US have been withdrawn over the past couple of weeks.

sabretoothtigger

Shares in Barclays dropped 13.1 per cent to 241¾p as buyers pulled away ahead of Friday’s auction to settle credit default swaps, a type of insurance contract, on Lehman Brothers’ debt.


With Lehman’s defaulted bonds trading at about 10 cents on the dollar, the payouts could reach $360bn. Traders said it was not clear what exposure, if any, Barclays would have but investors had decided to err on the side of caution and avoid Barclays for the time being. This trend was also evident on Wall Street where investment bank Morgan Stanley fell sharply in early trading.

So barclays to rise at 3:30?


Peston talks about lehman debt
http://www.bbc.co.uk/blogs/thereporters/robertpeston/





http://www.breakingviews.com/2008/10/08/Lehman%20CDS.aspx?email

Generali

chucky wrote: »

the counterparty risk is all dependant on what comes out over the next few weeks dependant on the structure of these trades and their settlements.

if counterparties have to settle cash and they are not very liquid then this is an issue.

if counterparties have to settle physically then it's not that much of a problem as they just have to deliver another bond of equal value which is much easier to do.

until this kind of information is released nobody really knows the answer even the people closest to it don't know it 100%, so this $400million figure is a complete guess that all trades were cash settlements and just looking for a shock reaction or a headline news story.

there are too many factors for us to consider here Sir Humphrey and we have no chance really of knowing the answers.

Well the results of the auction are on Bloomberg (link) and they are saying that there'll be a payout of 90.25%.

Apparently BNP Paribas reckoned that an 80% payout would cost a total of $220,000,000,000 ($220 bn) so presumably the payout will be substantially more than that.

sabretoothtigger

Final price at 2pm est apparently