On Sun, 12 Oct 2008 05:16:05 -0700, "John R. Carroll"
wrote:
snip
Couple of things wrong here George.
First, the auction was totally bogus. Nothing more is indicated by the
"benchmark" than the fact that nobody really wanted these things AT ALL.
Losses on credit default swaps are unlikely to exceed three or four percent
even in the worste case without intervention.
snip
===============
Indeed, but these were the Lehman Spondulicks, i.e. Lehman
Spondulick denominated bonds, or at least a significant subset of
them, on which the CDSs were written, and a $USR value had to be
established, as the holders of the CDSs wanted "coin of the
realm" and not more Spondulicks on other institutions which *MAY*
be as good as $USRs[and then again may not].

=========
snip
That's because derivatives traders, using an auction Friday, set
the price of Lehman's bonds at 8.625 cents on the dollar. The
amount of insurance--in the form of credit default swaps--written
to protect bond holders is estimated at $400 billion. Buyers of
the insurance will collect the full face value of their holdings
from the sellers of the insurance.

Of course that also means the banks, funds and insurance
companies that sold it are out $365 billion, which is the
difference between the price of Lehman's bonds as set in the
auction and the remaining 91.375 cents in face value.
snip
=========
for complete article click on
http://www.forbes.com/business/2008/...10auction.html

This establish at least a working exchange rate of about 0.0875
$USR = 1.00$USV(Lehman Spondulick) when all the BS was stripped
out and the amount of Spondulicks issued is netted against the
amount of $USR assets actually available to back these up.

Note that this does not include the value of the Lehman Spodulick
"money of account" denominated accounts payable, unsecured loans,
utility payments, deferred compensation, etc. that just vanished.

Also "missing in action" are huge amounts of negotiable
securities, some denominated in Spondulicks [various issuers] and
some in $USR, that were being held by Lehman as collateral.
These now appear to have been used by Lehman as collateral for
their obligations with other institutions. In many cases, this
"collateral" is reported to have already been sold, sometimes at
a steep discount, to cover the Lehman obligation. If this is
indeed the case, as it appears to be, it is a serious felony
called "wrongful conversion." It also indicates that the widely
reported Lehman "leverage" of 30:1 was a "best case" paper number
and the actual leverage was in excess of 100:1, when the total
amount of "borrowed" funds is considered.

As serious as Lehman's bankruptcy is, the more critical item is
how many more Lehman's are out there, and there appears to be a
large number.

In addition to all the known risks there was the
$USR---Spondulick exchange rate risk.

Don't take any Spondulicks....


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).