Lehman Assets Nearly Worthless, Dangerous Implications For Economy

So the final results from the Lehman Brothers CDS auction are in, and they're even uglier than expected. Finally price is 8.625 cents on the dollar.

Be prepared for the perma-bulls to start saying that all the money made by those getting paid out will be poured back into equity and the credit markets and save us all. And there are whiskey rivers on the Big Rock Candy Mountain.

This should result in another round of huge write-downs, and add paranoia to the market as everyone tries to guess who had the worst exposure to this disaster.

Read the whole story here.

Comments

[Barackaroo]

Hope cheney, rummy, dubya, wolfowitz, perle, addington, gonzo, john yoo, bill whathisface, feith, bremer, etal were all heavily invested.

[sculptor]

Lehman was highly "leveraged" which basically means they borrowed a ot money and its value was its financal momentun. Once that momentum was checked, the remaining true value was minimal. All things considered this seems like a risky bussiness model and future regultions should limit who can invest in a house of cards like this (just like the current limitaions on investing in a venture captitol firm.)

[bellrich]

We need to elect more progressives who should favor regulations no matter what party, but this is a conservative country that believes rules are for the middle class not them. If we do get a more progressive congress They must work with other countries to make sure that regulations are global.

[wayoutleft]

regulations don't matter any more. bush, congress and big capital decided that retirement accounts were ready for skimming. they took out 1.5 trillion in shorts, then congress gave them another trillion from the taxpayers. then the market drop takes about a trillion out of ira money markets. big guys buy depressed assets and recapitalize.

[Anciano]

Yes taxpayers and pension suckers who lost everything. Look who came out smelling like a rose?
Financial Week: Bush's Cousin Now Kingpin at Firm Rising From Lehman
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20081008/REG/810089997/1036
George Walker is the kingpin in the newly reincarnated asset management firm that"s emerging from the collapse of Lehman Brothers. When Mr. Walker, the President"s cousin, assumed the role of managing director and global head of the investment management unit of the i-bank late in 2006, an investment banker said: "Everyone in the universe is watching what George Walker will do at Lehman." The same is true now that Mr. Walker has managed to negotiate a deal to sell the $230 billion asset management division he heads to equity firms Bain Capital and Hellman & Friedman.

[dadw5boys]

THE S &P 500 WALKED AWAY WITH THE U.S. TREASURY AND INVESTED IN GOLD.

THEY CASHED OUT IN THE FALL OF 2007.

NURSED THE COMPANYS ALONG TILL THE TIME LIMITATION FOR INSIDER TRADING HAD PASSED THEN WENT BANKRUPT.

[wayoutleft]

lehman assets would be completely worthless except for the boxes of old baseball cards in the basement

[imsosure]

Nobody cares, obviously any regulations would have only made things even worse. But we have only just begun to self-destruct, we just need to give it some more time, things should get much worse sooner or later.

[eajphd]

Actually the following item from Bloomberg may be a more interesting part of the story - since there is estimated to be as much as 62 trillion dollars waiting to be dealt with. If the ratio report here holds the same the amount due to CDS holders would be over 56 trillion dollars. To paraphrase Everett Dirksen - a trillion here, a trillion there, pretty soon you're talking real monet.

"Today's auction determined that investors who bet on a default of Lehman's debt by buying derivatives called credit- default swaps should get 91.375 cents on their dollar. The price was set by auction administrators Creditex Group Inc. and Markit Group Ltd., with 14 financial institutions bidding. That figure was calculated based on an ``inside market midpoint'' price of 8.625 cents on the dollar for Lehman's debt."

http://www.bloomberg.com/apps/news?pid=20601087&sid=aTFpC.9DW5RQ&refer=home

[eajphd]

I'm sure everyone will be glad to know that market watch reports that '"An auction to set the value of Lehman Brothers debt for derivatives traders went "smoothly" and "efficiently," according to Robert Pickel, chief executive of the International Swaps and Derivatives Association.' ISDA of course played a major role in creating the mess and is eager to see it all get unwound - at our expense.

Market Watch article http://www.marketwatch.com/news/story/lehman-cds-auction-went-smoothly/story.aspx?guid=%7BEC7EABEF-1DB2-4388-8B28-DDA3A52C04BE%7D&dist=msr_9#comments

[funkalicious]

Bob Pickel is always looking for a happy ending to the big cds pipe tax payers are choking on.

the cluster f@ck in the derivative market with its notional value of a quadrillion dollars with 62 trillion of notional value now at 6.2 trillion whoopsy daisy. That market looks dead and because they are all daisy chained the derivatives one off setting the other Holy-crap-olly. The quadrillion in notional derivatives is really screwed.

A losing a quadrillion dollars would be like eating five thousand Big Macs a day for 32 million years,
that my friends is a lot of secret sauce. Just ask Bob Pickel chief executive of the International Swaps and Derivatives Association, kinda makes you wanna hurl huh?

[DavidATolucaLake]

Here"s to all the "I know better than you" free market groupies who talk about their love of derivatives and credit swaps, because they hedge risk (LOL, that"s a good one) and they increase liquidity (if by liquidity you mean they help money evaporate like water, yeah).

We need to get back to making money "the old fashioned" way. Creating great products that consumers want and running a business.

Nah, let"s think of ways to glamorize pyramid schemes and shout down those that disagree as anti capitalist.

I"m sure glad derivatives and credit swaps protected us from this major financial down turn. That would have been terrible. (Smirk)

[January]

I thought I heard someone say that investment bankers were leveraging $10 with $1. That means to me that in a declining market, $10/assets should be worth less than a $1. Isn't that what those buying the assets from Lehman are now also saying?

My math is notoriously poor, but maybe that's something that I share with investment bankers?

[rich misty]

10:1????

Try 30+ to 1 leveraged

[olephart]

"Finally price is 8.625 cents on the dollar."

That is the definition of illiquid assets and Bush, Paulson, Pelosi, McConnel, Reid and Boehner just bought $700,000,000,000 of them with our money. We're gonna come out way ahead on this deal.

[artsymermaid]

Does this mean designer handbags will be cheaper?

[cmp]

Ah, yeaaaaaah! Maybe I'll be able to visit Thailand on 6 cents on the dollar ? Time to look for the great twofers now.

[rich misty]

http://www.marketwatch.com/news/story/derivatives-new-ticking-time-bomb/story.aspx?guid=%7BB9E54A5D-4796-4D0D-AC9E-D9124B59D436%7D

Derivatives market cap in 2008 was $661 trillion. The meltdown in this market is where we are going.


http://www.bloomberg.com/apps/news?pid=specialreport&srnum=2

^^^ Excellent collection of historicals on how the mortgage ponzi scheme started the meltdown: How we got here

http://money.cnn.com/2008/09/29/magazines/fortune/varchaver_derivatives.fortune/

^^^ This is where we are in the process... It is the CDS market which is now tanking: this market and the derivatives market in general is not regulated nor traded thru any exchange or clearing house. It is literally a free for all...

Encourgaged by the GOP

[Formulaplot3]

WALL STREET CRASH - HEADLINE - 80 MILLION
BABY BOOM PENSIONS NOW WORTH = $00.10 / dollar.

Vote Republican! They allow Big Business to harvest the middle class everytime...

Maybe with:
*booming bankruptcy's
* millions of foreclosures
* massive unemployement
* deflated dollar
* collapsing economy
* 2nd Great Depression
* and multiple wars,

- voters today will finally begin to understand that voting for the GOP is absolute stupidity.
Next McCain will want to axe all social security & other programs in favor of more corporate welfare.
The disease of BANANA REPUBLICANISM has set in, and we need major changes. Vote all the career bums out!

[BlueZoo]

I'm trying! No incumbents in November!

[twofish]

If all incumbents are voted out in November, we'll end up with a Republican Congress. Is that what you want? The time to get rid of incumbents is in the primary election, when you can get a more progressive Democrat in place of a Bush's doormat, for instance.

Unless there is a chance a 3rd party candidate could get elected in your district. That would take a lot of organizing and probably isn't going to happen, unless that person is a party-hopper (like Lieberman in Conn.) or is already a celebrity. Not too likely.

[KCFreedom]

Not giving the Republicans a break, but just voting in Democrats won't solve anything. They'll just screw us too.

Vote for good people, regardless of political party, if any exist. There are a few good apples in Congress that deserve to be re-elected. Some are Republicans. Research your candidates.

As for Lehman Bros, it figures that Daddy Warbucks legacy would end up a fraud. Note they actually own part of the Federal Reserve Bank, along with several other Rothschild and Rockefeller-controlled banks. Yep; some European banks own our Federal Reserve Bank. Wonder how that will impact the Fed Reserve for them to dissolve?

[DrVeruju]

All those off-balance-sheet transactions are actually worthless in reality. The bailout is not fixing things ... can it ever?

http://larouchepac.com/news/2008/10/09/derivatives-or-civilization-take-your-pick.html