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cAt needs a GPS on his laptop....so that Big'Bro can him track him across the U.S.
Would that be Trenwick Zimbabwe dollars?
A hamburger in an ordinary cafe in Zimbabwe costs 15 million Zimbabwe dollars.
Dollar Danger, Will Robinson! Dollar Danger!
U.S. has plundered world wealth with dollar: China paper
Fri Oct 24, 2008 6:14am EDT
BEIJING (Reuters) - The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.
The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.
A meeting between Asian and European leaders, starting on Friday in Beijing, presented the perfect opportunity to begin building a new international financial order, the newspaper said.
The People's Daily is the official newspaper of China's ruling Communist Party. The Chinese-language overseas edition is a small circulation offshoot of the main paper.
Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis.
"The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University.
Shi, who has before been strident in his criticism of the U.S., said other countries had lost vast amounts of wealth because of the financial crisis, while Washington's sole concern had been protecting its own interests.
"The U.S. dollar is losing people's confidence. The world, acting democratically and lawfully through a global financial organization, urgently needs to change the international monetary system based on U.S. global economic leadership and U.S. dollar dominance," he wrote.
Shi suggested that all trade between Europe and Asia should be settled in euros, pounds, yen and yuan, though he did not explain how the Chinese currency could play such a role since it is not convertible on the capital account.
A two-day Asia-Europe Meeting (ASEM) of 27 EU member states and 16 Asian countries was set to open on Friday. Though few analysts expect much in the way of concrete agreements, Shi said it could prove momentous.
"How can Europe and Asia grasp each other's hands and together confront the once-in-a-century global financial crisis sparked by the U.S.; how can they construct a new equitable and safe international financial order?" he said.
"The world is waiting for this Asian-European meeting to achieve big results in financial cooperation."
Link - http://www.reuters.com/article/newsOne/idUSTRE49N1XX20081024?pageNumber=1&virtualBrandChannel=0
Dollar Danger, Will Robinson! Dollar Danger!
We may have some of the best reinsurance books in Bermuda...no Subprime/CDO exposure, or Credit Default Swap agreements...
CTA Cover Thy Ass
Josie the Plumber CTA
Danger, Will Robinson! Danger!
Worn,
Here's a link to place on your radar screen
Jesse's Café Américain
Link- http://jessescrossroadscafe.blogspot.com/
Good post,
Hold tight Mates...more rough sea ahead
Europe On Brink Of Currency Crisis Meltdown Link -
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3260052/Europe-on-the-brink-of-currency-crisis-meltdown.html
Danger, Will Robinson! Danger!
Fed heads toward uncharted territory
Ben Bernanke & Co. are likely to cut interest rates again on Oct. 29.
And some experts think rates could soon fall below 1% for the first time.
NEW YORK (CNNMoney.com) -- The Federal Reserve is widely expected to cut interest rates again next week. But could the Fed soon go where it has never gone before and bring them below 1%?
The Fed lowered its federal funds rate, the benchmark overnight lending rate at which banks lend to one another, by a half-percentage point to 1.5% in an emergency announcement Oct. 8.
Many investors believe the central bank will cut rates by at least another half-percentage point following the end of a two-day meeting on Oct. 29.
In fact, the fed funds futures on the Chicago Board of Trade are now pricing in a 26% chance that the Fed will cut rates by three-quarters of a percentage point to 0.75% by that meeting.
Fed Chairman Ben Bernanke has said in recent weeks that economic weakness is likely to continue into next year, despite rate cuts and other recent moves taken by the Fed and Treasury Department to try and fix the credit crisis.
On Monday, Bernanke pushed Congress to consider a new stimulus plan to spur the economy.
"Everyone at the Fed has pretty much told you they're going to cut," said Rich Yamarone, director of economic research at Argus Research. "They're in a kitchen sink mode right now. Rate cuts, fiscal stimulus, bailouts - they're throwing everything they can at this right now."
Still, would the Fed really consider lowering interest rates below 1%? The last time rates were at 1% was between June 2003 and June 2004.
Rate cuts have been a key tool the central bank has used in the past to boost a weak economy. A variety of lending rates, including credit cards and home equity lines, as well as the prime rate used to set many business loan rates, are pegged to the fed funds rate.
So lower rates usually lead to cheaper credit, thus spurring businesses and consumers to spend money more freely.
But in the current credit crisis, with banks afraid to make loans due to worries about their firms' own need for cash in the near term, already relatively low short-term rates have done little to get credit flowing. (The Fed cut rates seven times between September 2007 and April before holding them at 2% for several months.)
Some economists argue that another rate cut may be the least important step the Fed can take in its effort to solve the crisis.
"It's window dressing, only a psychological weapon," said Sung Won Sohn, economics professor at Cal State University Channel Islands. "Right now, the problem isn't the cost of the Fed's money, it's that the existing money supply is not circulating. The pipelines are clogged."
Even Fed Vice Chairman Donald Kohn seemed to acknowledge that rate cuts aren't as important as they once were. In an Oct. 15 speech, Kohn said the coordinated global cut the previous week had already been "overwhelmed ...by the further erosion in confidence."
Still, many economists say that fear and uncertainty in the markets is so great right now that the Fed can't risk leaving rates unchanged. And they say anything that can be done to spur lending is a positive.
"It's not irrelevant, even if it's not as important as usual," said David Wyss, chief economist with Standard & Poor's.
Wyss said that if the U.S. credit and financial markets remain in crisis, a cut below 1% could come later this year or early next year.
To be sure, some have pointed to rates being at 1% for as long as they were as a factor in the housing bubble earlier this decade. It was the plunge from those inflated home values that sparked the credit crisis now dogging markets.
Low rates can also feed inflation. But that might be a sacrifice the Fed has to make.
"Inflating our way out of this mess is the Fed's only option at this point," said Peter Boockvar, market analyst of Miller Tabak, in a note Friday morning.
With the global economy slowing down, there are few economists talking about the threat of inflation. And the continued decline in home prices has negated most fears of low rates leading to another housing bubble.
So even a cut to nearly 0%, a rate where the Bank of Japan left rates for much of the 1990's, is not out of the question, given the unprecedented nature of credit problems.
"There's a hesitation to do it because it looks like desperation. But they're getting desperate," said Wyss.
Link - http://money.cnn.com/2008/10/24/news/economy/fed_outlook/index.htm
Go forth and multi-ply our 401K retirement accounts...
Danger, Will Robinson! Danger!
You do not want to see the three major subsidiaries reunited, because the common shareholders of Trenwick Group Ltd would never see any value...IMHO
The only value we will see as Common shareholders is from the LaSalle and Trenwick Group Ltd reserve assets, and tax credits...IMHO
I may have to use Lughead's helmet to buy more shares.
Danger, Will Robinson! Danger!
[chart]static.seekingalpha.com/uploads/2008/10/24/saupload_flat_earth_society.jpg>
Item 1. Trenwick America Reinsurance Corporation
Item 2. The Insurance Corporation of New York
New TAC is a holding company and its principal subsidiaries are Trenwick America Reinsurance Corporation and The Insurance Corporation of New York, both of which have ceased writing business and are in run-off.
on August 15, 2005, TAC was reorganized and succeeded by Trenwick America LLC, a new Delaware limited liability company (“New TAC”).
Trenwick Group Ltd has no claim to Item (1) and (2).
Link - http://www.trenwick.com/
Danger, Will Robinson! Danger!
Item 3. Dakota Specialty Insurance Company
Aspen Insurance Holdings Limited, bought Dakota Specialty Insurance Company from The Insurance Corporation of New York. Dakota will be renamed Aspen Specialty Insurance Company.
September 10, 2003 Link - http://www.insurancejournal.com/news/national/2003/09/10/32178.htm
Global Schemes page 19
"Once payments have been made to all creditors under the plan, application will be made to the court for it to enter an order of dissolution, releasing the company from any further liabilities, and allowing the company to release its capital to its shareholders."
Taxation Issues page 23
"Rewards can be reaped by considering the tax implications of a scheme of arrangement sooner rather than later"
Hopeful the next 8-K will will discuss the LaSalle Order of Dissolution and the value to the Trenwick Group common shareholder
Danger, Will Robinson! Danger!
Scheme of Arrangement
http://www.pwc.co.uk/pdf/Schemes-Arrangement04.pdf
I'm hoping the Recession will end soon, so that the Depression can start.....
Danger, Will Robinson! Danger!
If you have both then you build your own Zoo and start collecting monkeys and money.
Education, then experience.
Education will always keep you above the monkeys with no education.
Whereas experience without education will always keep you trapped within the Zoo.
Bernanke May Seek New Tactics as Fed Rate Nears 1% (Update1)
By Craig Torres
Oct. 23 (Bloomberg) -- Federal Reserve officials are likely to bring interest rates down so aggressively over the next few months that they will have to search for fresh tactics to continue easing credit.
The Fed's Open Market Committee will probably reduce the benchmark federal funds rate by half a point next week to 1 percent, the lowest since May 2004, according to futures trading. The official rate has never been lower since the Fed made it an explicit target in the late 1980s.
Further cuts below 1 percent could turn Fed Chairman Ben S. Bernanke's focus away from the main rate and toward more use of alternative tools. Those might include increasing its holdings of mortgage bonds to lower costs for homebuyers and purchasing securities directly from the Treasury in order to pump more cash into the economy, Fed watchers said.
``If there is need for more stimulus, the Fed will buy up government debt'' to keep borrowing costs low, said Adam Posen, deputy director at the Peterson Institute for International Economics and a co-author with Bernanke. That's tantamount to ``turning government debt, as it is issued, into money.''
Bernanke, 54, has already thrown the central bank's balance sheet into action in unprecedented ways. Working with the New York Fed, the Board of Governors has rolled out 11 new programs aimed at absorbing risk or making dollars available when banks don't want to loan.
Assets Doubled
The result: The central bank's assets, which include a loan to insurer American International Group Inc. and a pool of investments once held by Bear Stearns Cos., more than doubled to $1.772 trillion last week from a year-earlier total of $873 billion that comprised mostly Treasuries. The latest weekly figures are scheduled for release at 4:30 p.m. in Washington.
There's more to come. The Fed announced this week a backstop for money-market mutual funds to which it will commit another $540 billion. A commercial-paper program approved Oct. 7 could buy up to $1.8 trillion of securities.
``The net effect of these facilities has been a truly staggering pace of growth in the Fed's balance sheet,'' said Jan Hatzius, chief U.S. economist for Goldman Sachs Group Inc.
When the Bank of Japan fought deflation and a banking collapse earlier this decade, its balance sheet ballooned to more than 30 percent of gross domestic product as it pumped money into the economy, Hatzius said. He predicted ``further rapid growth'' in the Fed's, which is now equal to 12 percent of U.S. GDP.
`Helicopter Ben'
As a Fed governor, Bernanke did research on alternative policy tools between 2002 and 2004, when U.S. central bankers last cut the benchmark rate to 1 percent. Traders nicknamed him ``Helicopter Ben'' after a 2002 speech that referenced Milton Friedman's comments comparing such unorthodox methods to dropping money from a helicopter.
Vincent Reinhart, the Fed's director of monetary affairs at that time, said Bernanke's policy activism, which contrasts with his predecessor Alan Greenspan's almost exclusive use of the federal funds rate, derives from the chairman's research on policy errors in the Great Depression and during Japan's rolling recessions of the 1990s.
``He saw what we viewed as an obvious policy failure and it was in the ability of human reason'' to fix it, said Reinhart, now a scholar at the American Enterprise Institute.
`Quantitative Easing'
The Bank of Japan, struggling against deflation, slow growth and consumers' reluctance to spend, brought its policy rate close to zero before turning in 2001 to a so-called quantitative easing strategy of increasing money in accounts held for commercial banks. The policy lasted for five years, before the central bank began to draw down reserves and raised its benchmark rate to 0.5 percent, where it has been since February 2007.
The Fed has flooded the economy with so much cash that excess reserve balances at banks, or cash surpluses beyond what banks are required to hold against deposits, soared to $136 billion for the two-week period ending Oct. 8 compared with an average of $1.4 billion in the same month last year.
``The Federal Reserve has already entered a regime of quantitative easing,'' said Brian Sack, vice president at Macroeconomic Advisers LLC who also worked with Bernanke as an economist in the Monetary Affairs Division.
As their liquidity programs dump excess funds into the banking system, it's become more difficult for the Fed to keep the rate at which banks lend overnight to each other in line with policy makers' 1.5 percent target.
Below Fed Target
In an effort to put a floor under the overnight rate, the central bank started paying interest on the reserves banks deposit with it. That hasn't stopped the so-called effective federal funds rate from falling below the target every day since officials lowered their benchmark by half a point in an emergency move on Oct. 8.
In the two weeks since then, evidence of a deteriorating economy has mounted and will likely push Fed officials toward a further rate cut when they meet Oct. 28-29, economists said.
Federal funds futures traders boosted their bets on a half- point rate cut to a 90 percent probability today from 46 percent a week ago. Traders see a 10 percent chance of a quarter-point reduction.
Industrial production in the U.S. fell in September by the most in almost 34 years, and retail sales dropped by the most in three years. Inflation pressures are easing as oil prices fall to a 16-month low, and nine months of job losses eliminates any pressure from wage increases.
Whether the target rate ends up below 1 percent depends on how fast consumers and businesses gain more access to low-cost credit. Economists at HSBC Holdings Inc. said the Fed would like to avoid cutting to zero. Still, if the economy doesn't improve, it ``could be at zero'' by the middle of next year, said HSBC economist Ian Morris.
``There is this understanding at the Fed that the worst thing you can do is save your ammunition,'' said Ethan Harris, economist at Barclays Capital Inc. ``You move fast -- that is the whole lesson of past crises in Japan and during the Great Depression.''
News Link - http://www.bloomberg.com/apps/news?pid=20601170&refer=special_report&sid=a0dn5p1E9ilY
More on the subject of Solvent Schemes of Arrangement
Link - http://www.insurancescrawl.com/archives/2005/07/dissolving_solv.html
Donald Rumsfield’s famous quatrain:
As we know,
There are known knowns.
There are things we know we know.
We also know
There are known unknowns.
That is to say
We know there are some things
We do not know.
But there are also unknown unknowns,
The ones we don't know
We don't know.
TWK shareholders known knowns reserve assets - 2 cents / share
TWK shareholders known unknowns reserve assets - $1.50 / share
TWK shareholders unknown unknowns reserve assets - PRICELESS
Danger, Will Robinson! Danger!
Trenwick Group has reserve asset locked up for future unknown unknown policy claims.
Schemes of arrangement can also be used to entirely eliminate very long term obligations. For example, insurance companies may use them to compel policy holders to accept an one-off payment in return for putting an end to future claims that might still arise on past policies.
The current Reinsurance "Schemes of Arrangement" trend is to present a drop dead date for policy claims, then shift the risks back to the policy holder, which free up the reserve assets back to pay off the creditor claims and shareholders.
Danger, Will Robinson! Danger!
Missed the memo to flip the record....
McCain wins Election, GAS $1.99/gallon, and DOW 13,000 early Spring 2009
Roubini Says `Panic' May Force Market Shutdown (Update1)
By Alexis Xydias and Camilla Hall
Oct. 23 (Bloomberg) -- Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said.
``We've reached a situation of sheer panic,' Roubini, who predicted the financial crisis in 2006, said at a conference in London today. ``There will be massive dumping of assets,' and ``hundreds of hedge funds are going to go bust,' he said.
Group of Seven policy makers have stopped short of market suspensions to stem the crisis after the U.S. pledged on Oct. 14 to invest about $125 billion in nine banks and the Federal Reserve led a global coordinated move to cut interest rates on Oct. 8. Emmanuel Roman, co-chief executive officer at GLG Partners Inc., said today that as many as 30 percent of hedge funds will close.
``Systemic risk has become bigger and bigger,' Roubini said at the Hedge 2008 conference. ``We're seeing the beginning of a run on a big chunk of the hedge funds,' and ``don't be surprised if policy makers need to close down markets for a week or two in coming days,' he said.
Roubini predicted in July 2006 that the U.S. would enter an economic recession. In February this year, he forecast a ``catastrophic' financial meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks exposed to mortgages and a ``sharp drop' in equities.
Bear, Lehman
The comments preceded the collapse of Bear Stearns & Cos. and Lehman Brothers Holdings Inc. as well as the government seizure of Freddie Mac and Fannie Mae. The Dow Jones Industrial Average, a benchmark for American equities, has lost 37 percent this year, including its biggest daily drop in more than twenty years on Oct. 15.
The Dow average rose 0.5 percent to 8563.42 as of 10:09 a.m. today in New York.
Italian Prime Minister Silvio Berlusconi roiled international markets on Oct. 10, first saying world leaders were discussing shutting down global financial exchanges, and then saying he didn't mean it.
``In a fairly Darwinian manner, many hedge funds will simply disappear,' Roman said, speaking at the same event as Roubini.
The hedge fund industry is stumbling through its worst year in two decades and posted its biggest monthly drop for a decade in September. Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
`Very Ugly'
``Things are getting very ugly also in the emerging markets,' Roubini said. ``We used to say when the U.S. catches a cold, the rest of the world sneezes. Well, the U.S. now has chronic and persistent pneumonia. It's becoming a mess in emerging markets.'
Developing nations' borrowing costs jumped to the highest in six years today as Belarus joined Hungary, Ukraine and Pakistan in seeking a bailout from the International Monetary Fund to help weather frozen money markets and a slump in commodities. Argentina risks defaulting for the second time this decade.
``There are about a dozen emerging markets that are now in severe financial trouble,' Roubini said. ``Even a small country can have a systemic effect on the global economy,' he added. ``There is not going to be enough IMF money to support them.'
Roubini, a former senior adviser to the U.S. Treasury Department, earlier this month said that the world's biggest economy will suffer its worst recession in 40 years.
``This is the worst financial crisis in the U.S., Europe and now emerging markets that we've seen in a long time,' Roubini said. ``Things will get much worse before they get better. I fear the worst is ahead of us.'
Not sure, this company never was any good at releasing news.
Sure was able to hide the assets and truth from the shareholders.
I prefer your DD review better than others.
Good luck to everyone.
At the end of the wash - the TWK Group shareholders and NOL credits may just be transfers over to Swiss Re. - we can only hope.
Trenwick Announces Agreement With Swiss Re to Purchase Trenwick Preferred Shares.
HAMILTON, Bermuda--(BUSINESS WIRE)--Sept. 6, 2002
Trenwick Group Ltd. (NYSE: TWK)("Trenwick") today announced that European Reinsurance Company of Zurich, a subsidiary of Swiss Reinsurance Company, purchased 550,000 of Trenwick's Series B Cumulative
Convertible Perpetual Preferred Shares with a liquidation preference of $100 per share for an aggregate purchase price of $40 million.
The son is in College now, the wife and I are planning to leave the son our nest and start a new life.
Drinking FREE coffee and eating DRY white toast has helped the family pay off the house, and allowed the wife to travel to Chile twice a year to feed her chickens.
Agree, the Re game is played by different rules and requires a different investment mindset.
No song writing allowed.
not sure, nice to see the old gang coming together.
Time to ring Virginia jad
U.S., Cuomo Open Credit Default Swap Investigation (Update3)
By David Glovin and Karen Freifeld
Oct. 20 (Bloomberg) -- The U.S. government and New York Attorney General Andrew Cuomo opened a joint investigation into the $34.8 trillion credit-default swap market, the top federal prosecutor in New York said.
The probe seeks to ``determine whether any federal laws have been violated'' in the market for the swaps, which function as a kind of insurance contract for bond losses, and will complement an earlier inquiry by Cuomo's office, U.S. Attorney Michael Garcia in Manhattan said today in a statement.
Cuomo has been probing credit-default swap manipulation by short sellers allegedly spreading false rumors about financial firms. Prosecutors are looking at whether they attempted to drive down stocks, including bankrupt Lehman Brothers Holdings Inc., according to a person in Cuomo's office who declined to be identified. The U.S. is also probing Lehman's failure.
``They're going to look at those individual traders who are responsible for these products and to find out whether or not they were deliberately manipulated,'' said Ralph Fatigate, former director of investigations at the New York State Banking Department and now a consultant at BDO Seidman LLP. ``It's an unregulated area.''
Credit-default swaps, conceived by bondholders, allow investors to buy protection against a possible default by a company. As the market expanded, speculators started using them to bet on a company's credit worthiness. The contracts pay the holder face value for the underlying securities or the cash equivalent should a company fail to repay its debt.
100-Fold
While growing 100-fold during the past seven years, total outstanding contracts in credit-default swaps remain dwarfed by other derivatives markets, including those that make bets on interest rates. Those markets had contracts linked to about $465 trillion as of June 30, according to the International Swaps and Derivatives Association.
The joint probe announced today will also examine allegations of insider trading, market manipulation and other forms of fraud, according to a second person familiar with the inquiry who declined to be identified. Garcia, 47, and Cuomo, 50, took the unusual step of working together in part because there is no central clearinghouse for swap data, the person said.
Cuomo has sought trading data from the New York Stock Exchange and the Financial Industry Regulatory Authority, according to the person.
Richard Adamonis, a spokesman for the NYSE, and Herb Perone, a spokesman for FINRA, declined to immediately comment.
Over-The-Counter
The absence of regulation in over-the-counter markets such as credit-default swaps was the ``principal cause'' of the meltdown on Wall Street last month, New York Governor David Paterson has said. There were at least $34.8 trillion of credit- default swap trades outstanding as of Oct. 9, the Depository Trust and Clearing Corporation, which operates a central registry for the derivatives, said in a statement last week.
``By combining the resources, expertise, and legal authorities of the two offices, we are taking a comprehensive approach to this important issue,'' Garcia said today of the joint probe.
Separately, New York State's insurance regulators began overseeing part of the credit-default swaps market Sept. 22. Manhattan District Attorney Robert Morgenthau has opened an investigation of the swaps market as well, his office said.
Three Companies
Cuomo on Sept. 25 subpoenaed three companies that provide price and trading data on the credit-default swaps market: Markit Group Ltd., Depository Trust & Clearing Corp. and Bloomberg LP, the parent of Bloomberg News, according to the person in his office. Cuomo has also subpoenaed hedge funds in New York, Texas and London as part of the probe, that person said.
The office is seeking information on transactions since July 1 involving Lehman, Goldman Sachs Group Inc. and Morgan Stanley, the person said.
``The probe will bring together top prosecutors from both offices while simultaneously avoiding multiple competing investigations,'' Cuomo's spokesman, Alex Detrick, said in an e- mailed statement.
``This is going to be a very arduous investigation for both the U.S. Attorney and for the attorney general because these are complex transactions,'' said Fatigate. ``If this is part and parcel to the demise in the system, somebody needs to fix this.''
Cuomo and Garcia decided to collaborate about 3 weeks ago, according to the person familiar with the case. Members of Cuomo's investor protection bureau are working with Garcia's securities fraud task force and in the process of cross- designating attorneys so state prosecutors can become special federal prosecutors with access to grand jury material, the person said.
Lehman default swaps still pending, DTCC says
By Laura Mandaro, MarketWatch
NEW YORK (MarketWatch) -- An industry clearing organization said late Tuesday that it was still awaiting final results from the settlement of Lehman Brothers' credit-default swaps, a massive financial transfer that would add significant support to a recovery in the credit markets.
The Depository Trust & Clearing Corp. will issue a statement when the settlement is completed, according to spokeswoman Melanie Best. She declined to comment on timing. Payments under these derivatives contracts have to be made by the close of business Tuesday.
The International Swaps and Derivatives Association, the group that represents swaps dealers, issued a statement just before 6 p.m. Eastern noting the "success" of the Lehman settlement. "Today's settlement demonstrates that the industry infrastructure for [credit-default swaps] clearly works," said Robert Pickel, chief executive of the ISDA.
The exchange between the buyers and sellers of credit-default swaps, a type of derivative contract that pays out when a company reneges on its debt, spooked markets Tuesday. Some investors worriedsellers would be unable to come up with the cash to pay their counterparties, and these no-shows would usher in a new round of bank or fund failures.
This type of domino effect turned what started as a U.S. housing-market collapse into a global credit crisis.
"Settlement of Lehman's CDS is what has the market on the nervous side," said Peter Cardillo, chief market economist at Avalon Partners, said earlier Tuesday about the credit-default swaps.
The major U.S. stock indexes briefly scaled back declines late in the session after reports that counterparties had closed the swaps settlement without a hitch.
Global interest rates spiked and lending contracted after Lehman Brothers declared bankruptcy in mid-September, a failure that risked taking some of the firm's numerous trading partners down with it.
The bankruptcy also triggered a relatively rare event in the $50 trillion market for credit-default swaps: the requirement that holders of protection on Lehman debt get paid by the sellers of these swaps.
An Oct. 10 auction determined terms of the payout. Buyers of protection against a Lehman default were slated to receive 91.375 cents for every dollar of Lehman debt they held.
The overall size of the payout was expected to be as much as $400 billion. But if the counterparties' offsetting trades are taken into account, the Depository Trust and Clearing Corp. has forecast that sellers of the protection may only have to cough up about $6 billion.
The credit-default swap settlement comes as stressed credit markets showed some early signs of recovery.
The cost of short-term borrowing continued its recent fall Tuesday.
The London interbank offered rate, or Libor, for three-month dollar loans fell to 3.83375% from 4.05875% the previous day. The decline follows a sharp drop of about 35 basis points, or 0.35 of a percentage point, on Monday.
Still, there are more companies at risk of default and more debt outstanding than in several years, and credit-default swaps may cause continued headaches for credit markets, said John Atkins, a fixed-income analyst at IDEAGlobal.
Going forward, "workouts can be much more convoluted," he added. "This doesn't mean things can't go wrong."
yep, $1.25 plus a nickel for every year held
$1.25 + 6(0.05) = $1.55
No, I bought in at 90 cents.
Yep, she was always your favorite.
Sweet Jesus, gonna have to up my sell price to five dollars....
Still holding out for a picture of Eva legs....
Hold the lipstick for now, time for a few scoop of tater-salad.
Almost life size...pass the corn pleaseeeeee
How This Bear Market Compares
http://www.nytimes.com/interactive/2008/10/11/business/20081011_BEAR_MARKETS.html
Bear Raids and Economic Warfare on a Global Scale
The lawmakers and regulators may wish to look into the quiet but devastating run on the hedge funds that is occurring right now, that is going to cut that industry in half, and distort the markets until the end of the year.
This will affect key commodities in addition to certain industries, and may temporarily impair some national economies.
The Prime Brokers have a rough idea where the hedge funds, their clients, have their major holdings, and are leading bear raids on them as the funds have to raise liquidity because of redemptions. They are publicly identifying those positions to other players in the industry. A conflict of interest of the first order it appears at first blush. Perhaps not illegal, but certainly destructive and 'feeding the fire.'
These bear raids on key positions generate more panic and losses for the hedge funds, which in turn generates more forced selling and losses.
The irony of course is that the Prime Brokers are also the biggest banks, and are being bankrolled by the US Treasury and the Fed by about 400 billions per day in rolling capital. They appear to be at a loss so to speak with regard to productive investment opportunities. Thus they turn to speculation.
In addition to the hedge funds, many banks with their own small trading desks are being caught in the cross fire.
We do not think of this as a conspiracy but clearly the unintended consequence of poorly thought out but well intentioned actions taken in haste.
The lawmakers and regulators must create a firebeak to stop the cycle of destruction. They could require any bank accepting Federal funds to adhere to some simple guidelines about the potentially predatory use of those funds, especially banks that are more like large hedge funds themselves in their composition.
This cycle of destruction of assets is exactly why the Congress enacted Glass-Steagall in the 1930's. Some of the Washington and Fed whiz kids might wish to go back and revisit the raison d'etre for that legislation.
Some likely measures would be an immediate limit on the expansion of short positions in all commodities, with limits based on market size, and the enforcement of laws against naked short selling on all equities immediately.
There should also be disclosure from all recipients of taxpayer money of all net positions to the SEC on a daily and weekly basis. We would also approve of a ban against short selling over certain limits of the size of a market or the shares outstanding by players over a certain size, and all those receiving Fed subsidies.
But this will probably not happen, which is why we may have a political crisis next year.
To put a very fine point on this so no one can miss it, it is not the hedge funds themselves that we care about, or the 'qualified investors' that put money into them. What concerns us are the unintended consequences, the malinvestment, the market distortions, the polarization of wealth, and the political blowback that come from interfering with markets and other people's business for a protracted period of time, and in a big way. The actions being taking by our banks, our 'national champions,' is ours because we are funding them and regulating them. And in this world, if you break it, you bought it, whether it was intended or not.
This is starting to look like economic warfare from some perspectives. The blowback may not be attractive.
I sold 150,000 shares in 2005 to settle my IRS 2002, 2003, and 2004 outstanding taxes.
I still hold about 15,000 shares under his two trading accounts with a 90 cent cost average.
We can hold for another 20 years.