"Big Tuesday" or Not?

[don]

This Tuesday will be the first really interesting day in the financial markets since the day last week when US Treasury Secretary Paulson partially nationalized the nine largest US banks. October 21 sees the settlement of the credit default swaps (CDS) issued on Lehman Brothers debt.

http://www.atimes.com/atimes/Global_.../JJ22Dj03.html

[Tulpen]

Re: "Big Tuesday" or Not?

I was long SP500 but I closed my positions this morning and went short the NDX.

I 'smell' another fallback followed by heavier selling tomorrow.

[GRG55]

Re: "Big Tuesday" or Not?

I was long SP500 but I closed my positions this morning and went short the NDX.

I 'smell' another fallback followed by heavier selling tomorrow.

Would seem the outcome for the markets near term depends on how the CDSs settle later today. If everyone comes up with the money, the markets may roar ahead tomorrow...:eek:

Edit Added: And as to speculation about what Treasury will do, I think it's safe to assume that they didn't "save" AIG just so they can start a domino default cascade in CDSs by not ponying up the taxpayers cash. They [actually the US Taxpayer] will pay up.

[Tulpen]

Re: "Big Tuesday" or Not?

Unless I see something like >10% down I will likely close my position and go long oil near the close. But time will tell and C (Citigroup) is hot right now.

[Tulpen]

Re: "Big Tuesday" or Not?

Unless I see something like >10% down I will likely close my position and go long oil near the close. But time will tell and C (Citigroup) is hot right now.

Closed my short position and went long NDX and oil.

[Chomsky]

Re: "Big Tuesday" or Not?

Any word on what time today the Lehman CDSs settle?

[GRG55]

Re: "Big Tuesday" or Not?

Any word on what time today the Lehman CDSs settle?

I would imagine it'll be sometime after the US market close.

[Chomsky]

Re: "Big Tuesday" or Not?

Hm, guess not? Seems odd that there's been nothing on Lehman CDS yet.

[GRG55]

Re: "Big Tuesday" or Not?

Hm, guess not? Seems odd that there's been nothing on Lehman CDS yet.

This is all that's on Bloomberg...

Lehman Swap Sellers Probably Paid Up to $8 Billion

By Shannon D. Harrington

Oct. 21 (Bloomberg) -- Sellers of credit-default protection on Lehman Brothers Holdings Inc. probably paid out between $6 billion and $8 billion to settle bets on the bankrupt company's debt, the International Swaps and Derivatives Association said.

More than 350 banks, hedge funds, insurers and others in the derivatives market had until the end of today in New York to settle most contracts, which were used to hedge against losses or speculate on Lehman's ability to pay its obligations, ISDA said in a statement.

Some analysts at banks including BNP Paribas had expected a payout of more than $270 billion, based on an estimated $400 billion in outstanding contracts. The Depository Trust and Clearing Corp., which runs a central registry for credit-default swap trades, said last week that there were about $72 billion in Lehman contracts outstanding.

ISDA Chief Executive Officer Robert Pickel, who earlier this month said concern that investors may be unable to come up with the payments was overblown, today said the settlement is a sign the market is weathering the global
financial crisis.

``Today's settlement demonstrates that the industry infrastructure for CDS clearly works,'' Pickel said in the statement.

Since the end of August, the market has been dealing with the bankruptcies of Lehman and Washington Mutual Inc., the failure of Iceland's three biggest banks and the U.S. government seizure of Fannie Mae and Freddie Mac. Each triggered a settlement of credit-default swaps linked to the companies' debt.

Sellers of default protection on Lehman were required to pay 91.375 cents on the dollar after an Oct. 10 auction that determined the value of bonds eligible to settle the derivatives.

[Chomsky]

Re: "Big Tuesday" or Not?

So much for that, then.

[Rajiv]

We will not know what the losses and who the losers were until the banks/insurance companies come out with their quarterly results. However, the destruction of "capital" should be visble in Finster's FDI -- more deflation!

[we_are_toast]

Re: "Big Tuesday" or Not?

``Today's settlement demonstrates that the industry infrastructure for CDS clearly works,'' Pickel said in the statement.

Coming from someone named Pickel, I'm finding this statement even more humorous than I normally would.