Tip of the Iceberg.....

Wikipedia on Iceberg:

Because the density of pure ice is about 920 kg/m³, and that of sea water about 1025 kg/m³, typically only one-tenth of the volume of an iceberg is above water. The shape of the remainder under the water can be difficult to surmise from looking at what is visible above the surface. This has led to the expression "tip of the iceberg", generally applied to a problem or difficulty, meaning that the visible trouble is only a small manifestation of a larger problem.


Listen that is the problem right now! Before Lehman went broke no one could even see the Iceberg on the horizon! Now everyone sees it, but very few are willing to acknowledge the fact what they see is only 10 pct of the real issue!

Lehman Senior Debt trades @ 12 cents on the US dollar from 95 cents! The only way it could happen would be fraud? Would it not? I am afraid anyone expecting money back from Lehman is going to have a hard time - but the issue with Lehman and why it still "plays" as a problem is the legal- and regulatory issues which Lehman showed the world.

Your Prime broker deal has no segregation of funds(unless you ask for it), investment banking as a supermarket model has died to be replaced by boutique-like-advice shops, there is no legal precedence on 80% of all issues related to Bear Stearn's and Lehman, the recovery rates used for modelling impact is clearly too low (again Leh senior debt pretty much worthless shows this!)... want me to go on ?

This is before we talk about European banks and their total lack of transparency! I am no longer allowed to mention names but there are major UK banks who are "hopers" - going to church on the week-end praying market will be up on the Monday!

The ECB changes of hair-cut on collateral will start off in February - ouch for Spanish, Italien and Portuguese banks , but bite me if this is not going to be changed before implemented.

If you have not noticed;..... the authorities and central banks have declared WAR on the banking crisis, even the stupid politicians seems to understand this ........changing the odds slightly away from short stocks, long fixed income towards long stocks and cash...

I am still 80% long cash - but as stated I have now net long exposure - mind you I will change inside one nano-second if the deal fails, but for now, the risk reward for being old, grumpy and shouting not worth it.

On a personal note today was not a day to remember...despite this I wish everyone a safe and nice week-end.

Steen