Probe of Lehman collapse escalated: report

This collapse was easy to see and I have written on if extensively in other forums.

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On to other things…I want to tell you about my pal, Ida. Ida is a golfer. She took up golf in her forties. Ida has 11 hole in ones. Quite a large number for a golfer. She is 97. I can hear her now saying….”I’m gonna get one more.”

The other night I finally asked her. How do you do it? How do you get so many?

She says, “oh, you just hit it down the middle, say a few hail marries, and it goes in the hole.”

That rang familiar with what I wrote here. Dream it, see it, do it, repeat.

While I am away, take some time to read one of my all time favorites. Bobby Evans definitely has a place in the volatilist hall of fame. He was optioning movie scripts that didn’t even exist while head of Paramount. He created a derivative market in the movie industry. What an unbelievable story. It also translates well to film. I am looking forward to having lunch with Bobby.

Peace

Bobby Evans

And Tonight, I present the one and only Mr. Volatility and his first ever Top3 List made public. Here ya go. If we agree or we disagree then maybe we have some volatility.

1. I read a lot about economics. I have always been fascinated by Milton Friedman. uglychart.com has a great video of Milton.

2. My Visa (V) short.

3. PLD rhymes with AIG.

Peace

So there I was, walkin’ around my favorite little place by the sea.

What did I see? I saw the sound of the ocean. I heard the light of the night sky. I dreamed I was dreaming. I still might be. It was everything the fairy tale life should be. Replete with stories of what was and what will be. Laughter, lots of laughter. And of course, lots of volatility.

This upward move we have seen so far is so so. In español así así. I am unsure how long it will last. As I write ($SPX) Futures are +23 so we could be looking at another gap up opening tomorrow morning. We shall see. We shall see. I was out at sea, and out came volatility with me as the ($VIX) ended the day at 54.99. That was off 14.96 points or -21%. We are in new territory. New lands. The cocoon is not the cocoon anymore. The butterfly is free. The crazy movement will continue. Opportunity abounds. Opportunity always abounds in the land of volatility.

My book? Oh yes, my book. The one I am writing? No. My book. On to my book, my chips, my bets, my money management, my chances, my tickets, call them what you will. What do I own that I anticipate selling for more value than it is worth at this moment in time? Well my two favorites of course. Downside insurance in Visa (V) and Prologis (PLD).

In a conversation with a trader this weekend, he mentioned the IPO price for Visa (V) is $44. It isn’t surprising to see some hope in that name at this level. Unfortunately, the volume was pathetic. I am undeterred at all. Visa has a passport, or a visa, straight to $22. It is just a matter of time.

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Prologis (PLD). Nice volume today. Not.

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As far as my other book, it is a science fiction novel. I’ll let you know the title as soon as I figure it out. Let’s just say that the main character is a private Eye (A PI). P. I.
He’s quite entertaining really. At times he’s the life of the party. At times he’s a Fly on the Wall. Whatever form, he lurks. When he enters the room, things get real interesting real quick. His first name is Mestir and his second name has several syllables and rhymes with incredibility.

And that is it from me. Today 10.13. I’ll see you when we shall see. Good night.

Mr. Volatility

The sequel and the prequel have already been written.  About what?  Our friends Merrill Lynch (MER) and Bank of America (BAC).  Look at the pretty little chart below that tells you that the price is telling us that there is WAY more deal risk here than anyone is even making a peep about.  Except the underwriters’ financiers, who have a Chinese wall relationship with the bankers and the auditors.  See what I mean?

This deal ain’t gonna happen.

If it was sold at $28 and it trades at $19 don’t forget the arb spread is three.  (For those of you tryin’ to arb this one out, remember how reelin’ the feelin’ was in the street when the EU blocked the GE (GE) Honeywell (HON) deal.  Risk arb works very well….until it doesn’t).  You see what I see?  It’s called volatility.

Those Merrill cheapies may be cheaper than cheap.  When the carpet gets pulled on this deal the volatility is definitely going to jail and he will not stop to pass GO to collect $200.

Pump up the jam…pump it up.

Peace

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We all have them.  All our lives.  Those moments.  Click.  It clicks.  It is when two things come together and what was once two questions instantly becomes one answer.  The ever elusive and cool…. Aha.  Instant.  Insight.  The aha moment.  The dots just connected.  The deduction has now been deduced.  Everyone sees the edge, I see between the edges.  Epiphany.  Click.  I get it now.  I understand.  Aha moments become ever more important when your lifestyle is volatilistic.

My aha moment with volatility happened at work some years ago.  1993 that is.  I was reading the pages of a very famous book about dinosaurs.  But it wasn’t about dinosaurs at all.  It was all about volatility.  It was the problem and the inverse of the problem all at once.  It was a sword fight between the taker and the undertaker.  The iterator and the re-iterator were dancing and I saw who was who.   It was the counterparty and the party all in the same room.  They were arguing profusely about who really held the risk.  The solution is still elusive.

It was in those pages that I made friends with Ian Malcolm.  I had an aha moment with Ian.  I still consult with him at times.  Ian gets it.  Who are you?  Do you get it?  Read on.

In my meetings with Ian, he presented me with a series of drawings.  The drawings describe very well what is happening in the Financials right now.

Allow me now to re-iterate what I have already iterated.  There is no financial company - or any company for that matter - that is immune to what is happening right now.  The tree has tipped.  Timber is being yelled.  Bailouts are nothing but band aids on broken bones.  Any ‘rescue’ or ‘bailout’ that you read about in the papers is nothing but Public relations.  The gains were for a few and now the losses and the risks are being shifted to the masses.

Do not read into this PR blitz any other way.  If no one will claim who is at the party and who is at the counter party, their common stock CANNOT be owned.  After all is said and done the words ‘common stock’ will have a whole new meaning.  Right now those words float like a butterfly.  Soon, they’ll sting like a bee.

The next shoe to fall from the sky is the commercial reit sector.  Everyone will still be running around saying, “HOW COULD WE HAVE SEEN THIS COMING!”.

First off, you can’t see it coming if you don’t look.  Second, now that it came you won’t ’see it coming’.  Why?  Because it is here.

Thank you Ian, for helping me with this.  To you I dedicate this post.  I am witnessing and documenting another seventh iteration.

“Increasingly, the mathematics will demand the courage to face it’s implications.”

-Ian Malcolm

Jeff

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“At the earliest drawings of the fractal curve, few clues to the underlying mathematical structure will be seen.”

-Ian Malcolm

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“With subsequent drawings of the fractal curve, sudden changes may appear.”

-Ian Malcolm

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“Details emerge more clearly as the fractal curve is redrawn.”

-Ian Malcolm

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“Inevitably, underlying instabilities begin to appear.”

-Ian Malcolm

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“Flaws in the system will now become severe.”

-Ian Malcolm

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“System recovery may prove impossible.”

-Ian Malcolm

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“Increasingly, the mathematics will demand the courage to face it’s implications.”

-Ian Malcolm