Subprime Is To Lehman As Prime Is To Lehman-Buyer Barclays?
We won't spend too much time to dwell on the following pamphlet of sheer "buy, buy, buy" desperation from Barclays' Sandeep Bordia, suffice it to say that we now know which would be the first European blue light special "rescuer" of Lehman to go under courtesy of a massively wrong bet on PrimeX should the "illiquid" market continue to flounder. Which it will. We will add, however, that it would be damn poetic, not to mention hilarious, if while long and wrong bets on Subprime is what detonated Lehman, then being John Holmes'd in Prime is what leads to Barclays' bankruptcy (and we do already know that Barc is the bank with the second largest capital shortfall in Europe courtesy of that other bank which hopes to pick up the pieces upon blue's implosion, Credit Suisse). It would appear that the vultures are already circling... And where the vultures are, the squid can't be far behind.
The funniest bit from the Barclays' pitchbook:
Technical risk: Will there be forced unwinds of leveraged PrimeX trades in a negative macro event? While this is potentially more credible than other risks, several investors put in more equity in PrimeX trades than required. More importantly, we believe that these indices look fundamentally very cheap at current levels and adequately compensate investors for this additional risk.
Well of course you do. Yet we wonder: just who are these investors who put in "more equity" in PrimeX which is now effectively wiped out?