3Q GDP - It's Not What It Looks Like

Advance 3Q22 GDP was announced last week as +2.60% (annualized).  Looks good, right? Particularly when you consider that soaring prices for essential goods like energy, transport, food and - most of all - housing surely put a crimp on discretionary consumer spending.  But looks can be deceiving.

Turns out all of the growth, plus a bit more, came from net exports/imports.  This part of GDP contributed +2.77%, a situation that is extremely rare (the US runs a perennial trade deficit), so taking this out leaves GDP at -0.17%.

And how come the US ran such an unusual trade surplus?  My bet is on LNG and grain exports.  Prices for both soared to all time highs during the third quarter and the US is a major exporter.  Thus, a nice fat GDP number.

But prices for both have since come down sharply, so don't expect this boost to repeat next quarter.

Is The US Headed For A Doom Loop?

 If there is one financial lesson that must be learned from the Truss Fiasco it is this: in a world of very high debt even relatively minor fiscal moves can have outsize negative effects in the bond and currency markets.

Case in point: The Truss unfunded tax cuts and energy support outlays amounted to approx. 85 billion pounds, or 3.8% of UK GDP. Though not entirely insignificant, this amount was meant to be spread out over several years, making the impact on the annual budget deficits rather manageable - if it wasn’t for the fact that the UK is already highly indebted at 96% of GDP.  The Truss proposals were the proverbial straw that broke the camel’s back; the rest was up to the Bond Vigilantes who kicked Gilt prices off the cliff and drove Truss out of office in a shameful 44 days.

Is there a lesson here for the US? You better believe there is. In some ways the US is in worse shape than the UK, particularly in the deep socio-economic divide that is splitting the country apart in ways not seen since the Civil War. While the UK went through the Boris Brexit drama, the US experienced Trump’s MAGA and a thinly disguised attempt at a putsch, while in the background debt to GDP soared to 135% (now slightly better, at 121%).

As the US heads to crucial midterm elections in a few days, it is imperative for fiscal rectitude to be maintained. It takes a very long time to build credibility in the bond market, but under current conditions it can be destroyed in an instant, producing a doom loop identical to what happened in Gilts.

What can cause it? There are plenty of candidates: student loan forgiveness, increased defense spending due to Russia/Ukraine and China/Taiwan, partisan tax cuts and/or subsidies formulated in a new Congress.

The United States is no longer the world's sole superpower, Pax Americana is no more.  American politicians, central bankers and financiers can no longer act as if the world is in thrall of the mighty dollar.  Quite the reverse, in fact, despite its record price in FX markets.  It feels to me that while many are looking towards Rome, or even Paris, for the next shoe to drop, it could very well be in Washington.

How Safe Are Treasury Bonds?

 The recent sudden collapse of UK Gilts (government bonds) led me to write a post warning about black swans on the horizon. In it I mentioned US public debt, ie Treasury bonds.

Today, a chart that should have all of us worried.  It shows the relationship between federal debt as a percentage of GDP (green line), the market yield on 7-year Treasury bonds, chosen because the average maturity of federal debt is approximately 6 years (red line), and interest paid by the federal government as a percentage of GDP (blue line). All data are shown indexed to better observe the trends (1970=100).

While debt/GDP has constantly gone up and recently soared, debt service/GDP has been low because inflation was low, thus keeping interest rates very low. That’s obviously no longer the case, meaning that the US government will have to devote a much bigger portion of its budget towards paying interest.

Debt/GDP has tripled in the last 15 years and, when combined with sharply higher interest rates, will lead to a very rapid increase in debt service payments, certainly faster than in the 1980s, which were bad enough in themselves.

All other things equal, I expect debt service to at least triple over the next few years as older, cheaper debt matures and is replaced by debt carrying higher interest rates.  How long can the US afford this? How long before it falls victim to its own “Truss Moment”, perhaps caused by some new President who believes in even lower taxes?

This makes it IMPERATIVE for the Fed to kill inflation ASAP, whatever it takes. The alternative is the biggest black swan of them all: insolvency for the US.

Pax Romana vs Pax Americana

From our History Rhymes dept.

Rome utterly destroyed Carthage in 146 BC, razing the city to the ground. Some historians believe that the annihilation of Rome's single most powerful adversary was the cause for Rome's own decline and ultimate fall, centuries later. 

The reason, they say, was the absence of the necessary drive to overcome a worthy opponent. After destroying Carthage, Romans were in the race all by themselves so they didn't have to train and run as hard as before.  After centuries of  slowly growing fat and lazy from the inside, they finally succumbed to fitter and faster opponents. By 410 AD when Alaric reluctantly sacked Rome, the city was but a shadow of its old self. 

I don't know if this analysis is correct, but being a competitive athlete myself, it sounds plausible.

The Sack Of Rome By Alaric - 410 AD

Which brings us to the present and the one empire very much modeled after Rome: the United States of America.  After the Soviet Union's collapse I have increasingly looked at US history as paralleling that of Rome.  Obviously not exactly, or even nearly, but I think it "smells" the same.  

As in Rome after Augustus and Tiberius, following Bill Clinton came a series of weak/inept/buffoonish Presidents, social and economic polarization, the gutting of domestic industry in favor of "cheap" imports and a rising tide of foreign powers willing to challenge America's supremacy.  The 9/11 attack galvanized Americans, but it also made them more xenophobic and  isolationist than ever, and forced the government to look for enemies even amongst friends (you're either with us or against us).

What is more important than the rhyme of History is the speed at which events are unfolding now.  Rome hardly evolved (eg in military technology) in the six centuries between the bookend sacks of Carthage and Rome, but in just 30 years since the Soviet collapse we have seen IT, telecom and social media technologies permeating even the remotest corners of the world, China leapfrogging in astonishing fashion and, most worrying of all, climate change accelerating more than even the most vocal scientists predicted just ten years ago. 

Bottom line: The Rise and Fall of Rome took many centuries.  Pax Americana may be undone in mere decades.

Black Swans On The Horizon

The UK has made an unholy mess of things. The Boris-Brexit nonsense, the inept handling of COVID and now the Truss unfunded tax cuts which collapsed the gilt market and brought most pension funds to within a hair of going under (via LDI leverage).  In my 40 year career in financial markets I have never seen sovereign debt of a major G7 nation collapse as fast and spectacularly as UK's gilts.

I am afraid that we are witnessing only the opening act of this drama. Even at current sharply higher yields, gilt returns are still far below inflation - see chart below.  If you are a buy and hold fundamental investor (say, an insurance company) would you buy right now at negative real interest rates when national politics are cratering? Or would you unload the stuff from your portfolio and stay away for a while? At the very least, you will not invest more.

Black Swan Warning: has anyone modeled the UK going bankrupt? Because gilt prices dropping off a cliff sure points that way. And I don’t think the IMF has enough money for a rescue of this size, this time around.

UK 10 Year Gilt Yield (red) And Inflation (blue)

Speaking of Black Swans: what’s the fundamental difference, if any, between the chart above and the chart below? 

US 10Year Treasury Yield (red) And Inflation (blue)

Right now a US bankruptcy is entirely unimaginable, of course. Then again, so was a UK one just 3 months ago and look at it now: the UK Credit Default Swap has zoomed from 10bp to 43bp, a reading that puts its imputed probability of default at 0.72%, just a touch below Portugal’s. Moreover, Fitch just reduced its credit rating outlook to negative, meaning the AA- rating is likely to be downgraded to A+ shortly. Not good.

                                                               UK 5 Year Credit Default Swap 

With so much global debt created in the last 10-15 years, even a hint of fiscal impropriety results in an immediate and disproportionately large straw/camelback effect. “Basically we've moved from looking not too dissimilar from the U.S. or Germany as a proposition to lend, to looking more like Italy and Greece," former Bank of England Deputy Governor Charlie Bean told Sky. And within days, I might add - see chart below.

UK 10Y Gilt Yield Zooms To Near Italian And Greek Levels 

Can the US be the next black swan? As the world’s largest economy, the US has traditionally been the global safe haven; but what if it loses that advantage?  Events that were once considered unthinkable in America have already happened: a sitting President rejects election results, claims fraud and prompts his loony followers to storm Congress in a thinly veiled attempted coup. A far right Supreme Court bans abortions and rejects a ban on semi-automatic weapons. The next President, the oldest ever to assume office, ignominiously pulls out of Afghanistan in a haphazard, disorganized fashion and hands the country back to the Taliban.  And more...

The UK mess is very instructive and should act as a warning to anyone planning unfunded giveaways and tax cuts on the other side of the Atlantic. We really don't want black swans flying West.

The Rolex Market. Seriously?

 If you want the epitome of what is wrong today with investment banking, market analysis and the socioeconomic gap all wrapped up in one sentence this is it, the headline in a Bloomberg article about secondhand Rolex watch prices. I had to doublecheck it wasn’t April Fools Day.

We are talking Morgan Stanley here, not the 47th Street Pawn Shop.

Given that people are going to struggle to heat their homes this winter (it’s already “heat-or-eat” time in Europe), this “report” is up there on the asinine social deafness scale along with Marie Antoinette’s cake. And we all know how that ended.

The Return Of The Bond Vigilantes

I found the following manifesto on my desk yesterday after I came back from lunch.

<>

We are the Bond Vigilantes! 

For years we were in hibernation.  We had no reason to be out of our dens, wasting our energy searching for prey in a world of near zero inflation and negative interest rates. We had no raison d'etre. Mostly, we sulked and dreamt of better (well, worse, actually) days to come. But no more. A series of unfortunate events followed by increasingly inane political decisions has awoken us. 

Most of you have never heard of us. You were not around when we ruled the trading floors, gnashing our teeth at those who dared oppose us. But you will soon discover our power, and our name shall strike fear in your young hearts. 

No? You think otherwise? You think the world has changed since James Carville, the Clinton era genius Democratic political operator said, clearly in awe of us: “I want to be reincarnated as the bond market. You can intimidate everybody”. Sure, you have your iPhones, Twitter and even cryptos, God forbid. But we still have the same “I SELL” button on our Reuters dealing keyboard. And we still have fingers

 (um.. claws).

We are the Bond Vigilantes and you  have been warned!!

<>

I briefly wondered why the manifesto was circulated yesterday afternoon - then I realized: it was right after Liz Truss sacked her BFF minister and gave that pathetic speech/press conference. Yup, the Vigilantes are back and are already feeding. I think pasta is on their menu next. 

Editor’s Note: The Bond Vigilantes are not to be confused with the Bond Daddies. The latter were an older bunch who came into their own in the mid to late 1980s when interest rates came crashing down, and all of a sudden the boring bond department became profitable and sexy. They are now mostly an extinct species.

Get Out Of The Game And Hide In The Locker Room?

 I just read a very interesting article in Bloomberg.  It turns out that major national wealth and pension funds have radically increased their holdings in private, non-marketable investments like hedge funds, infrastructure projects and real estate. The chart below, taken from the article, tells the story.

When, as now, traditional stock and bond markets drop, these non-marketable investments "shield" the valuations of such pension and wealth funds because private holdings are marked to market (valued) very infrequently, making them look like they are outperforming.  Even then, valuations depend on "independent" experts who get paid by the investors themselves.  Having a bit of experience on the subject, I can tell you that such valuations are highly subjective.

When large investors exit traditional markets, volatility increases - there are fewer large, long-term investors to act as dampeners/shock absorbers.  To make a football analogy, a team's star players  are exiting the game and are hiding in the locker room.  This leaves the B players out in the field (eg retail investors with their ETFs) at the mercy of sharp short-term players, scalpers, and manipulators.  The A players can claim that they are not being beaten, but the team will lose the game, anyway. Even worse, the whole of the NFL (or FIFA, pick your football) will soon get totally disorganized and eventually fail.

And the final insult? As the A team hides in the locker room, it will get out of touch with the game, grow fat and lazy.  When it comes time for them to prove their A status by playing a game (get a real mark-to-market valuation for their illiquid assets) they will discover that they are now C players...

Inflation At 40 Year High: Deja Vu All Over Again

News Flash: Core inflation rises to 40 year high, markets plunge as their (misbegotten) expectations for a lower number are once again dashed.

I'm a broken record, a repeat of Groundhog Day, a Yogi Berra aphorism.  But, I repeat myself (ha, ha).

Once more, with gusto: inflation is not going to go down until the Fed shrinks its balance sheet substantially and reduces money supply. Just raising interest rates is not enough.

It's really NOT rocket science...

 Core Inflation At 40 Year High

Fed Balance Sheet Assets Bloated At Record High

The End Of The Dollar's Oil Anchor?

The recent decision by OPEC+ to curtail crude oil production infuriated the United States, since it was engineered by Saudi Arabia and Russia acting in concert.  President Biden announced that "there will be consequences for Saudi Arabia", without going into detail. A serious break in the decades-old close relationship between the US and SA will be a watershed event and a turning point in the global financial/monetary status quo. 

The dollar has been "anchored" to crude oil ever since the FDR-Ibn Saud meeting aboard USS Quincy on Feb. 14, 1945.  Even though the minutes remain sealed to this day, it is obvious that the Saudis agreed to price their crude in US dollars in exchange for a military security guarantee.  This gave the US an enormous advantage: a national currency that became the global reserve currency literally overnight in a world dependent on ever rising oil imports payable only in dollars.

The ability to mint/issue the global reserve currency has been the absolute necessary condition for all empires throughout history.  Athenians had the silver tetradrachm, Romans/Byzantines minted gold aureus and solidus, the Spanish had silver reals, the British gold sovereigns and paper pounds.  These empires ended with massive devaluations of their currency, be it by adulterating their coinage or by allowing their fiat currency to lose purchasing power (ie "print" more than the rest of the world wanted to absorb/use).

If the US decides to break completely with SA, what will happen to the dollar's crude oil anchor? Could the Saudis decide to start pricing their oil in another currency, or a basket of currencies?  It would make sense, anyway, since the US is no longer the world's largest economy - China is now #2 in nominal terms and #1 in purchasing power parity terms.  More importantly, the US is now far behind the EU and China as an oil importer: the EU imports 14 million barrels/day, China 11 mbbl and the US only 6 mbbl.

Just going by this admittedly simple yardstick, crude oil should be priced in a notional currency basket made up of 45% euros, 35% yuan and only 20% dollars.  That would be anathema to the US, of course, and it's not exactly that simple, anyway.  But it provides a guideline, a direction of where things could go - once they get going.

Currency wars may be in our near future. Actually, they are already happening. Just ask the Brits.

Tesla Stock Price: One Picture, A Thousand Words

 Today, one picture only and zero commentary.  But feel free to post your own comments, please.

Tesla Stock Price Chart 

Some price points for historical reference:

May 2019 $12

May 2020 $55

May 2021 $220

November 2021 $412 (all time high)

Now $216

Ben Gets A Nobel - Is It Time For QT For Real Yet?

 Ben Bernanke, fondly known as Helicopter Ben, just got the Nobel Prize in Economics.  To be exact, Alfred Nobel never established a prize for economics (no fool, he) - instead, it was established much later in 1969 by the Sveriges Riksbank, the Swedish central bank. So... a bit of professional camaraderie going on here?

Mr. Bernanke is best known for flooding the system with cash to avert a second Great Depression in 2007-09, aka engaging in Quantitative Easing (QE).  At the time, it looked huge. But I'm willing to bet that even he was amazed at the audacity of the Fed and Treasury to print so much during 2020-22, to take QE to heights never before imagined.  To boldly go where no helicopter has gone before (yes, I'm a Trekkie).

Which brings us to inflation today.  What is the cause? No matter how much politicians and mainstream Wall Street analysts want you to believe that it's because of logistics bottlenecks and wartime shortages, it just isn't true - at least not by as much as they claim.  The real cause of roaring inflation is the printing of enormous quantities of money by the Fed, ECB and BOJ,  period. Just Google what Milton Friedman, a Nobelist himself, had to say on the subject.

Therefore, to bring inflation down the only truly effective tool today is Quantitative Tightening (QT), to reduce the money supply of dollars, euros and yen by shrinking central banks' assets. Again, period.  

Everyone is bemoaning higher interest rates, ie the price of money, but very few are raising the issue of quantity. Alas,  QT is proceeding at a snail's pace, if at all (it isn't happening in the eurozone, it isn't happening in Japan and is only now starting, very slowly, in the US).  

It's like trying to cure COVID, a viral disease, by using antibiotics. Sure, they will prevent opportunistic infections, but the patient is going to keep suffering and perhaps pass to greener pastures.

Fed Balance Sheet Assets

It seems that central banks were very willing to use an unconventional tool (QE) to prevent economic meltdown during the Debt Crisis and the pandemic, but are now relying only on conventional rate hikes to fight inflation, which was caused by QE to begin with. Not only does this not make any logical sense, it is unnecessarily damaging the economy, too.  High(-er) interest rates cause all manner of economic pain, the most obvious being the cancelation of  productive investment.

The Fed, ECB and BOJ urgently need to use the right tool to fight inflation: Quantitative Tightening.

More On The Liability Driven Investment (LDI) Disaster

 In a recent post I went over the collapse of the UK gilt market and what caused it. Though the proximate cause was the announcement of massive unfunded tax cuts for the rich by the new, UNELECTED government of Thatcherite Liz Truss, the astonishing rapidity of the drop was due to yet another instance of acronym derivative folly, margin calls and forced collateral liquidation. In other words, a textbook crash that came within hours - literally - of causing pension fund disaster.

Ten Year UK Government Bonds (Gilts)

The innocuously named Liability Driven Investment (LDI) strategy is nothing more than a scheme to profit from fat fees and hidden spreads.  A Guardian article mentions LDI, in passing, as a cause for the bond massacre, but does not go into depth because a) the popular newspaper is probably not editorially equipped to do so and, b) it has more politically driven priorities, ie to bash Tory policies.

(The Financial Times, however, is certainly equipped to handle financial market analysis and has just published an article on LDI, albeit by a guest writer in its Alphaville section  - which once honorably mentioned this blog, back in the day 😏).

The Bank of England had to step in to forestall the immediate collapse of £1.5 trillion worth of pension funds using LDI, promising to buy £65 billion in gilts. It has averted the disaster for now, but the problem has not gone away. Even a cursory look at the chart above reveals that bond investors are now carrying massive mark-to-market losses created in mere days. 

The LDI “strategy” is based on long term derivatives (interest rate swaps) collateralized with long term gilts, and are definitely still very deep in the red.  All that BOE did was to step in temporarily as buyer in a market awash in supply, when other buyers (eg market makers) stepped away from the falling knife.  But even a central bank does not have unlimited buying power, unless it is willing to monetize huge amounts of debt by excessively bloating its balance sheet (aka print inflationary currency). And huge it would have to be: the £1.5 trillion of LDI nonsense amounts to 70% of UK GDP.

The problem has not gone away, it is merely averted - for now. Why just for now? Because the UK has just joined the 100% Club of nations whose public debt matches or exceeds the size of their economy (100% of GDP).  This dubious membership makes debt servicing and refinancing difficult, particularly when interest rates rise as they are doing now.

Looking past the LDI mess, the UK has a serious debt problem and the market knows it. Once again, it is  the Bond Vigilantes who have spoken clearly: Mrs. Truss you are playing with fire.

Inflation: Fast And Slow

I went to the supermarket the other day and got a real shock.  The price of sliced bread has gone from around 95 cents to 1.85 in less than a month.  I don't eat the stuff, but my daughter makes sandwiches and toasties often, so it's a price I follow - if only subconsciously.  Even as wheat and energy prices soared in Spring and Summer, suppliers apparently worked through their cheap pre-existing raw material stocks and then raised prices all in one go. 

Then two days ago I walked into my neighborhood baker (the Bread Connection is purely coincidental);  the lady who owns it is a really sharp cookie (har, har), very much in tune with the economy.  I told her about my sliced bread experience and she countered with yeast: her supplier raised prices 45% in just one day!

The sharp rise in those two examples got me thinking... why this Sudden Inflation? This is my explanation:

Prices for raw materials like commodities and energy may spike fast, but such prices are slow to ultimately feed through to the final consumer items.  It's like a subsea earthquake, the tsunami does not reach the shore until later.

We are now experiencing a shockwave of delayed, "slow" inflation that is hitting the final retail consumer.  Judging from recent behavior, Mr. and Mrs. Public had largely ignored the warning signs and kept on spending, lulled into complacency by prices that were still low.

How are consumers going to react?  I think they will cut back their spending correspondingly fast, since their income is not rising nearly as rapidly.  And since consumer spending makes up the vast majority of the economy, I fully expect a recession to arrive any day now...

LDI: Do They Ever Learn? - Or Is It Plain Old Greed?

 Remember my UK Plunge Extra post from just a few days ago? Told you so….

This blog was one of the very first to point out the risks inherent in CDS going back as early as 2007.  We know what happened afterwards.  Let’s be absolutely clear: there is ZERO fundamental need for CDS, or a plethora of other such financial market derivatives. In fact, instead of reducing risk such derivatives BY DEFINITION increase systemic risk because they introduce at least one (and frequently many more) extra counterparties to the equation: the issuer(s) of the derivative(s). Just Google “AIG CDS credit crisis” and my point becomes clear.

After the CDS meltdown in 2008-09 one would think that the market learned its lesson: Derivatives are dangerous, no matter if they dress in sheep’s clothes. But no, the lesson hasn’t been learned.

The newest culprit is called LDI, an innocuous enough strategy of Liability Driven Investing targeted mostly at corporate pension funds. As a pension fund manager you have a known future liability stream X to pay pensions, medical benefits, etc. , and current assets of Y.  Unless you work for Norway or Qatar, you have a definite mismatch problem, which ultimately boils down to this: you can’t possibly predict the far future.

Enter your friendly investment bank/pension consultant who offers you an investment strategy called LDI purporting to solve your mismatch problem.  It involves an array of derivative instruments, of course, but hey,…. It sounds good, right? Give them your money, toss the Bloomberg terminal password into the drawer and head down to the pub for a few. Problem solved.

Riiiiiiiiight….. until the (not so) unthinkable happens and a new PM decides to go for a massive unfunded tax cut and absolutely destroys the gilt market. The LDI derivatives go underwater and scream for additional margin money.  Which, of course, you don’t have unless you sell gilts or other such in order to raise cash, which pushes prices down, which creates more margin calls. Same old, same old… time and again.

10 Year Gilts Collapse

Why do they come up with this stuff, you ask? Why not stick with plain old long government bonds? Wanna know the truth? Because there’s no money in it for anyone. Plain bond trading commissions are almost zero, and so is managing portfolios of such plain vanilla stuff.  But OTC derivatives are opaque and carry hefty fees and spreads. In a word, it’s greed dressed up as “innovative” finance.

Why does LDI exist in the first place? 

Regulators started requiring corporations to carry unfunded future pension liabilities on their balance sheets, first in the UK and then in the US - and properly so. Obviously, companies hate this because it destroys their valuations.  And many companies, particularly older ones, have very sizable unfunded liabilities.  Enter your friendly banker who sells you a bunch of swaps that “hedge” all or part of your liability, thus reducing or even eliminating the hit to your balance sheer. Problem with hedging with derivatives is that they may hedge the future all right,  but they require margin today, so when the doodoo hits the fan you end up getting squeezed cash-wise, today. And, of course, you counterparty risk has increased as well. 

It boils down to this: you buy a swap from BubbaBank to reduce your future liability and promise to keep such swap properly collateralized. Essentially, you have swapped your future liability for:

1. An unknown stream of margin/collateral payments today

2. Increased counterparty risk from BubbaBank

3. A hefty upfront fee, included in the price of the swap

Doesn’t sound too attractive to me but, hey, PT Barnum had something to say about it.

Not surprisingly, the LDI business is now huge, growing from zero to $4 trillion in less than 10 years, globally.  Half of this amount involves UK pensions alone, ie a whopping 65% of UK GDP. Explains the gilt and sterling disaster last week, doesn’t it? It also explains why Truss & Co today backtracked on their I Love Maggie tax cuts. (Note: it’s a tiny backtrack, it involves only 2 billion out of a 45 billion program).

This episode of Greed Is Good is very far from over, I think. Stay tuned.

Credit Suisse

 Credit Suisse is a fiduciary institution. Fiduciary is a word derived from the Latin fides, ie trust. The word Credit prominent in its name also derived from Latin: credo means belief.  Like any financial institution, it bases its entire existence on the widespread belief that it can be trusted.

When the market prices its CDS (credit default swap) as in the chart below, it signals that it believes that it can’t be trusted.  Any other explanation, like using Credit Suisse CDS as a vehicle for hedging the investment banking industry in general, while partly true, doesn’t begin to negate the overwhelming conclusion: Credit Suisse is in trouble.

Another pretty obvious conclusion: when the chairman/CEO of a bank has to distribute a memo to all employees to proclaim that all is well…. All is not well.

I hear CS private bankers have been working the phones furiously, contacting customers to reassure them their money/securities are safe.  OK…. put yourself in a customer’s position: you get such a phone call from your advisor/PB. What’s your first thought? 

Unfortunately, the demise of Lehman, et al is not so long ago in the past as to be shrouded in the mists, in the Lethe of history.