Wall Street is only just now realizing the dilemma (ZT)

From www.thehousingbubbleblog.com, Poster "KIA"

"Comment by KIA
2007-08-04 12:59:37
WallStreet is only just now realizing the dilemma they are in. Eachinstitution needs to call the margins they hold and exercise theirrights so they can restore their own asset balance and avoid margincalls on themselves. That doesn't sound too clear, so lemme put it thisway: Remember how some folks have been complaining about the fractionalreserve lending system? Well, the big houses and brokerages didn'tcough up 30% + returns over the last five years by engaging in normalbrokerage activities. They all leveraged themselves out 12x to 20x ormore in imitation of what the banks have been doing for decades.

Allof that leverage is unwinding, and the more firms that get called, themore firms have to make their own calls. When the calls go out, and theassets don't support the calls, then they need to dig into their ownpockets for the cash. Everything is selling off worldwide as the bighouses attempt to recapitalize and avoid the brutal losses beinginflicted by calls in a down market. Carry trades are going, stocks aregoing, bonds, everything. They won't actually succeed in their effortsof course, because the leverage is too high. What they may think ofdoing is cherry-picking those assets which might survive. If they'rereally, really smart, they'll do the reverse of a merger: they'llcreate new holding entities for the assets which are worthwhile,transfer said assets for cash, use the cash to stall for just over 90days to avoid the bankruptcy preference period, then you'll see a hugewave of bankruptcies. Meanwhile, the execs will have exercised alltheir options (again, before the 90 days) and jumped ship to the newholding companies or simply left town for a while. Probably the latter,because who wants to hang around and explain all of this to frowninginvestigators?

Meltdown began July 24 (as predicted) thereforenew prediction: Total carnage by the last week of October or the firstweek in November. I'll call it election week just to be sure. Thistime, barring unforseen intervention, it will be financial blood in thestreets."