Tuesday, March 16, 2010

Lehman in Wonderland

Now I don’t know about you, but I think the Valukas report will make for adventurous reading. For now it can be told - Lehman Brothers’ balance sheet is FULL of fascinating mysteries.

Let’s look at the liability side. Now we know that unicorns* exist on Lehman’s liability side. They disappear when you start looking for them, but they irritatingly reappear at the most inconvenient of times. Now we know what happened to Lehman’s equity – the unicorns ate it!

Now how about Lehman’s asset side? Now we know that Valkyries** exist on Lehman’s asset side. The more we look, the more beautiful they are. But watch out. They‘ll take the life out of you.

And I’m pretty sure that if you look hard enough, you’ll also find Gorgons on their asset side. If you look straight into their eyes, it turns them into capitalized gain.

Now, I haven’t actually read the report, but how come there seems to be no mention of the possibly numerous Elvis sightings*** on the income statement?

* Liabilities that disappear via the magic of Repo 105 and total return swaps.
** Assets whose risks are obscured, via the magic of mysterious valuation techniques.
*** Items which are not exactly what you think they are. These sightings were also numerous in a previously famous company.

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