Long-Term Memory?

I worked with a guy who in the mid-nineties once claimed hush-hushedly to have structured a big series of "repair bonds" for the Olympus Corporation. He was not boasting, but trying to help. For this was interesting to me for no other reason than I was managing a reasonably-sized long-short book primarily in Japan, and such information hitherto was (except for precious few) completely unknown to the market. It was concurrent to the exposition that many Japanese companies had such liabilities, yet the analysts I queried about the possibility of such liabilities at Olympus laughed it off with incredulity, as they cheered the stock higher with estimate upgrades and near-ubiquitous buy recommendations.

For those wondering what a "repair-bond" is, it is a financial transaction - typically structured [unsurprisingly] by foreign bankers, primarily (but not exclusively - Hello O.P.L.- U.P.S.!!) in Japan which for an example might replace an existing trading position or security deep under water (with a large typically undisclosed mark-to-market loss) with a long-duration security that they can mark to par, but which really isn't worth par if not held to maturity. There are many flavors of such shenanigans. Many Japanese companies (and Refco!!) used a variation of "pass-the-parcel" to move undeclared liabilities between their multitudes of subsidiaries with differing fiscal year-ends in order to elude the auditors. Others, tried to shuttle the remainder of a position into something more aggressive (like Martin Armstrong's PEI) to try and win-back what they'd lost which is/was almost universally a lousy idea.

The Japanese seem more susceptible to such schemes since losing face is decidedly of great importance - above and beyond the financial loss. So crucial is it, that counterparties devised convoluted pathways to reimburse a financial to avoid embarrassment and culpability on all accounts for all concerned.

Olympus' gargantuan black hole recently disclosed allegedly caused by bizarre transactions with brass-plate offshore entities is of a magnitude not dissimilar to that which was purported to have existed 15 years ago. Yield or investment opportunities for repair have been few and far between. Anything non-yen denominated has imploded, has anything Japanese stock-market related. One must wonder whether the hole is in someway related to these now ancient legacy losses - stuck to Olympus' shoe like a piece bubble-gum. Perhaps the foreign CEO came to understand, whatever his personal inclination to come clean and "Do a Bill Clinton", that this was not, in Japan, as easy as it seemed. Of course, this may not be related to the Zaitech fiddling and diddling clean-up. But, then again, perhaps it might....