From Good Morning Silicon Valley…

Just yesterday we pointed to an old video of Steve Wozniak pitching a Datsun 280Z, and now we learn that time has done nothing to slow down Apple’s co-founder, no matter what he’s driving. Woz confirmed that back in March, he’d been pulled over by the CHP on Interstate 5 for speeding … at 104 mph … in a Prius. Yes, right on the bumper of the Al Gore III endorsement of the hybrid’s surprising oomph comes the Woz seal of approval (bolstered by the fact that he’s owned eight of them). And he confessed, this wasn’t the first time he’d pushed the hybrid above the century mark, recalling a Thanksgiving trip to Burbank. “Highway 5 was empty that night and I made good time and was surprised to discover that the Prius was very stable, even with major gusting winds,” Wozniak told the Merc’s Gary Richards. “Being used to a Hummer I expected the opposite.” Yes, apparently Woz has his own carbon offset plan going.

Clever fellow that he is, Woz offered the judge a suitably geeky excuse. “I pleaded guilty, with an explanation,” he said. “I said that I was really scientific, and in the last year had been in Athens, Moscow, Berlin, Frankfurt, Munich (twice), Zurich, Canada (three times), Columbia, Singapore, Japan, London, etc., and had gotten used to kilometer speeds.” Good try, but no joy; the fine was about $700. Woz says he’s reformed, and happy about it. “I’m not a fast person or a fast driver,” he said. “When it comes to personality types A and B, I’m a C. That’s the type that doesn’t know what the letters stand for and doesn’t care. I’m very laid-back and patient and don’t mind going slowly at all. So this ticket was a good thing for me, actually.”

Er, the aforementioned “old video” is this:

Thanks to Dr Macenstein for the link.

From today’s Telegraph…

Switzerland’s top banker has warned of massive losses from the unfolding credit crisis, describing the collapse in US lending standards as “unbelievable”.

Jean-Pierre Roth, president of the Swiss National Bank, said market turmoil was far from over as tremors from the sub-prime debacle continued to rock the world.

“We’re certainly not at the end of the story. There are question marks surrounding the development of the American economy,” he said. “Something unbelievable happened. People who had neither income nor capital got credit with very attractive conditions. Now reality is striking back,” he said.

In Germany, the state bank SachsenLB admitted that it had received a €17.3bn bail-out after its investment arm Ormond Quai racked up huge losses on US sub-prime debt. It had previously denied holding direct exposure to sub-prime…

The Economist deployed a nice simile to explain what’s been going on:

THE old-fashioned financial system was like Old Maid, a parlour game once beloved of small children. The banks were like players, dealt hands from a pack of cards, which they swapped among each other. At the end, one player was left holding a lonely queen—a bad debt, if you will—and lost. Over the past few decades the game has changed. Securitisation has snipped the old maid into pieces; new faces, such as hedge funds, have joined the party, enabling the banks to distribute those pieces among a larger number of players. When the game is over, lots of players are left holding small losses instead of one player holding a big one.

During two exceedingly prosperous decades, that theory seemed to work just fine. But the swings in almost all financial markets this month have made dispersed risk suddenly morph into dispersed mistrust. The uncertainty has been magnified by the way that bad risks have become so hard to value. Investors have bought asset-backed securities that use shaky subprime mortgages in America as collateral, but as defaults have risen, the value of that collateral has tumbled. Meanwhile, collateralised-debt obligations (CDOs), made up of clumps of those securities and laced with leverage, have become almost impossible to trade. So none of the players really knows how much he has lost. While this uncertainty lasts, investors are taking it out on the banks that peddled the securities by dumping their shares; and the banks are taking it out on those they sold them to by demanding more collateral on their loans. The banks have even grown cagey about lending to each other.

And the conclusion?

At the end of Old Maid as banks used to play it, the loser would take a big write-off and then everyone could start playing again. In the new version, the use of leverage means the game is being played with hundreds of packs of cards and by thousands of different players. “Securitisation,” says Avinash Persaud of Intelligence Capital, a financial adviser, “has meant that credit risks have moved from knowledgeable, long-term hands, to fast hands, where the principal risk-management strategy is to sell before prices fall more”. Working out who has won and who has lost in this round will take a long time.

So while every day the markets don’t fall is a relief, there’s a dark cloud hanging over the entire system, and nobody knows yet how big it is.