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I've been watching it fall also, bought some (little) LUK a couple days ago, I think they now own about 30% of JEF. LUK has had several rough days also.

from naked capitalism:

1. Can the institution with CDS exposure afford to collateralize all of their exposures? This was a big factor in why MF Global moved so quickly to bankruptcy – as MF and their exposures got downgraded, MF ran out of available assets to post against their CDS. This is probably why they violated their segregated accounts. This is also what drove AIG to needing a bailout – they lacked sufficient funds to post against their very large exposures. Thus, the problem is not the mechanics of CDS and collateralization, but the fact there is no real limit on how much exposure an institution can take on in CDS relative to assets available for collateral posting.
2. What is the credit worthiness of the various counterparties? Gross exposure may be netted down via CDS hedges, but what if the counterparties run into an MF Global or AIG situation? If a counterparty is unable to honor its hedge (either through collateral posting or outright), then the value of the hedge is greatly diminished and more likely to yield something like ten cents on the dollar (a typical ISDA auction level for unsecured CDS debt). This is the issue that ZeroHedge has been harping on with Morgan Stanley and Jeffries – i.e. “gross is the new net”. Since the various gross exposures to various European sovereigns is quite large, a legitimate question can be asked about how secure these hedges (and the resulting netting) will be in the event of significant country or institution downgrades. >>
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