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Ton,
<P>When will the patch be available?
<P>A.J. Maas wrote:
<BLOCKQUOTE TYPE=CITE> <FONT COLOR="#000000"><FONT SIZE=+0>Jeffrey
Ho,</FONT></FONT>The 6.52 update-announcement came from Equis International,
Inc. and was sendon by me to the List as additional info. As to your
questions, I refer you to Equis Support's earlier reply to the List, wichis
printed below, and wich was about a simular question. -Metastock 6.0
will NOT have this new millennium/Win98 compliant patch available.-6.0
users are advised to upgrade to 6.5(see the previous mail) and then
get the new 6.52 update-patch.-The 6.52 update-patch<FONT COLOR="#000000"><FONT SIZE=-1>
</FONT><FONT SIZE=+0>will be free to 6.5 users.</FONT></FONT> <FONT FACE=""><FONT COLOR="#000000"><FONT SIZE=+0>Reg.
Ton Maas</FONT></FONT></FONT><FONT COLOR="#000000"><FONT SIZE=-1>===============================================================</FONT></FONT>There
is no free upgrade from 6.5 to 6.51.6.51 is MetaStock Professional.6.5
is MetaStock for Windows 95/NT.The current patch on the web is for MetaStock
Professional 6.51.
<P>There will be a patch toward the end of September or early October that
<BR>will upgrade version 6.5 to MetaStock for Windows 95/NT to version
6.52.
<BR>That will be Y2K compliant and fix the minor Win98 caused problems
in
<BR>version 6.5.
<P>Equis Support
<BR>http://www.equis.com/customer/support/
<BR>
<BLOCKQUOTE
style="BORDER-LEFT: #000000 solid 2px; MARGIN-LEFT: 5px; PADDING-LEFT: 5px"><B><FONT FACE="Arial"><FONT SIZE=-1>-----Oorspronkelijk
bericht-----</FONT></FONT></B>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>Van: </B>Jeffrey Kiat Ho <hkiatj@xxxxxxxxxxxxxxxxxxxx></FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>Aan: </B>metastock@xxxxxxxxxxxxx
<metastock@xxxxxxxxxxxxx></FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>Datum: </B>vrijdag 25 september
1998 18:52</FONT></FONT>
<BR><FONT FACE="Arial"><FONT SIZE=-1><B>Onderwerp: </B>Re: Equis &
millennium</FONT></FONT> <FONT COLOR="#000000"><FONT SIZE=-1>Dear
Mr Maas,</FONT></FONT> <FONT COLOR="#000000"><FONT SIZE=-1>I would
be most grateful if you could tell me when Metastock 6.52 for windows 95
will be available, and also when the patch will be ready for Metastock
6.0.</FONT></FONT> <FONT COLOR="#000000"><FONT SIZE=-1>Thank you.</FONT></FONT> <FONT COLOR="#000000"><FONT SIZE=-1>Jeffrey
Ho</FONT></FONT></BLOCKQUOTE>
</BLOCKQUOTE>
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</x-html>From ???@??? Sun Sep 27 23:02:16 1998
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For Guy Tann and the rest of the list,
Guy, like you I do not know about hedge funds. I took the following text
from the
Omega forum. So please do not attribute any of the following discussion
to me.
Obviously, I cannot answer any follow up questions.
The following text consists of 3 e-mails that centered around the recent
LTCM
fiasco. I do not know any of the people who authored these e-mails so I
cannot
vouche for the accuracy. I did find the discussion interesting, however,
and so
I thought you might also.
I separated each of the e-mails with two lines of
========================.
Regards,
Tim
P.S.
I think that Rajesh should continue to post his Elliot commentary. At
least it
relates to the markets and trading. I certainly hope that the people who
criticized
him were not the same ones who blathered on and on about Bill, Monica,
and the
baseball homerun conspiracy. Now THAT was a waste of bandwidth (on a
TRADING discussion forum).
=============================================================
=============================================================
I'm certainly no expert on hedge funds, but I've read everything I could
get
my hands on over the past few days about them, and I now feel both
better
and worse about the whole situation.
The good news is I think the meltdown scenario a lot of people are
claiming
will happen as the derivitives owned by failing hedge funds are unwound
is
greatly exaggerated. People are wondering which fund after Long Term
Capital Management (LTCM) will need a bailout next. It appears LTCM
really
was the "worst of the worse," simply because they invest almost
exclusively
in bonds. Unlike most other assets, there is apparently no legal limit
on
the amount of leverage one can obtain on bond holdings. If you have a
bond
portfolio with a face value of $1,000, a bank can loan you $1,000,000+
with
only those bonds as collateral (incredibly stupid, but legal). LCTM
therefore was employing a much larger amount of leverage than most hedge
funds.
The other thing to remember is that most of these derivatives employed
by
hedge funds were hedged, therefore losses on one side should have been
offset by gains on the other. What has cost the funds so dearly is that
in
certain cases the party or institution on the other side of the hedge is
not
honoring their agreement (Russian banks...). Somebody on the list
already
pointed out very accurately that these funds shouldn't have even been
entering hedge agreements with entities that were on very shaky
financial
grounds to begin with (Russian banks...), and therefore posed a serious
risk
of default. The good news is that the defaults seem to be fairly
limited
to just a few areas (as of right now...) , primarily in Russia and
Malaysia,
where currency trading has effectively been shut down.
The last piece of good news is I think the quick intervention we saw
this
week by large financial institutions on behalf of LTCM was a smart move.
Recent history has clearly showed that indecisive, half-hearted
responses to
global financial problems only end up making them much worse. I would
rather see the parties involved overreacte now than do nothing.
The bad news is in how this situation was ever allowed to happen, and
what
will stop it in the future. This part of the story really has me pissed
off. Tim Morge is absolutely correct in saying one of the appeals of
hedge
funds is that there is very little regulatory control over them
(especially
those based offshore). However, there is supposedly PLENTY of
regulatory
oversight of the financial institutions that lent LTCM the money to go
on
their leveraged bond spree to begin with. How in God's name did these
lenders not see this coming, and where the hell were the banking
authorities
and accounting firms that watch these lenders?
Let's not forget that the Asian meltdown began over 1 1/2 years ago.
You
would think these people would have started pouring over the books of
their
borrowers to see what their overseas exposure was. Call me crazy, but
I'd
like to think that a hedge fund with only $4 billion in hard assets but
over
$90 billion worth of financial commitments would have raised some red
flags.
People shouldn't just be fired over this, they should be shot.
I find it even more reprehensible that Greenspan and the Fed had to get
involved to begin with. Some people take this as a sign of how the
serious
the problem is. I have a different view. I take it to mean that John
Merriwhether of LTCM first went to these banks to bail him out, and they
told him to go take a long walk off a short pier. He would've never
gotten
Greenspan involved unless he had been totally rebuffed on his own. A
lot of
people are speculating there was some kind of quid-pro-quo involved,
like a
promise from Greenspan to lower interest rates. Nobody knows the truth
except for Alan, but I sure hope he didn't promise to overlook their
past
sins. Remember, most of the lenders who ended up giving LTCM money
ALREADY
had large amounts of outstanding loans to LTCM. An audit of their books
may
have sent a few people to jail (and should).
It's bad enough that probably no one will ever get held responsible for
this, but now Congress is going to hold hearings on hedge funds. Great,
the
same people who can't balance their own checkbooks with the House Bank
are
going to solve the hedge fund problem.
The good news is I think the solution is pretty simple- TOTALLY BAN all
leveraged investments in emerging markets. Want to short the dollar?
Use
all the leverage you want. Want to short the Thai Baht? Put up 100% of
the
money. Any lending institution providing leverage for a third world
trade
should be dissolved. These markets are simply incapable of dealing with
the
massive flow of money (both in and out) that hedge funds throw at them.
They may grow at a slower rate because of this, but they'll be better
off in
the long run. Hedge funds should also have to report within 24 hours
any
leveraged investment they've made. If a hedge fund has a large
leveraged
position in a stock I own, I want to know about it so I can reach the
exits
first if I read their Brazilian bond trade has gone bad. They might
have to
sell the stock just to meet a margin call.
=============================================================
=============================================================
Yes, you would think that bank regulators would be attuned to these
problems.
In practice, I assure you that the people that are overseeing the use of
the
bank's risk allocations only find out about the incredibly stupid
overuse and
abuse of leverage by fund managers when there is a problem.
Let me start with a small example. I trade cash currencies. Sometimes I
am
active, sometimes I go a month without doing much. The clearing house
where I
have the majority of my accounts has a 24 hour cash currency desk. I can
do cash
deals there of easily 25 X leverage per trade of my ending account
balance
today. My account balance changes depending on my market activity, since
I don't
get adequate interest on my funds on deposit.
Now, that cash currency desk is filled with young currency traders. I
don't have
any friends on that desk and their spreads are too wide [The reasons are
fake,
but the example is valid]. So to keep me a happy customer, the clearing
firm/bank also lets me have EFP and cash currency rights, with no money
on
deposit with three other clearing firms/money center banks. And they
also let me
have EFP limits with two other FCMs that are not attached to any bank.
They give
me this nice treatment because I have been a great customer with the
firm for 20
years. And when I was managing large amounts of money, I did business
with them.
I like them, they like me.
At each of those places I am allowed to trade at about 25 X my closing
balance
as of today. The limits haven't changed for several years. Now, imagine
what
would happen if I went on a crazy spree and began recklessly using those
lines.
Maybe I lost a bunch in the Globex session on S&Ps and I want to
leverage way up
to try to get some cash back... In miniature, this is what non regulated
hedge
funds, or regulated funds that are trading non regulated instruments,
have
available to them. many times, the granting of this ridiculous credit is
the one
thing a bank trading area can do to capture a fund's business. What does
the
bank get out of it? Wouldn't you like to have a half hour lead on the
rest of
the market with the news that Soros was selling 2 billion sterling? Or
better,
how about buying $500 million US against New Zealand? All you have to do
is buy
your $50 million US while you do his order and then watch him drive it
your way.
Is that enough profit to make a trading manager go throw a tantrum to
get
increased credit limits for a fund manager? In these times of
non-existent
spreads, you bet your life. It happens every day.
I'll post more examples if anyone really finds this stuff interesting.
When you
start looking at letters of credit and derivatives and clearing risks
that
extend not to the party you lent to, but the third or fourth party down
the
chain, it's amazing how much 'risk' that can be generated rather quickly
right
in front of a bank's lending manager and the bank examiners.
Again, I don't want to fill the list with off subject discussions.
I hope all of you in the southeast US coast are safe, and I hope
everyone has a
very fine weekend.
=============================================================
=============================================================
Thank you for your (as usual) insightful response. And, yes, I do
happen to have a few questions.
First, let me see if I'm correctly understanding the situation:
(1) The brokerage firms who loaned Long Term Capital money to prevent a
margin call now own 90% of the Hedge Fund. These loans were backed by
various Banks who are being tacitly backed by the Federal government who
is being backed by the taxpayer.
(2) Hedge Fund investors have now lost 90% of their equity.
(3) The brokerage firms who now own 90% of LTC are now invested in a
situation almost as highly-leveraged as what existed prior to the loans.
If this is true, what happens if/when this House of Cards begins to
collapse? Do the brokerage firms then go to the Banks who then go to
the Federal Government who then goes to the Taxpayer for yet another
Savings-and-Loan-type Bail Out?
What does the Federal Government do? Do they, under massive negative
public pressure, back away from their tacit support of the Bank loans?
If so, do we have a potential Bank collapse on our hands?
Do we face the prospect of an OTC market collapse due to contractual
payment obligations being broken by bankrupt brokerage firms?
How does all of this effect already-weakened foreign economies and what
effect does that then have on our own economy?
What, if anything, can Alan Greenspan do to keep such a downward spiral
from accelerating out of control?
Are there other Hedge Funds beside LTC who have gone through (or are
close to going through) the same scenario? If so, who and how many and
just what is our total potential exposure?
Did you *really* mean it when you said, "there are no regulations or it
isn't clear which agency has jurisdiction"...or were you just being
facetious?
Is there reason for concern? Is it Trailing Ticks I'm hearing or "Tick,
tick, tick, tick,...,BOOM"?
=============================================================
=============================================================
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