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Guy et all,
Here's a msg I posted yst:
BTW: Don't these spooky things look like a good topic for X-files? <G>
Hi Fletch,
Thanks for "the good,bad and ugly" post.
As far as I understand it, it's a margin-problem:
If I have a value of $1000,= in stocks with my bank, i can lend 25% extra to
buy more stocks. The bank charges me some interest and that's it.
As soon as my original $1000,= value tanks to let's say 750,= I get this
phonecall.
Or I sell some or I put up more cash.
Same with my futures trading.
But these hedge-funds seem to be another piece of cake.
If they have this $1000,= value they seem to be able to lend an additional
$10000,= or even more.
How they get their banks so far ?
They probably come up with this constructions, showing how clever they hedge
this.
And the bank (Some risk-officer) accept it.
Suppose you owe $1000,= to your bank for which you pay 6% interest and you
buy Russian bonds which pays you a cool 16%.
Things keep going fine untill the Russians stop paying.
In my and Al's example, I get this phone-call and I/Al have a problem.
But if we owe millions or billions or trillions of bucks and we get this
phone-call, they (the bank) have a problem.
Now if the US-Treasury starts to intervene into this problem, the conclusion
is that there is a real problem...
The solution IMHO lays with the banks who should not lend so much against
their customer's equity.
But they will say: If we don't do it another bank will do it. Plus they feel
the safety of IMF, Governments, taxpayers and the like, 'cause they think
they will be bailed out anyway.
The answer must be regulation, in which the max. % they can lend against any
security is determined.
Accidents will probably keep happening, but anything is better than......
Rgds.
Frans
At 21:10 27-09-98 -0700, you wrote:
>Frans
>
>The exposure I heard quoted was $1T! That's a one with 12 zeroes after it.
>Now I haven't read all the responses but will get to them tonight. X-files
>are on and I'm out of here <G>.
>
>Regards
>
>Guy
>
>
>> -----Original Message-----
>> From: owner-metastock@xxxxxxxxxxxxx
>> [mailto:owner-metastock@xxxxxxxxxxxxx]On Behalf Of derksenf
>> Sent: Sunday, September 27, 1998 1:33 AM
>> To: metastock@xxxxxxxxxxxxx
>> Subject: Re: Hedge Funds - Help!
>>
>>
>> Al,
>>
>> If you own US$ 214.75 to your bank you have a problem.
>> If you owe US$ 90 billion, the bank has a problem.
>>
>> In this case even Alan G., other banks and probably the tax-payers have a
>> problem.
>>
>> BTW: Thanks Tim for your very informative posting on this subject.
>>
>> Trade cool,
>>
>> Frans
>>
>>
>>
>> At 13:09 26-09-98 -0500, you wrote:
>> >As I understand it, if the fund had to liquidate their HUGE holdings in
>> >TBonds, this would have depressed the market and caused great calamity in
>> >the markets. Mr. Greenspan said this was to keep the markets from being
>> >roiled. (Did this sound like we have to supply liquidity to Morgan
>> >Stanley, Merrill Lynch, Goldman Sachs?) How do you get to be "to big to
>> >fail"? Can I get the $214.75 back that I lost on my Barnes and Noble
>> >short?
>> >
>> >Al Taglavore
>> >
>> >----------
>> >> From: Guy Tann <grtann@xxxxxxxxxxx>
>> >> To: Metastock <metastock@xxxxxxxxxxxxx>
>> >> Subject: Hedge Funds - Help!
>> >> Date: Friday, September 25, 1998 7:42 PM
>> >>
>> >> To All:
>> >>
>> >> Since I'm just an ignorant futures trader, I need help from all of you
>> >> experts to understand what in fact a hedge fund is, how it works, why a
>> >> bunch of banks had to take that one over the other day, why the market
>> >would
>> >> think this is good or bad, and why our banks have a potential
>> trillion $
>> >> exposure to other hedge fund losses (based upon the talking heads)????
>> >>
>> >> Is this just another thing I have to worry about? It's not enough I
>> >worry
>> >> about what those idiots are doing in Washington, the problems in Asia,
>> >> Russia, Central & S. America and Mexico. Now I have to worry
>> about hedge
>> >> funds, bailing them out and the exposure to our banking system.
>> >>
>> >> Thanks
>> >>
>> >> Guy
>> >>
>> >>
>> >>
>> >
>> >
>>
>
>
>
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