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Someone asked me privately:
>If these guys are the primary investors in these funds, then why the
>hell are we the public oblidged to bail them out? Or are we bailing
>them out?
>
The public isn't bailing them out at all. It's all private investment
capital, although some of the participants are public companies that trade
on New York.
The Fed just used its influence 'jawboning' to get the deal done. To avoid
the domino effect that might have followed a nasty uncontrolled collapse, to
help bring about an orderly interim refinancing, and to be well informed on
a new financial calamity.
The deal might still leak again, depending on whether or not the bond
spreads between for example, Russian and emerging market junk bonds and US T
bonds these guys were betting on, get worse or not.
Rumour has it they are not out of the woods yet on all the trades. The idea
was to NOT totally unwind all the hedges and liquidate all the portfolios.
THAT is precisely what everyone wanted to avoid. It's just that in the
process the principals of the fund lost 90% of their capital by the meltdown.
At 04:30 PM 9/28/98 -0700, you wrote:
>Michael Paauwe wrote:
>>
>> Dave said:
>> >If it were up to me, I'd toss the whole damn bunch of them into Prison.
>> >They're nothing but a herd of White-collar Con Artists with Ph.D.'s
>> >hiding behind their Grey Poupon...and I don't buy it. And as far as I'm
>> >concerned, none of them cut the mustard when it comes to living up to
>> >their obligation as Stewards of the Public Trust.
>>
>> That's just it, Dave. They're not Stewards of any Public Trust. They are all
>> just sophisticated investors, ready to gamble their firms' money. And they
>> didn't do their homework.
>>
>> Hedge funds are exempt, have no prospectus per se, and do not involve the
>> public's money. The investors that lost money are just the same as the boys
>> running the hedge fund.
>>
>> Michael Paauwe
>> mpaauwe@xxxxxxxxxx
Michael Paauwe
mpaauwe@xxxxxxxxxx
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