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----- Original Message -----
From: <tradejacker@xxxxxxxxxxxx>
> hi bruce, wasn't ltcm's bankrupcy a result of the then popular yen / bond
> strategy unwinding too??? or is that what you're referring to?
>
> TJ, a small nibbler fish in a big big ocean
Well, I know they were short bonds and the Yen carry trade requires going
long bonds, so I don't think so.
In hindsight, it's a shame that Merriweather didn't accept Buffet's offer to
buy out LTCM, because it could have led to one of the greatest financial
showdowns of the 20th century. Just imagine, on the one hand you have
Merriweather and the "Dream Team" of market and economic analysts engaging
in complex hedge trades using borrowed money. On the other hand you have
Warren Buffet, the epitomy of conservative, buy and hold investing who
abhors speculation (he once stated that consumer stock option trading should
be banned...).
Just when the other large trading centers thought they had Merriweather
broken, in steps a man with incredibly deep pockets and incredibly large
amounts of patience. How would have the whole affair ended? It's anybody's
guess, but I bet the large traders would have held firm for a short time,
until Greenspan made his now infamous intra-meeting rate cut. That led to a
buying spree on stock markets worldwide, and would probably have caused the
bond buyers to sell in a panic. Buffet, the long term player, would have
pounded some of the biggest names on Wall Street.
That's the kind of story blockbuster movies are made of...
Bruce
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