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Don,
I think, if you read my reply.... that we said the same thing. What it really
demonstrates is that Minimum Margin is a sign of Minimum Intelligence.
Ironically Orange County would have broken even less than 60 days later, but the
leverage absolutely killed them. They were not a delta hedger however. The
curious question, and I use this at every seminar, is who made the money O. C.
lost? The usual answer is the brokerage houses ... which is incorrect. Think
about who were the longs and shorts in the mortgage market?
Don Roos wrote:
> <Orange County, LTCM and others died in the short run, but their positions
> would have in
> fact been profitable if held longer.>
>
> Doc:
>
> I know what you are saying, but I would respectfully refute that argument by
> saying that holders of 1:10 margin accounts in 1929 would have been
> profitable if they had held long enough too. But that's the catch, isn't
> it? How do you hold onto something that is burning you up in the process?
> ("If I could hold this fire long enough, it would go out, and I would be
> ok"). Hope or arrogance that keeps one from dumping a losing position is
> the masochistic pill of the trader. And it can be deadly.
>
> Best regards,
>
> Don
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