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This example of over leaverage and its real consequences is an excellent
example of what not to do that has been touched upon many times over the
last year on RealTraders. Somewhere risk reward was over run by
overconfidence and exposed more than the entire portfolio...Lesson Number
One. Now we know why his book was selling for $19.95 or was that $29.95
last year. Maybe Eddie and John will reopen RT for VN. We could learn
something from him.
BobR
At 06:59 PM 10/29/97 -0600, Michael E. Strupp wrote:
>Here's something I scraped of "TheStreet.com" on the subject:
>
> Fund Watch Features: Hot Copy: Straight
> From The Fax Machine, Niederhoffer Tells
> Customers The Bad News
>
> By
> 10/29/97 6:13 PM ET
>
> The following unsigned letter was faxed to
>clients of Victor
> Niederhoffer on Wednesday, October 29, 1997
>after 5:00 p.m.
> EDT:
>
> October 29, 1997
>
> To:
> Limited Partners of Niederhoffer Intermarket
>Fund, L.P.
> Limited Partners of Niederhoffer Friends
>Partnership, L.P.
> Shareholders of Niederhoffer Global Systems,
>S.A.
>
> Dear Customers:
>
> As you no doubt are aware, the New York stock
>market dropped
> precipitously on Monday, October 27, 1997. That
>drop followed
> large declines on two previous days. This
>precipitous decline
> caused substantial losses in the fund's
>positions, particularly
> their positions in puts on the Standard &
>Poor's 500 Index. As
> you also know from my previous correspondence
>with you, the
> funds suffered substantial losses earlier in
>the year as a result
> of the collapse in the East Asian markets,
>especially in
> Thailand.
>
> The cumulation [sic] of these adverse
>developments led to the
> situation where, at the close of business on
>Monday, the funds
> were unable to meet minimum capital
>requirements for the
> maintenance of their margin accounts. It is not
>yet clear what is
> the precise extent (if any) to which the funds'
>equity balances are
> negative. We have been working with our
>broker-dealers since
> Monday evening to try to meet the funds'
>obligations in an
> orderly fashion. However, right now the
>indications are that the entire equity positions in the funds has
>been wiped out.
>
> Sadly, it would appear that if it had been
>possible to delay
> liquidated most of the funds' accounts for one
>more day, a
> liquidation could have been avoided.
>Nevertheless, we cannot
> deal with "would have been." We took risks. We
>were
> successful for a long time. This time we did
>not succeed, and I
> regret to say that all of us have suffered some
>very large losses.
>
>
>
>
>
> © 1997 TheStreet.com, All Rights Reserved.
>
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