LTCM

[Tin Mervin Yeung <tinyeung@xxxxxxxxxxxxxx>]

Hi, RTs,

I heard that Long Term Capital screwed up because it was betting on the
narrowing of bond spreads of different qualities, such as the spread
between Italian gov't bond and German gov't bond.  I am puzzled.  Why
did they think that in a global debt liquidation, this type of bond
spread would narrow??  Isn't it the basic theory that under economic
stress, flight to quality almost always occurs?  Even before Russia,
Asia was already in a debt liquidation.  Correct me if I am wrong.

Mervin