The next LTCM?

[torero 10]

Even the brightest and best can't pull their own weight.

 

http://www.bloomberg.com/apps/news?pid=20601087&sid=am005JehQcNY&refer=home

[PYenner 10]

If you assume that the $5B fund was making 10% or 1/2B per year, then the 1.4B they lost in one month would take them 3 years of trading under normal conditions to recover. They are not going to get normal conditions.

 

After the 1.4B injection, they stand to lose 6.4B and they presently stand to win only the 3.6B that was left. That 3.6B can only be expected to shrink before it might start to grow again. Would you trade with a tp that was half your sl, and would you double up to do that? Or would you close out and keep the 3.6B? It looks to me like they cant close out, at least not fast enough to save the 3.6B they report as "assets". Only 50% of those assets have to become liabilies and the 3.6B is toast. The 1.4B they lost also used to be "assets". Where is the up side, zero net profit for 3 years?

[torero 10]

What surprises me is that these people are supposed to be veteran market players. Being veterans, you assume these are people use sound money management principles or conservative approach to investing right? It took me 3 years to be enlightened about the money management approaches but if these guys have 10 or 20+ of experience, what did they learn in between?

[PYenner 10]

It looks to me like the whole industry is overtrading and undercapitalized.

Competition tends to drive all players towards the higher risk edge.

It looks like nothing was learned from LTCM.

[Reaver 10]

Apparently there were quite a few major blowups after this so called credit crunch...

[Reaver 10]

Neiderhoffer for instance...AGAIN.