roguetrader
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Racer said:
Check again, it seems Joules is indeed systematically removing his posts one by one.
roguetrader
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On the edit page you are offered the option to delete a post, to do it one by one would take quite a few hours. obviously he has his reasons to go to that much effort, rather odd.Racer said:
roguetrader
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Racer said:
Yes, unfortunately it looks that way, he has removed most of his posts from the Dow thread also.
Woodcrusher
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position change
sold my long (1194,4) and got a sell at 1192,4
-2 profit
sold my long (1194,4) and got a sell at 1192,4
-2 profit
FetteredChinos
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doing all your donkey work again Joules lol 
FetteredChinos
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lol no worries.. how come you deleted the best part of a thousands posts? those must be pretty fat trading fingers
FC
FC
FetteredChinos
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ps. get well son old chap... if we see your Dow comp entry this week, then im a dutchman..
keep your chin up.
FC
keep your chin up.
FC
Joules MM1 said:
Three peaks and a domed house ?
http://jessel.100megsfree3.com/SPX.png
Not my chart, thanks to Jesse, the info on his site is usually very good, any opinions ?
I saw the comments on this pattern on the Dow thread.
Thanks
roguetrader
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Joules MM1 said:
Rough translation, "Trade what you see, not what you think."
roguetrader
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What is it about Hedge funds that has everybody so excited, not referring to you Joules, but in general, everywhere you look people are talking about Hedge funds like they're the anti-christ. I haven't actually seen a definitive article that lays it on the table, "Hedge funds are dangerous because......" Merely speculation to the effect " pst did you hear some big hedge funds might have lost a lot of money in....." what makes them so special?
roguetrader
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An attempt at an answer.
Posted 5/18/2005 11:50 PM
Could hedge funds cause market meltdown? By Adam Shell, USA TODAY
NEW YORK — Hedge funds, the investment of choice for the rich, prefer to toil in anonymity. But recent rumors of steep hedge fund losses circulating on Wall Street have pushed this elite, ultra-secretive fraternity out of the shadows.
The rumblings of trouble have rekindled the debate on whether these lightly regulated funds, which employ exotic trading strategies, such as shorting and arbitrage, and use borrowed money and leverage to goose returns, pose a danger to financial markets. It has also reminded investors just how little they know about these funds despite the immense financial power they wield. Some analysts fear the explosive growth and growing clout of hedge funds is morphing into a bubble like the dot-com mania that could end in a similar meltdown.
"When something becomes so popular, you know you're late to the party," says Scott Black, president of investment firm Delphi Management. "A lot of this is gambling with other people's money."
A lot of money, at that. Although the financial bar has been brought down in some cases, most hedge funds still require initial investments of up to $1 million. And unlike mutual funds, hedge funds are allowed to bet that money on virtually any available financial instrument.
A rumored bet gone bad, it turns out, is what has investors on edge. The rumor, which originated abroad on May 10 and quickly made its way to U.S. trading desks, was sobering: One or more of the roughly 8,000 hedge funds was allegedly in financial trouble, victim of a losing trade involving both the stock and debt of troubled automaker General Motors.
The rumors have yet to be confirmed, but investors remain shaken. The Dow Jones industrials, which fell more than 100 points the day the first whispers circulated, has more than made up its loss, partly because there have been no hedge fund casualties and because oil prices have dropped and inflation fears abated. Still, investment banks, which lend money to hedge funds, are still being monitored closely by investors. And the corporate bond market remains under pressure as cash shifts to the safety of U.S. Treasuries.
What's more, commentary from pundits is still laced with words full of negative connotations associated with past hedge fund implosions: Leverage. Risky. Derivatives. Margin calls. Ripple effect. Contagion.
Jittery investors can't help but wonder if another hedge fund blowup similar to the 1998 implosion of Long Term Capital Management (which required a Federal Reserve-engineered bailout from leading banks) — or a series of mini blowups — is looming out there somewhere.
Little more than a week since the May 10 scare, the fallout from the rumors still reverberates on Wall Street. No hedge fund has admitted to being close to going belly-up. And there's no certainty any will.
Still, angst is evident in recent Wall Street research reports. The potential for "hedge fund insolvencies" has been added to the list of market worries compiled by Smith Barney strategist Tobias Levkovich. The headline on a report by Lipper research analyst Jeff Tjornehoj: "What Equity Investors Need: A Hedge Against Hedge Funds." Ken Tower of CyberTrader cautioned: "Derivative Disaster Ahead?" Even Securities and Exchange Commission Chairman William Donaldson warns of a possible "disaster."
The industry's defenders say disaster is unlikely. Closer regulatory scrutiny, tighter lending standards at banks and stricter controls of leverage at hedge funds in the wake of Long Term Capital Management (LTCM) make a meltdown less likely, says John Gaine, president of the Managed Funds Association, a hedge fund trade group. "The watchdogs are watching," he says. "There is not a run-on-the-bank-type situation."
Federal Reserve Vice Chairman Roger Ferguson made a similar point in a speech last week. Hedge funds are "not a source of instability, nor likely to become one," he said, adding that internal risk management at hedge funds had improved since LTCM.
Blamed for everything
Still, some hedge fund analysts, portfolio managers and market strategists say it is too early to rule out a fund failure or delayed pain in the financial markets. "Sometimes something happens, and it takes months or years before the ripple effect leads to a crisis," says Mike Tito, head of hedge funds for Wilshire Associates.
Hedge funds are again on trial in the court of public opinion. With nearly 9,000 funds and assets under management doubling over the past five years to roughly $1 trillion, they're a big target.
"Hedge funds are getting very uppity. They are driving CEO resignations. They're driving corporate behavior," says Donald Hambrick, professor of business at Penn State University. "The pension plans were aggressive but more genteel. The hedge funds get vicious. They are much more brash."
Hedge funds have been blamed for everything from sky-high oil prices to the slumping dollar to speculating in gold and commodities, knocking those markets out of equilibrium.
"Hedge funds are the scapegoat du jour," says Mark Minervini, president of Quantech Research Group.
That's why the industry is in damage-control mode, deflecting criticism about poor performance, too many funds chasing too few investment opportunities, too few first-rate managers. It's also downplaying the potential for systemic risk to financial markets caused by losing bets by hedge funds. Back in December, Charles Gradante, managing principal of hedge fund consultancy Hennessee Group, declared that "hedge funds are not the elephant in the swimming pool" and argued that other "players" exert more market influence. He's been out defending the industry in the past week as well.
Lagging performance is causing angst in the hedge fund community. The average fund in the Van U.S. Hedge Fund index lost 1.7% in April and is down 1.6% for the year. And even though that is better than the 4.5% loss suffered by the Standard & Poor's 500 index in the first four months of the year, it's troublesome. Declines of 8.3% for managed futures funds and a 5.8% drop for convertible arbitrage funds also are cause for concern.
The reason: Hedge fund managers earn most of their money by taking a 20% cut of the profits they produce. If the losses continue, disenchanted investors might withdraw their money, Jim Cramer, former hedge fund manager and host of CNBC's Mad Money, warned on a recent telecast. That could force fund managers to sell holdings to meet redemptions, further dragging down performance and creating a vicious cycle of lower returns, or even fund closings.
Not everyone views the recent turbulence as a sign that the best hedge fund returns are behind us.
"If you look at the performance of hedge funds over the past six months, or even the past month, there is not enough damage to infer that something is dramatically wrong," says Charles Davidson, senior hedge fund director at Standard & Poor's.
The longer-term record of hedge funds remains solid. Since 1987, the average fund in the Hennessee Hedge Fund index has outpaced the broad S&P 500 benchmark by roughly 3 percentage points a year.
The industry's popularity skyrocketed in the last bear market, when hedge funds did a better job protecting investors' capital than mutual funds did. The ability of hedge funds to profit when stock prices were falling via a "shorting" strategy — betting on falling prices — enabled them to post gains from 2000 through 2002, a period when the broad stock market lost half of its value. In 2000, the year the bear market began, the Hennessee Hedge Fund index rose 7.6%. In 2001 it eked out a 3.9% gain, followed by a mild 3.5% loss in 2002, the last year of the bear market.
Unfortunately, hedge funds are graded by the amount of money made or lost — not how they fare against peers or stock indexes.
Right now, with gains increasingly harder to come by as the current economic expansion slows and the bull market nears its third birthday, hedge funds sporting losses get failing grades.
The worry: That the dearth of profit-making opportunities is causing some hedge funds to take more risk to boost returns.
7-year-old fallout still stings
The hedge fund industry is still suffering from the fallout of LTCM's collapse seven years ago. The fund, which was run by a brainy team including two Nobel prize winners for economics, ran into trouble when its sophisticated models designed to control risk failed to factor in the unexpected.
Thanks to secrecy and a blitz of cheap loans extended by major banks, LTCM made huge leveraged bets that went the wrong way, putting it on the precipice of bankruptcy, an outcome that had the potential to spread financial pain throughout global markets.
In the summer of 1998, thanks to massive leverage, the fund's investments totaled more than 50 times its actual capital base. (Today the average hedge fund's leverage is said to be roughly two times its asset base.) Then trouble struck. Russia devalued its currency that summer, and spooked investors sold risky bonds and fled to the safety of U.S. Treasuries — the opposite of the trade LTCM had in place. When word of its losses leaked out, margin calls kicked in from banks looking to get back some of the money they loaned LTCM. That's when the Fed stepped in to broker a bailout.
The latest hedge fund scare had some similarities and some differences. What is similar is the veil of secrecy the funds work behind, which makes it difficult to know what they are doing and how much money — if any — was lost.
"Rumors are nothing new, but you don't hear anyone throwing around any names," says Bill Hornbarger, head of fixed income investing at A.G. Edwards. "There is a sense of unease. But no one can put their finger on it and say, here is the problem."
Another similarity is that the losses were sparked by a relationship between financial assets that was unexpected. In the recent GM trade that went bust, hedge funds were basically betting that the stock of the beleaguered carmaker would fall and instead bet on its bonds, which they thought was a less risky play.
But two things happened that turned that logical trade upside down. First, billionaire investor Kirk Kerkorian went public with his plan to nearly double his stake in GM stock, which jolted the shares of the stock higher. A day later, S&P shocked bond investors when it downgraded GM's credit rating to "junk" status, which resulted in a drop in price of GM's bonds. The result: Both sides of the trade resulted in losses.
If there's anything to be learned from LTCM and the recent GM-related scare, it is this: "It dispels the myth that hedge funds are higher beings," says Woody Dorsey, president of Market Semiotics, a behavioral finance firm. "Accidents can happen."
Contributing: Michael McCarthy
Posted 5/18/2005 11:50 PM
Could hedge funds cause market meltdown? By Adam Shell, USA TODAY
NEW YORK — Hedge funds, the investment of choice for the rich, prefer to toil in anonymity. But recent rumors of steep hedge fund losses circulating on Wall Street have pushed this elite, ultra-secretive fraternity out of the shadows.
The rumblings of trouble have rekindled the debate on whether these lightly regulated funds, which employ exotic trading strategies, such as shorting and arbitrage, and use borrowed money and leverage to goose returns, pose a danger to financial markets. It has also reminded investors just how little they know about these funds despite the immense financial power they wield. Some analysts fear the explosive growth and growing clout of hedge funds is morphing into a bubble like the dot-com mania that could end in a similar meltdown.
"When something becomes so popular, you know you're late to the party," says Scott Black, president of investment firm Delphi Management. "A lot of this is gambling with other people's money."
A lot of money, at that. Although the financial bar has been brought down in some cases, most hedge funds still require initial investments of up to $1 million. And unlike mutual funds, hedge funds are allowed to bet that money on virtually any available financial instrument.
A rumored bet gone bad, it turns out, is what has investors on edge. The rumor, which originated abroad on May 10 and quickly made its way to U.S. trading desks, was sobering: One or more of the roughly 8,000 hedge funds was allegedly in financial trouble, victim of a losing trade involving both the stock and debt of troubled automaker General Motors.
The rumors have yet to be confirmed, but investors remain shaken. The Dow Jones industrials, which fell more than 100 points the day the first whispers circulated, has more than made up its loss, partly because there have been no hedge fund casualties and because oil prices have dropped and inflation fears abated. Still, investment banks, which lend money to hedge funds, are still being monitored closely by investors. And the corporate bond market remains under pressure as cash shifts to the safety of U.S. Treasuries.
What's more, commentary from pundits is still laced with words full of negative connotations associated with past hedge fund implosions: Leverage. Risky. Derivatives. Margin calls. Ripple effect. Contagion.
Jittery investors can't help but wonder if another hedge fund blowup similar to the 1998 implosion of Long Term Capital Management (which required a Federal Reserve-engineered bailout from leading banks) — or a series of mini blowups — is looming out there somewhere.
Little more than a week since the May 10 scare, the fallout from the rumors still reverberates on Wall Street. No hedge fund has admitted to being close to going belly-up. And there's no certainty any will.
Still, angst is evident in recent Wall Street research reports. The potential for "hedge fund insolvencies" has been added to the list of market worries compiled by Smith Barney strategist Tobias Levkovich. The headline on a report by Lipper research analyst Jeff Tjornehoj: "What Equity Investors Need: A Hedge Against Hedge Funds." Ken Tower of CyberTrader cautioned: "Derivative Disaster Ahead?" Even Securities and Exchange Commission Chairman William Donaldson warns of a possible "disaster."
The industry's defenders say disaster is unlikely. Closer regulatory scrutiny, tighter lending standards at banks and stricter controls of leverage at hedge funds in the wake of Long Term Capital Management (LTCM) make a meltdown less likely, says John Gaine, president of the Managed Funds Association, a hedge fund trade group. "The watchdogs are watching," he says. "There is not a run-on-the-bank-type situation."
Federal Reserve Vice Chairman Roger Ferguson made a similar point in a speech last week. Hedge funds are "not a source of instability, nor likely to become one," he said, adding that internal risk management at hedge funds had improved since LTCM.
Blamed for everything
Still, some hedge fund analysts, portfolio managers and market strategists say it is too early to rule out a fund failure or delayed pain in the financial markets. "Sometimes something happens, and it takes months or years before the ripple effect leads to a crisis," says Mike Tito, head of hedge funds for Wilshire Associates.
Hedge funds are again on trial in the court of public opinion. With nearly 9,000 funds and assets under management doubling over the past five years to roughly $1 trillion, they're a big target.
"Hedge funds are getting very uppity. They are driving CEO resignations. They're driving corporate behavior," says Donald Hambrick, professor of business at Penn State University. "The pension plans were aggressive but more genteel. The hedge funds get vicious. They are much more brash."
Hedge funds have been blamed for everything from sky-high oil prices to the slumping dollar to speculating in gold and commodities, knocking those markets out of equilibrium.
"Hedge funds are the scapegoat du jour," says Mark Minervini, president of Quantech Research Group.
That's why the industry is in damage-control mode, deflecting criticism about poor performance, too many funds chasing too few investment opportunities, too few first-rate managers. It's also downplaying the potential for systemic risk to financial markets caused by losing bets by hedge funds. Back in December, Charles Gradante, managing principal of hedge fund consultancy Hennessee Group, declared that "hedge funds are not the elephant in the swimming pool" and argued that other "players" exert more market influence. He's been out defending the industry in the past week as well.
Lagging performance is causing angst in the hedge fund community. The average fund in the Van U.S. Hedge Fund index lost 1.7% in April and is down 1.6% for the year. And even though that is better than the 4.5% loss suffered by the Standard & Poor's 500 index in the first four months of the year, it's troublesome. Declines of 8.3% for managed futures funds and a 5.8% drop for convertible arbitrage funds also are cause for concern.
The reason: Hedge fund managers earn most of their money by taking a 20% cut of the profits they produce. If the losses continue, disenchanted investors might withdraw their money, Jim Cramer, former hedge fund manager and host of CNBC's Mad Money, warned on a recent telecast. That could force fund managers to sell holdings to meet redemptions, further dragging down performance and creating a vicious cycle of lower returns, or even fund closings.
Not everyone views the recent turbulence as a sign that the best hedge fund returns are behind us.
"If you look at the performance of hedge funds over the past six months, or even the past month, there is not enough damage to infer that something is dramatically wrong," says Charles Davidson, senior hedge fund director at Standard & Poor's.
The longer-term record of hedge funds remains solid. Since 1987, the average fund in the Hennessee Hedge Fund index has outpaced the broad S&P 500 benchmark by roughly 3 percentage points a year.
The industry's popularity skyrocketed in the last bear market, when hedge funds did a better job protecting investors' capital than mutual funds did. The ability of hedge funds to profit when stock prices were falling via a "shorting" strategy — betting on falling prices — enabled them to post gains from 2000 through 2002, a period when the broad stock market lost half of its value. In 2000, the year the bear market began, the Hennessee Hedge Fund index rose 7.6%. In 2001 it eked out a 3.9% gain, followed by a mild 3.5% loss in 2002, the last year of the bear market.
Unfortunately, hedge funds are graded by the amount of money made or lost — not how they fare against peers or stock indexes.
Right now, with gains increasingly harder to come by as the current economic expansion slows and the bull market nears its third birthday, hedge funds sporting losses get failing grades.
The worry: That the dearth of profit-making opportunities is causing some hedge funds to take more risk to boost returns.
7-year-old fallout still stings
The hedge fund industry is still suffering from the fallout of LTCM's collapse seven years ago. The fund, which was run by a brainy team including two Nobel prize winners for economics, ran into trouble when its sophisticated models designed to control risk failed to factor in the unexpected.
Thanks to secrecy and a blitz of cheap loans extended by major banks, LTCM made huge leveraged bets that went the wrong way, putting it on the precipice of bankruptcy, an outcome that had the potential to spread financial pain throughout global markets.
In the summer of 1998, thanks to massive leverage, the fund's investments totaled more than 50 times its actual capital base. (Today the average hedge fund's leverage is said to be roughly two times its asset base.) Then trouble struck. Russia devalued its currency that summer, and spooked investors sold risky bonds and fled to the safety of U.S. Treasuries — the opposite of the trade LTCM had in place. When word of its losses leaked out, margin calls kicked in from banks looking to get back some of the money they loaned LTCM. That's when the Fed stepped in to broker a bailout.
The latest hedge fund scare had some similarities and some differences. What is similar is the veil of secrecy the funds work behind, which makes it difficult to know what they are doing and how much money — if any — was lost.
"Rumors are nothing new, but you don't hear anyone throwing around any names," says Bill Hornbarger, head of fixed income investing at A.G. Edwards. "There is a sense of unease. But no one can put their finger on it and say, here is the problem."
Another similarity is that the losses were sparked by a relationship between financial assets that was unexpected. In the recent GM trade that went bust, hedge funds were basically betting that the stock of the beleaguered carmaker would fall and instead bet on its bonds, which they thought was a less risky play.
But two things happened that turned that logical trade upside down. First, billionaire investor Kirk Kerkorian went public with his plan to nearly double his stake in GM stock, which jolted the shares of the stock higher. A day later, S&P shocked bond investors when it downgraded GM's credit rating to "junk" status, which resulted in a drop in price of GM's bonds. The result: Both sides of the trade resulted in losses.
If there's anything to be learned from LTCM and the recent GM-related scare, it is this: "It dispels the myth that hedge funds are higher beings," says Woody Dorsey, president of Market Semiotics, a behavioral finance firm. "Accidents can happen."
Contributing: Michael McCarthy
ROGUE
The reasons vary from excessive leverage, to correlated trades, to very similar strategies.
So if one hurts, they all tend to hurt, and if enough hurt is applied that they have to start closing positions, it tends to be a rush for the door.
Many of them use variants of VAR, for risk management. In a "statistical" market there are no real problems, however, if the market breaks, VAR goes out the window as correlation runs to 1
As the market is currently undervalued, and there is and has been a "wall of worry", a market break is unlikely, thus the "Hedge Fund" meltdown is far less likely,. especially as the media is chatting about it..........almost guarantees that it won't happen.
cheers d998
The reasons vary from excessive leverage, to correlated trades, to very similar strategies.
So if one hurts, they all tend to hurt, and if enough hurt is applied that they have to start closing positions, it tends to be a rush for the door.
Many of them use variants of VAR, for risk management. In a "statistical" market there are no real problems, however, if the market breaks, VAR goes out the window as correlation runs to 1
As the market is currently undervalued, and there is and has been a "wall of worry", a market break is unlikely, thus the "Hedge Fund" meltdown is far less likely,. especially as the media is chatting about it..........almost guarantees that it won't happen.
cheers d998
Joules MM1
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1 hedge funds managers have mostly not been through a true bear market phase so don't have the knowledge or experience to restrain themselves.
2 This is proven by the 25billion inflows into (long) leveraged position to take advantage of the so-called new bull phase.
3 There is not sufficient evidence that I am aware of from Mar 07 to the April lows to confirm the unravelling of some large hedged postions but I am in no doubt that the volumes included that action.
4 After a severe 50-70% declines in the US markets from the Jan 2000 high do you not think that the sentiment is bullish and not a wall of worry? Did I miss something in my learning process after having lived through a severe bear market of 1970-74 where the losses weren't near as a bad?
5 Be clear on what leverage actually is: upon the decline in value of the position the move swings exponentially against the holder. We know this, you say.....I'll come back to this.......
So, tell me about the Calpers which is effectively broke or The PBGC which is now taking over new retirement accounts which are in the red and this fund is ALREADY effectively broke because itself has NO money!
These retirement accounts are in common stocks....the economy is not geting better.....the world economy has a mass low interest rates...it is shrinking in a deflationary manner....the US Central Bank lowered the funds rate in a panic slash for a couple of years...why? ....because the American consumer has to spend more credit ....this blooming debt is funded by overseas investors in common stock and they are getting impatient to see a return on their investment and theyre are not getting it...low interest..
......see, low interest rates arent the the save-all people say they are...low interest rates are a false stimuli to a mass that isnt that interested....the US consumer lost interest in 2000 it was simply bull-marketed out...got over spent and over the whole bull market rush.
Think on this; retirees are losing value in their acounts, major companies have to pump more into the retirement accounts to meet regulations so the value of the company dilutes....oversees investors are losing value and not getting any income, the mass decides it wants less stocks so the markets go down....more news of the GMs and Fords write downs plus higher funding costs to the companies...is the picture getting clear?
The US government is on a record belting debt spree with tax cuts it can't afford and spending it needs to cull...Take a look at Japan...same deal...real estate bubble...you got a mortgage that needs to be paid in a hurry but the real estate market is too slow and stocks easy to off-load at a cheaper price....which one are you going to relinquish first?
Ok, see number 5 above: When leverage managers have to liquidate quickly in a losing positon they have to give up more than the original stake to cover the loss so the position left (which is now smaller in unit size) needs to outperform, considerably stronger than, the original stake and this I think is the most vital part of the picture not understood and the most crucial area that needs to be known. If during this time the postion keeps going against the managers then the rest is obvious yet, unfortunately, I think not obvious enough. This is the pin in the granade.
...clouds disappearing some?
By the way, the US has been showing consistant positive sentiment as observed by the Uni of Mich and many other sentiment surveys and on top of this the volitility is at historic lows and to me this is not indicative of a "wall of worry" regardless of what one may glean from the media the numbers simply do not support a bull market continuation. A smooth market encassed in such rampant and unguarded speculative clearly indicates to me that intelligence of hedge fuinds managers is not the key to long term gains or even longevity, period. LTCM is a clear example that arrogance rules the waves and such arrogance is born of a the same-old same-old desires much as they did in 1929-1930. Remember in 1929 some 5 months after the initial shock that many leading heads of states and banks agreed that hey had simply witnessed and unusual glitch and today the hedge fund managers have the EXACT SAME DISPOSTION FOR STUPIDITY.
In 1929 the percentage of debt to GDP was 204............ today it is in excess of 300.
Next time you go for spin in the car and just as you aproach a bend, try and look in your rear-view mirror the whole way around the bend.......sounds stupid doesnt it?
No driver that I know would do this especially on a road they are not familiar with, so, what on earth makes a hedge fund manager think that just because they saw a bull market in the rear-vision that they are seeing one ahead of them?
Fun, fun, fun...........
A driver who does stare into the mirror whist driving hard around a bend is likely to do what?
Cetainly may leave one with some severe skid marks, if you catch my drift.
Julian
=================================================================
PBGC Pension Benefit Guaranteed Fund
The last record I have for Debt as a percentage of GDP is for 2004 at 304%
The 25 billion I have sited is from memory and I'll need to track down the quote.
2 This is proven by the 25billion inflows into (long) leveraged position to take advantage of the so-called new bull phase.
3 There is not sufficient evidence that I am aware of from Mar 07 to the April lows to confirm the unravelling of some large hedged postions but I am in no doubt that the volumes included that action.
4 After a severe 50-70% declines in the US markets from the Jan 2000 high do you not think that the sentiment is bullish and not a wall of worry? Did I miss something in my learning process after having lived through a severe bear market of 1970-74 where the losses weren't near as a bad?
5 Be clear on what leverage actually is: upon the decline in value of the position the move swings exponentially against the holder. We know this, you say.....I'll come back to this.......
So, tell me about the Calpers which is effectively broke or The PBGC which is now taking over new retirement accounts which are in the red and this fund is ALREADY effectively broke because itself has NO money!
These retirement accounts are in common stocks....the economy is not geting better.....the world economy has a mass low interest rates...it is shrinking in a deflationary manner....the US Central Bank lowered the funds rate in a panic slash for a couple of years...why? ....because the American consumer has to spend more credit ....this blooming debt is funded by overseas investors in common stock and they are getting impatient to see a return on their investment and theyre are not getting it...low interest..
......see, low interest rates arent the the save-all people say they are...low interest rates are a false stimuli to a mass that isnt that interested....the US consumer lost interest in 2000 it was simply bull-marketed out...got over spent and over the whole bull market rush.
Think on this; retirees are losing value in their acounts, major companies have to pump more into the retirement accounts to meet regulations so the value of the company dilutes....oversees investors are losing value and not getting any income, the mass decides it wants less stocks so the markets go down....more news of the GMs and Fords write downs plus higher funding costs to the companies...is the picture getting clear?
The US government is on a record belting debt spree with tax cuts it can't afford and spending it needs to cull...Take a look at Japan...same deal...real estate bubble...you got a mortgage that needs to be paid in a hurry but the real estate market is too slow and stocks easy to off-load at a cheaper price....which one are you going to relinquish first?
Ok, see number 5 above: When leverage managers have to liquidate quickly in a losing positon they have to give up more than the original stake to cover the loss so the position left (which is now smaller in unit size) needs to outperform, considerably stronger than, the original stake and this I think is the most vital part of the picture not understood and the most crucial area that needs to be known. If during this time the postion keeps going against the managers then the rest is obvious yet, unfortunately, I think not obvious enough. This is the pin in the granade.
...clouds disappearing some?
By the way, the US has been showing consistant positive sentiment as observed by the Uni of Mich and many other sentiment surveys and on top of this the volitility is at historic lows and to me this is not indicative of a "wall of worry" regardless of what one may glean from the media the numbers simply do not support a bull market continuation. A smooth market encassed in such rampant and unguarded speculative clearly indicates to me that intelligence of hedge fuinds managers is not the key to long term gains or even longevity, period. LTCM is a clear example that arrogance rules the waves and such arrogance is born of a the same-old same-old desires much as they did in 1929-1930. Remember in 1929 some 5 months after the initial shock that many leading heads of states and banks agreed that hey had simply witnessed and unusual glitch and today the hedge fund managers have the EXACT SAME DISPOSTION FOR STUPIDITY.
In 1929 the percentage of debt to GDP was 204............ today it is in excess of 300.
Next time you go for spin in the car and just as you aproach a bend, try and look in your rear-view mirror the whole way around the bend.......sounds stupid doesnt it?
No driver that I know would do this especially on a road they are not familiar with, so, what on earth makes a hedge fund manager think that just because they saw a bull market in the rear-vision that they are seeing one ahead of them?
Fun, fun, fun...........
A driver who does stare into the mirror whist driving hard around a bend is likely to do what?
Cetainly may leave one with some severe skid marks, if you catch my drift.
Julian
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PBGC Pension Benefit Guaranteed Fund
The last record I have for Debt as a percentage of GDP is for 2004 at 304%
The 25 billion I have sited is from memory and I'll need to track down the quote.
FetteredChinos
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great post
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