Comments on: The Barriers to Bottom Fishing http://www.nakedcapitalism.com/2007/09/barriers-to-bottom-fishing.html Mon, 23 Nov 2009 00:58:00 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: a http://www.nakedcapitalism.com/2007/09/barriers-to-bottom-fishing.html#comment-718 a Wed, 05 Sep 2007 07:18:00 +0000 http://www.nakedcapitalism.com/2007/09/the-barriers-to-bottom-fishing/#comment-718 It's not just the margin call. The bank line itself could be cut, for any number of reasons, forcing the liquidiation of the asset whatever its value. It’s not just the margin call. The bank line itself could be cut, for any number of reasons, forcing the liquidiation of the asset whatever its value.

]]> By: Andreas Stover http://www.nakedcapitalism.com/2007/09/barriers-to-bottom-fishing.html#comment-717 Andreas Stover Wed, 05 Sep 2007 05:56:00 +0000 http://www.nakedcapitalism.com/2007/09/the-barriers-to-bottom-fishing/#comment-717 If it wasn't so unfortunate, it would be funny that this pattern of behavior so closely mirrors that of mutual fund managers in the '90s and of mortgage lenders during the credit bubble expansion. <br/><br/>Their careers, not their savings are on the line. This means that all they need to care about is avoiding bad relative performance at any price. If they miss out on a great investment together with everyone else, they can probably still keep their jobs.<br/><br/>I happen to have written a post about this phenomenon just yesterday entitled "Bank Credit Cycles (Part Two)" at http://cyclesandtides.blogspot.com<br/><br/>Feel free to take a look. If it wasn’t so unfortunate, it would be funny that this pattern of behavior so closely mirrors that of mutual fund managers in the ’90s and of mortgage lenders during the credit bubble expansion.

Their careers, not their savings are on the line. This means that all they need to care about is avoiding bad relative performance at any price. If they miss out on a great investment together with everyone else, they can probably still keep their jobs.

I happen to have written a post about this phenomenon just yesterday entitled “Bank Credit Cycles (Part Two)” at http://cyclesandtides.blogspot.com

Feel free to take a look.

]]> By: Keith http://www.nakedcapitalism.com/2007/09/barriers-to-bottom-fishing.html#comment-715 Keith Wed, 05 Sep 2007 01:34:00 +0000 http://www.nakedcapitalism.com/2007/09/the-barriers-to-bottom-fishing/#comment-715 Responding to the title - the major barrier to bottom fishing is that we are nowhere near the bottom. This will take a bit of time, but the most immediate issue will be how the hedge funds respond to the most recent round of redemption requests. I expect funds to be writing to their clients during the next few weeks. The content of such letters will likely not include a cheque, but rather some excuse to justify not paying up. After this we will see another round of hedge fund bankruptcies, with perhaps another round of louder denials of the OTC/ABS/CDO implosion. Responding to the title – the major barrier to bottom fishing is that we are nowhere near the bottom. This will take a bit of time, but the most immediate issue will be how the hedge funds respond to the most recent round of redemption requests. I expect funds to be writing to their clients during the next few weeks. The content of such letters will likely not include a cheque, but rather some excuse to justify not paying up. After this we will see another round of hedge fund bankruptcies, with perhaps another round of louder denials of the OTC/ABS/CDO implosion.

]]> By: Anonymous http://www.nakedcapitalism.com/2007/09/barriers-to-bottom-fishing.html#comment-714 Anonymous Wed, 05 Sep 2007 01:07:00 +0000 http://www.nakedcapitalism.com/2007/09/the-barriers-to-bottom-fishing/#comment-714 A couple of articles of interest from Brad DeLong:<br/><br/><a HREF="http://delong.typepad.com/sdj/2007/09/financial-quote.html" REL="nofollow">Financial Quote du Jour</a><br/><br/><i>"<br/><br/>Paul Kedrosky:<br/><br/> Paul Kedrosky: Financial Quote du Jour: From a chat today with a hedge fund guy:<br/><br/> Market impact ate my alpha.<br/><br/> Like me, most of my readers will have heard variants of this one before, but for everyone else it's such an evocative and lovely phrase -- like out of some filmic cross between Wall Street and Godzilla -- that I had to repeat it here.<br/><br/>Note that unless things really go to hell in a handbasket--and as if this writing it really doesn't look like there's a noticeable chance that they are going to--the past month's liquidity panic has eaten the alpha only of the undercapitalized. For the well-capitalized, it has boosted their alpha.<br/><br/>Only they are staying quiet. Very quiet.<br/>"</i><br/><br/><a HREF="http://delong.typepad.com/sdj/2007/09/axel-weber-of-t.html" REL="nofollow">Axel Weber of the Bundesbank Picks Up on Paul Krugman's "Non-Bank Bank Run"</a><br/><i>""Call it the first "non-bank bank run"....."The ever-quotable Paul McCulley of Pimco went on to call it a "run on the shadow banking system"."</i><br/><br/><br/>-A- A couple of articles of interest from Brad DeLong:

Financial Quote du Jour

“

Paul Kedrosky:

Paul Kedrosky: Financial Quote du Jour: From a chat today with a hedge fund guy:

Market impact ate my alpha.

Like me, most of my readers will have heard variants of this one before, but for everyone else it’s such an evocative and lovely phrase — like out of some filmic cross between Wall Street and Godzilla — that I had to repeat it here.

Note that unless things really go to hell in a handbasket–and as if this writing it really doesn’t look like there’s a noticeable chance that they are going to–the past month’s liquidity panic has eaten the alpha only of the undercapitalized. For the well-capitalized, it has boosted their alpha.

Only they are staying quiet. Very quiet.
“

Axel Weber of the Bundesbank Picks Up on Paul Krugman’s “Non-Bank Bank Run”
“”Call it the first “non-bank bank run”…..”The ever-quotable Paul McCulley of Pimco went on to call it a “run on the shadow banking system”.”

-A-

]]> By: Lab Rat http://www.nakedcapitalism.com/2007/09/barriers-to-bottom-fishing.html#comment-712 Lab Rat Tue, 04 Sep 2007 23:04:00 +0000 http://www.nakedcapitalism.com/2007/09/the-barriers-to-bottom-fishing/#comment-712 Does anyone have any non-gated links to the cited paper? Not that my plate isn't already full with all the Jackson Hole papers.<br/><br/>I wonder if this is a useful application of the "market maker of last resort" concept? Does anyone have any non-gated links to the cited paper? Not that my plate isn’t already full with all the Jackson Hole papers.

I wonder if this is a useful application of the “market maker of last resort” concept?

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