naked capitalism

Lune says:

Any estimates on how much money we’re talking about here? If the sum total is only a few billion (i.e. most hedge funds got out in time) it might not mean much. OTOH, much larger amounts might be enough to create cascading failures among hedge funds unable to remain liquid.

OTOH, this is a great opportunity for some banker with inside knowledge of which hedge funds and assets are frozen to trade against those players knowing they can’t defend themselves. Kind of like kicking a quadraplegic.

Anonymous says:

Things are just warming…like one of the sites I frequent, the posters say…get your popcorn ready, sit back and enjoy the show.

Anonymous says:

“Things are just warming…”

My day job is to draw more eyeballs to the telly.

In the past few days, my job just got a whole lot easier so that now I can spend my time learning what the monkeys have been doing and the ramifications for the rest of us blokes.

My father, a stockbroker, taught me, one man’s loss is another man’s profit.

Anonymous says:

I’m a hedge fund manager. I’ve never considered myself to be a Master of the Universe and I’ve always try to be savvy. I don’t understand why you are systematically “attacking” the persons working for this industry. You should know that as in any other profession there are “good” and “bad” example.

I was also expecting from a person like you the capacity to be critical enough to understand that some people got stuck with LEH debacle because rules have been changed and not because of their ego/hybris like you are implicitly assuming.

molecool says:

You GOT to be kidding me Mr. Hedge Fund Manager – you boys have been getting every break in the book and then some. It only ocurred to you to unwind your positions at the very last minute?

dd says:

More fallout…why does one have to search the world’s newspapers for news?
AIG fears cause securities trading to halt
Shareholders were left unable to trade popular commodity securities yesterday, due to fears over the future of their backer, AIG.
Banks and brokerages stopped making markets in the Exchange Traded Commodities (ETCs) backed by the troubled insurer and sold by ETF Securities (ETFS). The price of the stocks also plummeted due to the worries over AIG.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/17/cnetc117.xml

Matthew Dubuque says:

Mattthew Dubuque

Please note that the recent Federal suspension (NOT elimination) of the rule prohibiting funds transfers from CB parents to IB subsidiaries helped here.

One reason the rule was suspended was to provide a non-taxpayer funded incentive for B of A to purchase Merrill.

If B of A had NOT purchased Merrill, that IB would have collapsed this week, despite some good faith efforts of Thain to address the toxic waste issue. (Recall their courageous sale of some assets at 22 cents on the dollar.)

Had Merrill collapsed this week, one of the collateral effects would have been an even larger hit to hedge fund clearing operations than the Lehman hit referenced above.

The goal of the Fed is stability. During this ATTEMPT at a hard, forced landing for the global economy, we don’t want the plane to go into a tail spin or lose a wing, crashing the plane and killing all on board.

Hence one more reason for the suspension of the rule, permitting the sale of Merrill to B of A without using taxpayer dollars.

Matthew Dubuque

Anonymous says:

I rarely see anyone but a Greek scholar use the spelling hybris. We normally use hubris in the United States. Regardless, please point me to the “attack” in Yves’ post. Other than the use of the phrase Masters of the Universe (which has been around for **decades**), I cannot possibly see an attack in this post.

Anonymous says:

Peter,

let me ask you: is it buying a house when you can’t afford it or using HEW to buy a car or selling mortgages to people that don’t understand the contract clauses or keeping the rates at 1% for 1 year the savviest behavior ?
Definitely not. Is hybris, ego.

Has it got something to do with hedge funds? Definitely not, too.

Hence, don’t mix up subjects and be more respectful.

Anonymous says:

This is the financials margin call. When an investor makes a bad bet
and gets a margin call, the hedge funds have absolutely no mercy. They
have no problem wiping you out completely. Now it is their turn.
Unfortunately, the government bails some of them out – AIG, and others,
Merrill, find a sugar daddy. Investment banks and hedge funds should
be wiped off the face of the earth. They were a sophisticated scam to
begin with. This is only justice. As you would tell your investors who couldn’t make a margin call, “Nothing personal, this is just business”. Tragically, it is the individual
investor and the public at large who are once again shown no mercy,
by the government.

Anonymous says:

“…hedge funds should
be wiped off the face of the earth. They were a sophisticated scam to
begin with…”

no comment

Beedge,

1. “Hedge funds add no real value to an economy” …this is a matter of opinion;

2. “We need an economic system that rewards real factors of production”, you are right, but is a political/regulatory issue, nothing to do with hedge fund managers;

3. “Obscene bonuses for no real productive …”. So why institutional and other type of investors keep investing in HFs? Out of what do you think bonuses are paid?

Ginger Yellow says:

On a perhaps related note, the administrators of Lehman’s UK (ie European) arm just held a webcast. They said (roughly, among other things): “Lehman significant leverage to certain clients to acquire positions. We expect to liquidiate those positions to realise cash for the estate. We don’t yet know if there will be any residual cash for the clients.”

Ginger Yellow says:

Yeah, I’m not too up on the intricacies of hedge funds and prime brokerage (securitisation is my field, for my sins). I just thought it might be relevant.