Bail Out of Hedge Funds 101

Hein-Verbruggen

Bail outs for fraud are needed when the fraud is so grand as to threaten the world economy. Not every fraud gets bailed out, but this CDO, no doc underwriting, sell it-then-spin-it, leveraged hedge fund, SIV, SPE will be excused by all central banks along with fiscal welfare too. This is NOT a sub-prime mortgage problem, rather it is a GLOBAL CREDIT PARALYSIS crisis.

HF Long Term Capital Management was bailed out in September 1998.
http://www.luc.edu/orgs/finroundtable/statement99.html

http://www.diversityjobmarket.com/l...fund-fails.html

They just guessed wrong on hedging interst rates (sound familiar?)

http://deseretnews.com/dn/view/0,5143,695203802,00.html
Bill Gross wants fiscal bail outs--not monetary which might hurt his Pac Life portfolio (everyone chimes in with personal issues)

Hedge Fund Bailouts coming (sad but necessary)
http://www.progressive-economics.ca...s-and-bailouts/

Inaction lead to these consequences:
Stock Market Crash of 1929---No bailout assistance, 10 year depression
Barings Bank (1995)---No bail out assistance, sold for One British Pound
Arthur Andersen---Enron accounting fraud and DOJ contempt---gone

btw: Central Banks will NOT clean up the fraud---only add steroids and trauma care via lower rates and open market junk paper buybacks. No regulation for Hedge Funds is expected. So expect more fraud.

Crankyfeet

They were leveraging interest rate arbitrage Figowitz. Hedging means nullifying risk by taking opposing positions in the same market.

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Originally posted by Frigo's Luggage...

"[Calling him] 'dickcheese' is the insult of a master. Some people work in oil, some people work in clay. He [thoughtforfood] works in profanity. Open your mind and enjoy its beauty."

Hein-Verbruggen

WRONG, not anymore! Hedge fund is just a cool marketing slogan. Most hedge funds NEVER hedge. Instead, they exist to serve the Mgr and their banker friends.

LTCM blew up due to 'lack of hedging derivative tactics' (aka raw speculation), in the end smart guys guessed wrong (no hedge in place)--but were saved by Greenspan & friends.

Hedge Fund really means: 'Secret Black Box' exempt from all SEC filing, regs, fee schedules and 'carried interest LT cap gain treatment for Mgr fees. All the Big banks and Brokers hatched hedge funds to promote trading revenue w/o any audit exposure or ABA rules. (eg: CDO funding w/o loan losses)

No wonder you guys have no clue how central bankers work, you are blissfully unaware off how off-shore tax havens, and unregulated MONSTER Private Equity functions.

Stay tuned for a long education.

Hein-Verbruggen

btw: the present credit crisis is so extraodinary, so deep, that central bank rate redcutions and junk paper purchases, along with plenty of trash talk WILL NOT LOWER the LIBOR index or stimulate mortgage lending or unwinding of SIVs (structured investment vehicles), CDOs.

The secrecy of hedge funds--and evasion of banking rules, transparacy has lead us directly into a 'lack of trust problem'.

Wall Street does not trust itself now. It knows the tricks of the trade but cannot see inside the black boxes they invented.

No transparacy = no market bids or asks

No bids/asks = no market valuations

No market valuations = no trading action

No trading action = no credit

No credit = no deal flow

no deal flow = recession

Steroids may not be enough to fix this mutt.

Crankyfeet

When did I say that hedge funds practice hedging? If you carefully read my post, I was correcting your statement that they were hedging interest rates. They weren't hedging. They were leveraging arbitrage positions in different markets. It was you who said "they got it wrong hedging interest rates". Of course hedge funds don't hedge. Anyone knows that. You learn it in Investment 101.

If English was your first language then these misinterpretations wouldn't be happening I presume.

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Originally posted by Frigo's Luggage...

"[Calling him] 'dickcheese' is the insult of a master. Some people work in oil, some people work in clay. He [thoughtforfood] works in profanity. Open your mind and enjoy its beauty."

Hein-Verbruggen

Reading for crank users: hedge Funds seldom hedge

limerickman

The collapse of Barings Bank had no effect, and no consequences, on the greater economy.

The collapse of Enron?
Apart from it's employees losing their jobs - the damage to the wider economy was miniscule.
Most of the Andersen people were absorbed in to the other Big 4 companies.

Stock Market crash of 1929 did have a wider effect on the economy.
But like the South Sea Bubble, the 1929 fallout did not destroy economies.

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.."But finally the last thing I’ll say to the people who don’t believe in cycling, the cynics and the sceptics. I'm sorry for you. I’m sorry that you can’t dream big. [I]I'm sorry you don't believe in miracles. You should believe in these athletes, and you should believe in these people. I'll be a fan of the Tour de France for as long as I live. And there are no secrets" - this is a hard sporting event and hard work wins it - Armstrong 2005 TDF
morelike hypocrisy.

Hein-Verbruggen

Lim: Great points, suprisingly.

Greenspan did NOT cause those messes either, eh?

But 1929 depression does indeed serve as an excellent example for the current global commercial credit crisis. (fed zigged instead of zgged with anti-cooperative the Smoot Holly tariff) If ECB fails to act soon--they too may be blamed for a depression.

Central banks alone---may not be able to stimulate action. When trust is broken as it was with hedge fund, shell games, SIVs, CDOs, lipstick on pigs sold as Stallions, lying, off-shore baking, lack of transparacy, rules evasion, suspended underwriting guidelines, credit and trust both die on the vine.

It is a real pickle we are all in. The US to Ireland to India to mainland China, credit makes the world go round at a steady tempo. That tempo has been stalled effective last month.

Cheers, Hein

Crankyfeet

If you think that this is anything like the 1929 event then you are a typical fear-mongerer devoided from reality (which coincidentally IMO you are).

So how many 1930's depressions have you been predicting in the last 25 years? The finger count would be at least on two hands if this crisis is all it takes for you to trigger a doomsday alert. Yes we may have difficult times. But the economy is far bigger than the value of defaulted loans. And your arrogant bearishness makes me comfortable that there is not alot of unappreciated risk out there. Your unqualified and derivative warnings show that fears have been discounted into the valuations.

By the way. Keep those losing stock and oil positions running. They will eventually run in your direction. Eventually the world and the market will see your light. Just remember to feed the margin calls or you'll lose your position. BTW I hope you didn't short LIBOR interest rates (the truest global interest rate measure). They were reset up 40 basis points in September.

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Originally posted by Frigo's Luggage...

"[Calling him] 'dickcheese' is the insult of a master. Some people work in oil, some people work in clay. He [thoughtforfood] works in profanity. Open your mind and enjoy its beauty."

Crankyfeet

Hey Heiny. Did your little Grand Cayman Offshore Tax Evasion/scheme company go belly-up and big Mr. Government didn't bail you out. It would explain your disgust at government measures to mitigate economic damage.

I find it paradoxical that you are so negative on fraudulent offshore financial enterprises, but have told us that you have gained experience working in one. Either you are a dope or you are a Larry Craig/Ted Haggerty style hypocrite.

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Originally posted by Frigo's Luggage...

"[Calling him] 'dickcheese' is the insult of a master. Some people work in oil, some people work in clay. He [thoughtforfood] works in profanity. Open your mind and enjoy its beauty."

Hein-Verbruggen

Huh? What? Did Jan Ulrich steal your steroids too?

Love to project off-shore money laundering/reg evasion filing crimes onto my awareness of it? Shoot the messenger syndrome 101. Too much crank and not enough 12 steps.

The only role of all central banks is for financial fraud or gross specualtion error Bail Outs. They serve no other purpose.

Thanks for reading.

Crankyfeet

So what did this mean then?

Ref. Post #5. Rate cuts are coming! It's June 25, 2003 in this forum.

I assume you were working in that field, or were you just reading lots of newspaper articles about "Grand Cayman finances & Edge Act banking matters" that gave you that "long steeped background".

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Originally posted by Frigo's Luggage...

"[Calling him] 'dickcheese' is the insult of a master. Some people work in oil, some people work in clay. He [thoughtforfood] works in profanity. Open your mind and enjoy its beauty."

Crankyfeet

The mind boggles at your lack of understanding as to what LTCM were doing. If my memory serves me correct (and unlike you I leave open the possibility that I might be wrong), LTCM were arbitraging (with huge leverage) two different markets which, in their view, should eventually realign. However both positions unexpectedly went further apart in volatile circumstances. They were never hedging anything for anyone. They were making huge returns before the demise of their arbitrage scheme by leveraging a small gain into a big gain. Their miscalculation was in underestimating the risk that both markets could decouple. Of course once things went awry for them, the forced unwinding of the arbitrage made matters worse, much like a squeeze in the futures market.

They always were speculating. They never denied this to their clients. But they ignorantly didn't understand the full risks and projected this ignorant view to their clients no doubt.

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Originally posted by Frigo's Luggage...

"[Calling him] 'dickcheese' is the insult of a master. Some people work in oil, some people work in clay. He [thoughtforfood] works in profanity. Open your mind and enjoy its beauty."

Hein-Verbruggen

I first became acquainted with off shore banking in 1980 thank you.

Since then I have added the BVI and Dutch Antilles to my base.

Jan Ulrich buys his illegal drugs via Zurich banks.

btw: Steeped slopes can make crank abusers fall far.

Rate cuts are coming--as are trillions of junk CDO central bank purchases

Much like in June 2003.