LOL seriously... the LTCM gang was trading for their ego... for immortality... not just the money... i remember robert merton saying his first tought after the blow up was "oh what's going to happen now to my precious finance theory" the hell with the investors... if we all were trading for money markets would be as efficient as economists say but the inefficiencies come from ego-greed-fear-show off foolish trading.
A Bloomberg reporter is sending out emails asking who is the unlucky sob. I personally don't know ....
If you are taking so much risk that your positions are blowing you out of the game, then it isn't about just making money, it is a hail mary pass. It's wrong, it's irresponsible, and unnacceptable. This type of trade is strictly about EGO, IMO! When I trade, it is about responsibly managing risk to make consistent daily profits, I would NEVER consider making an airplane trade and leaving someone else holding the bag. Good trading to all! Mike
Do you think your smaller profitable "risk management" trades don't leave the other side holding the bag? Trading is the wrong field to try to be Pope Benedict or even better, Bill Bennet, or a Holy Crusader. Someone is definitely trying to leave you holding the bag everyday, your broker for starters.
Hedge fund GLG denies rumors of losses in auto credit Tue May 10, 2005 12:54 PM ET NEW YORK, May 10 (Reuters) - GLG Partners, a London-based hedge fund, on Tuesday denied persistent rumors it is suffering from heavy losses related to exposure to General Motors Corp. (GM.N: Quote, Profile, Research) and Ford Motor Co. (F.N: Quote, Profile, Research) credit. The rumors, which have intensified in recent weeks, were partly credited for a downturn Tuesday for the shares of Deutsche Bank AG (DBKGn.DE: Quote, Profile, Research) , which was believed to have loaned money for credit derivatives to GLG. "The funds are fine and we have no concerns," a spokeswoman for GLG said today. http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=8444062
Unless there's a default by either F or GM (highly unlikely anytime soon) the leveraged bond holders have a trade with tremendous positive carry. It's really the equivalent of being short puts on the bonds. The trade has several hundred basis points a year in carry. Further the bond holders could sell OTM calls to an OTC derivatives desk and take in even more premium. I don't see this blowing up Deutsche as a counter party but the fund itself could be sitting on some HUGE losses.
I am not holy crusader, I understand that there is risk in trading, and some win and some lose. Someone who deliberately put on such size with extreme leverage so as to cause risk to the entire system, and I am talking the potential of major defaults and shifting our country back into a major depression type risk, is a bad person. I don't think you fully understand how leveraged the american economy is right now. Our system is based upon a promise to pay, nothing else. If we were to experience a sudden disruption to the system by someone failing to back their promise to pay, this could very easily spiral into and cause a system wide economic collapse. Do you even realize the amount of "off the books" derivative trades there are out there? It is many times the size of the entire stock market. Good trading! Mike
There is also another rumour that Deutsche Bank may have losses related to large proprietary positions in GM and F bonds and its possible exposure to the U.S. hedge fund.... http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=8443969