Because they put uneducated people in charge of them and they seem to be people who just go pay whoever seems the most knowledgeable. Those guys who are the most knowledgeable usually know that you can sell the shit to these uneducated fund managers because they want to make good returns and have a lot of money. Same thing as the way the car dealers who sell for Mercedes and Lexus are probably sleazier than those selling for Honda and Toyota.
It's in the article, sad but true: "Mark D. Lay acknowledged little experience with hedge funds." lol
Take money from a few old people in decietful ways,....you're a conman. Take money from a few tens of thousands of people in decietful ways,....you're a fund manager.
Seems to just be the way it is. Sadly, those people who run these funds and mess up are often the loudest the next time something similar is happening and yet it happens over and over and the big companies get away with it. Oh well, that's how it works I guess.
"There came unto Egypt a Pharoah who did not know" "Its the same game the rich have been playing on the poor since the beginning of time. Its called greed. He's in it for the quick hit, and he don't take no prisoners." (or something to that effect) Bud Fox's Father
you did see the "Brookstreet" thread???? But everything is ok. Wait till the Clearing Firm goes thru that mess.
I guess if they bail out the fund you could say hello to 14k, they will do anything to keep this bull market going and if it cost $3.2 billion dollars it doesnt matter.
Fidelity is saying the paper is worthless. Bear is pumping 3.2billion into them. Whose pricing is correct? Brookstreet Folds Under CMO Margin Calls Del.icio.us Digg Technorati Comments | Trackback June 21, 2007 From the OC Registerâs resident mortgage blogger Matthew Padilla (he gets paid to do this stuff!), broker dealer Brookstreet Securities Corp. was forced to close down today, laying 100 off as bets on collaterized mortgage obligations at the firm soured quickly. The company was an Irvine, Calif.-based broker dealer. [Brookstreet spokesperson Julie Mains] said the company went from $16 million in capital Friday to being $3 million underwater Wednesday because its clearing firm, National Financial Services, sold the securities⦠A spokesman for National Financial Services said itâs not his companyâs fault that Brookstreet ran out of capital. You might be interested to know that NFS is a Fidelity Investments company. You might also be interested to know that many investors at Brookstone lost their entire investment. Padilla quotes an entire email circulated among Brookstreet employees Wednesday - the highlights: To Our Valued Brookstreet Members, Disaster, the firm may be forced to close⦠Today, the pricing system used by National Financial has reduced values in all Collateralized Mortgage Obligations. Many of those accounts were on margin and have suffered horrendous markdowns and unrealized as well as realized losses. National Financial and the regulators expect Brookstreet to pay for realized liquidated losses and take a capital charge for unrealized mark to market losses. This firm has done a valiant if not Herculean job of managing the liquidations and capital charges to the firmâs net worth and net capital. We had reduced the margin balance significantly; we had liquidated and reduced exposure by 80%. That still left a $70,000,000 margin balance against around 85,000,000 of value. Unfortunately the pricing service used by NF revalued many CMO positions downward last night. We went from a positive net capital of 2.4 million, down from 11 million at the end of May, a negative net capital of 2.1 million. It would take a capital infusion of at least $5,000,000 to keep the company in compliance with no guarantee that additional markdowns will not be forth coming. I have to wonder how many hedge funds are finding themselves in a similar position right now. Update: Tanta at CR asks a very apropos question: if weâre talking CMOs here â real REMIC CMOs â itâs pretty amazing to see NFS mark them down overnight and sell because of problems in the CDO market. Of course, it depends on what sort of securities Brookstreet had its retail clients into, but most REMICs arenât usually seen as particularly
Newbie here, have a question: Bloomberg: "The funds speculated in highly-rated CDOs -- securities backed by bonds, loans, derivatives and other CDOs -- that were hurt in March and April as defaults on subprime mortgages to people with poor or limited credit histories increased. The fund also lost on opposite bets against home-loan bonds, which backed many of its CDOs." So they were hurt by subprime, which is understandable, but they had opposite bets AGAINST home loans. So the defaults are mainly in the subprime sector and the home atm machines are fine? Because the home loans were mostly to prime borrowers? So in turn they went long subprime and short home loan bonds to hedge? or what?