he de-leveraging of the financial system picked up steam and entered new markets Thursday as more big investors were hit by margin calls. Carlyle Capital Corp an affiliate of private-equity giant Carlyle Group that invests in mortgage-backed securities, said Thursday that it failed to meet margin calls from four counterparties and had received one notice of default. De-leveraging refers generally to a reduction in the amount of money that's borrowed. More specifically, margin calls happen when securities bought with borrowed money lose value. If they drop too far, brokers require that more cash be deposited in an investor's account to support the position or else sell some of the assets. Last year's subprime-mortgage crisis has triggered a global credit crunch in which a decade of increased leverage, or borrowing, is beginning to unwind with often-painful consequences. Investment banks, hobbled by their own mortgage-related write-downs, are lending less and calling in loans made to hedge funds, mortgage finance companies and other borrowers. http://www.marketwatch.com/news/sto...x?guid={17E8CFA4-66F4-4AC4-9FEF-CC6A0EAADF48}
Suss------if the hedge funds in question are actually "hedged", liquidations of offsetting positions won't be a problem.
agreed. i dont think these senate banking committees and politicians in general understand that these hedge funds are one not hedged and should be renamed punt and hope we get it lucky funds. and two that they are leveraged up to the eye balls by a factor of 10 to 15 to get the returns they need to pay themselves momumental bonuses. in 20 years from now students and academics will look back at this and wonder how the fucjk this was all allowed to actually happen. on a seaprate note as i have commented before on this foum deleveraging was the single heaviest blow that hit the markets in 1929. the system is completely infected and i think things will get a lot worse in the coming weeks. im positioned accordingly.
"Hedged"...that´s the f.cking problem of these "hedge-funds"....it´s an absolute abuse of the expression... where is the diversification factor in a "hedge-fund" focusing only on "distressed securities" or on "statistical arbitrage" or "merger arbitrage" or "equity short bias" or whatsoever.... I am really ANGRY with some collegues calling themselves " hedge fund manager".... What the hell where they "hedging" ????? Their incentive fees and management fees ??????????