Hedge funds ready to blow as positions liquidated (hedge fund death watch)

The Australian ^ | 09/06/08 | Adele Ferguson

[TigerLikesRooster]

Ping!

[cyborg]

I shed a tear.

[Broker]

There seems to be some small justice playing out as these high-rollers meet the realities of the market.

If you humble yourself to the market, it will exault you. If you exault yourself to the market, it will humble you.

Next week is “statement shock” week. Their quarterly charges plus piss poor performance might be a perfect storm climaxing in stupid selling. So sharpen your pencils and know good stocks will be cheap for no good reason.

[TigerLikesRooster]

know good stocks will be cheap for no good reason.

Right.

[Paladin2]

I thought hedge funds would be hedging against the future no matter which way things went.

[TigerLikesRooster]

Apparently, there is little hedge going on at many hedge funds.

[q_an_a]

Someone with plenty of skill and knowledge about investments may be able to clarify this - but I think only a select group of people can invest in a hedge fund. These people are very rich and their investment would be a tiny portion of all they have at risk or they are fools for taking too big a protion of their money and putting it in a hedge fund. So if the hedge funds die - only the gamblers will be hurt. If banks are putting money there that is not even remotely wise... their money is little old lady money and should never ever ever be at risk.

[BRL]

Why hedge when you can go "all in" with other peoples money, and if you win, you walk away with tens of millions of dollars? If you lose, simply disolve the fund and try again.

You only have to win once. Unlike most of us stiffs that have to spend years tooling at our careers knowing that one goof may cost us our paycheck forever, and never getting the one time - for life paycheck.

The banks , debt, mortgages, credit system is rotten to the core.

[navyguy]

Bullseye, Broker. On the upside, overselling will eventually create a true buyers market (which is much the case now). But first the mortgage/credit/hedge fund static needs to clear out. I see a nice rally next spring. Maybe sooner.

[Thane_Banquo]

I am a portfolio manager for a hedge fund in Chicago, so I’ll give an insider’s view on Ospraie: A number of weeks before Ospraie went under, the CFTC issued a statement that a large player with huge positions had its commercial status revoked in a number of commodities. What this means is that the firm had the status that its actions in the futures market were to hedge its exposures as a commodities producer or processor. This would allow it to get around the legal position limits.

The rumor going around in some circles in the market is that firm was Ospraie. They had to liquidate their huge commodities positions, and since the market couldn’t absorb such a huge liquidation, the prices tanked and Ospraie got killed.

[TigerLikesRooster]

Would CFTC continue to go after all those exploiting loopholes or just big ones?

[Thane_Banquo]

Hopefully they will go after who they can, but the problem with legal loopholes is that, most of the time, they are legal, so you can't do anything. The Congress and the President need to pass legislation to close the loopholes.

[Moonman62]

You only have to win once. Unlike most of us stiffs that have to spend years tooling at our careers knowing that one goof may cost us our paycheck forever, and never getting the one time - for life paycheck.

The banks , debt, mortgages, credit system is rotten to the core.

You aren't jealous are you?

[BRL]

You aren't jealous are you?

I am not jealous of folks who need an asbestos suit when they die.

I would not care if they government did not have to come along now and bail all these institutions out.

Here is the pattern...

1. Banks way overlend - pay them selves countless millions

2. People quit paying, and the countless millions in bonuses are sitting in bank accounts for the super genious bankers.

3. Government bails out all the banks because the economy cannot take the hit.

That is not jealuosy, but rather a little outrage.

PS the hedgefunds got all their money from the banks so they could leverage the crap out of all their positions.

[RegulatorCountry]

So if the hedge funds die - only the gamblers will be hurt. If banks are putting money there that is not even remotely wise... their money is little old lady money and should never ever ever be at risk.

Your understanding is somewhat idealized. The truth of the matter is that "funds of funds" have invested in hedge funds, state pensions have invested in hedge funds ... it's not contained within a certain class of investor. With a mass liquidation looming to cover redemptions, everyone who holds investments, in equities or commodities, is going to take a hit, and it could be a rather large one.

[AndyJackson]

What was it Greenspan said about a new financial era with better mechanisms to handle risk?

[ThePythonicCow]

the prices tanked

How many more large commodity hedge funds would you guess are going to blow up in the near future?

[Thane_Banquo]

How many more large commodity hedge funds would you guess are going to blow up in the near future?

I'd guess a good number. Clarium was up something like 60% at one point this year. But with the drop in commodities, they're only up like 30%.

[ThePythonicCow]

I'd guess a good number.

Thanks. Sounds like I'd better wait a little longer before trying to get in the business of catching falling knives.