hb, In those types of hedges, folks usually have very little risk. Every once in a while you get somebody who wants to play cowboy, like Orange County or Long Term Credit, but most folks don't use that kind of margin. Still, the losers are losing and they should show up.
However, when you look at trading results at banks, brokers and insurance cos, the bottom line isn't sufficient. You have to look at the balance sheet, which is the corporate locked drawer where bad trades are hidden. This is especially tricky as many of these institutions are allowed to carry them at the better of cost, face value or market until they are realized. So, my guess is that is where a lot of the pain is hiding. I remember during the bond bear market of the early 1980s, an insurance co. where I worked carried many bonds trading at $65 at $100, perfectly legally, but not exactly enlightening to anyone reading their financials. |
