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Gold/Mining/Energy : Gold Price Monitor
GDXJ 93.43-4.5%Nov 20 4:00 PM EST
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To: pater tenebrarum who wrote (53938)6/8/2000 1:37:00 PM
From: LLCF  Read Replies (2) of 116764
 
<i always wondered what happened to the counter-parties of Fannie's and Freddie's rate hedges for instance...when the bond market tanked i figured somebody must sit on anywhere from 20-30 bn. dollars in losses. yet no-one reported such, presumably because the mark-to-market rule didn't exist.>

But you have to assume both sides are 'hedged' no?? So only the 'spread' would hurt... long term capital?

<the latter works fine as long as the PoG keeps declining...but i'm not buying gold stocks because i believe in further gold price declines. that simply makes no sense.>

I hear you, my feelings exactly. But there's also the issue of being 'forced' to mark to market for earnings statements etc... this is where I think the companies would get hurt and learn religion if that's really the way it works?

ie. If the company has 1 oz in the ground and sells 1 oz short forward @ $300. When the price goes to $400 does the company have to show a $100 loss if they haven't delivered yet?

Now, the banks side of the hedge: The bank buys 1 oz forward @ $300 and sells some stuff on the comex futures maket shorter term to hedge. It's my understanding that they mark the forward wherever they please [but current practice is finally "in line" with 'value' after some spectacular examples to the contrary] at the end of the year.

DAK
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