Clown-Free Zone... sorry, no clowns allowed Message Board

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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: GraceZ who wrote (211721)	12/29/2002 8:45:03 PM
From: reaper	Read Replies (2) of 436258

it was that the transactions were dependent on the market acting in a rational manner been reading a lot of stuff from Merriweather's publicist recently, i see... LTCM's book was one huge spread convergence trade. a gigantic, leveraged bet on spreads narrowing across a wide range of financial instruments. they were not "hedged" for sh8t! what could be more "macro" (what LTCM claimed they didn't do) than that? the bet worked great all the way to early 1998 as spreads across just about everything shrank and converged, and then went against them in spectacular fashion as spreads blew out. would you care to explain to me what was "irrational" about spreads blowing out (from historically low levels, no less) in the summer of 1998? then i guess things are only MORE "irrational" now, since spreads on the whole are even HIGER today? Cheers

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