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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (43391)10/13/2005 12:19:29 PM
From: orkrious  Read Replies (3) of 110194
 
Two separate John Succo posts from Minyanville. I hope they don't mind me posting this. It's important
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For all intents and purposes Refco (RFX) has just gone bye-bye. It's customers will not be able to get their money back for 15 days (yeah right) because the company does not have sufficient liquidity. I am trying to sort through what this all means, but Bloomie shows $66 billion of liabilities for RFX, and if I were the creditor right now I'd be looking for a big diaper.

Elmer may have one more headache before he retires.
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The Refco (RFX) situation is being likened by some to LTCM.

RFX has $77 billion in positions for customers. In other words, they have extended that amount in credit to their customers.

To support that they have only $500 million in regulatory capital.

This could spill into a systemic situation depending on how it is handled. A third party could come in and take over the company's porftolio. Or the situation might be that many of the positions could net out internally.

But the potential is there for disruption.

Other than a catalyst (the CEO cooking the books), the same situation exists in any broker dealer. But a JPM is a jillion times the size.

And that is the key. You know where I stand. This particular situation may or may not cascade, it depends on how it is handled.

But there are many more landmines out there.
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