Applied Materials No-Politics Thread (AMAT) Message Board

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Technology Stocks : Applied Materials No-Politics Thread (AMAT)

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To: etchmeister who wrote (20789)	10/2/2006 11:56:36 PM
From: etchmeister	Read Replies (1) of 25522

Though GS was in frontline in pimping energy (crude super spike) they emerge as a "winner" Goldman Sachs Appears to be Among the Winners in Amaranth Mess Monday September 25, 5:29 pm ET By the BullMarket.com Staff Better risk controls implemented after the Long-Term Capital Management meltdown just eight years ago have contained the potential fallout from the huge losses at hedge fund Amaranth Advisors this month. The firm saw -60% of its assets disappear in September due to bets on natural gas prices that went the wrong way and cost it -$6 billion. Had the controls that limit Wall Street's lending to such firms not been in place, the damage to prime brokers like Goldman Sachs (NYSE: GS - News) could have been substantial. Instead, by limiting the amount that firms like Amaranth could borrow against its assets, firms like Goldman and Morgan Stanley (NYSE: MS - News) are instead looking like winners in this debacle. ADVERTISEMENT Amaranth outlined that it believes it will remain solvent. That's backed by the fact that to date it has been able to meet its margin calls. A company like Goldman, meanwhile, has been booking fees from acting as the prime brokerage for these big trades. Goldman's and Morgan Stanley's ability to avoid such large hedge fund problems bolsters both their reputations and their attractiveness to investors, as they're seen as being able to participate in the boom in hedge funds without sharing all the risk. The stocks both closed higher on the day. They can thank post-LTCM industry changes for the improved bulletproofing from such heavy losses. Bloomberg pointed out that whereas LTMC had been able to borrow $25 for every dollar in equity it had, Amaranth was limited to about $4.50 for every dollar it borrowed. Although Goldman did have money invested with Amaranth, the company is well diversified by not only its investments but also by the fact that it also provides prime brokerage services. Companies that are trying to gain market share on leaders like Goldman and Bear Stearns (NYSE: BSC - News) will likely take the problems at Amaranth as a warning not to get too free and loose with their own prime brokerage regulations. If they lower their standards to win business, they up their risks considerably. Amaranth was the latest example of how quickly those risks can pile up into losses. Goldman's position at the top of the prime brokerage heap looks well protected.

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