The coming US dollar crisis Message Board

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Strategies & Market Trends : The coming US dollar crisis

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To: RockyBalboa who wrote (4501)	2/25/2008 12:12:28 AM
From: Real Man	Read Replies (2) of 71475

It's an attempt to save a very sick system. In fact, such attempts have been done periodically since 2002. LTCM leverage is nothing in comparison to the leverage that exists today. LTCM bailout certainly created Moral Hazard. The derivatives markets mainly work on arbitrage, models similar to LTCM's. Volatility has risen enormously, and I actually wonder why the system did not collapse yet. It must be due to a constant flow of bailouts and manipulation. en.wikipedia.org The total losses were found to be $4.6 billion. The losses in the major investment categories were (ordered by magnitude): $1.6 bn in swaps $1.3 bn in equity volatility $430 mn in Russian and other emerging markets $371 mn in directional trades in developed countries $215 mn in yield curve arbitrage $203 mn in S&P 500 stocks $100 mn in junk bond arbitrage no substantial losses in merger arbitrage See also: East Asian financial crisis Long Term Capital was audited by Price Waterhouse LLP. Ironically, after the bail-out by the other investors, the panic abated, and the positions formerly held by LTCM were eventually liquidated at a small profit to the bailers. Some industry officials said that Federal Reserve Bank of New York involvement in the rescue, however benign, would encourage large financial institutions to assume more risk, in the belief that the Federal Reserve would intervene on their behalf in the event of trouble. Federal Reserve Bank of New York actions raised concerns among some market observers that it could create Moral hazard.

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