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Gold/Mining/Energy : Gold Price Monitor
GDXJ 106.75-0.5%Dec 3 4:00 PM EST
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To: Terry Rose who wrote (10680)4/26/1998 1:54:00 PM
From: tekgk  Read Replies (1) of 116791
 
Exactly correct. Most of the mutual fund industry has established very large lines of credit with the banks to deal with any unexpected redemptions. This part is fact. The part that is not and that I can't prove is that the funds have also been using the lines of credit to buy stock, obfuscate true performance and a variety of other associated games. Contrary to popular opinion, the banks are exposed to the same degree or even greater degree of risk to a stock market correction as they were at the end of the roaring twenties.

The reason I suspect that they have been using the line of credit to do whatever they want is because of my experience when I took out a line of credit on some stock that I owned at one time. The surprising part was how easy the credit was to obtain. Once obtained, the bank did not care what I did with the money. They did not monitor it in any way. They didn't even monitor the value of the underlying stock. I was absolutely amazed by the whole thing. My reasoning is that if it was this easy for me then it is at least as easy for the mutual funds. My other reason is that given money, the average 28-year-old manager will find some reason or thing to spend it on. At the end of the day the taxpayers or currency depreciation will have to pay for the inevitable debacle IMHO.
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