David; Looking at the reports coming out my opinion is all we can
really do is guess. My guess is they lost a lot of their own
money right along with the fund, making long bets when they
thought Asia and Russia had bottomed, but to soon,
then became convinced we were to follow shorted this market
to high heaven hoping to make up for the other losses.
One of the problems with that much leverage is each layer has
it's cost ( in interest rates ) the more of it you use the
less time you have to be right, at some point simple volatility
can cause you to have to make margin calls , and they had
borrowed from just about every body they could.
I bet they had some good positions but just couldn't hold
them long enough.
For the time being I will give them the benefit of the doubt
of having got caught up in "gamblers fever" , I'm almost sure
now that I saw this coming down when the last big bets were
placed but I had no idea of who it was. Being I use to be a
sort of errand boy for some professional gamblers, I saw
this type of thing bite some very smart people. I tend to
think they most likely turned their own pockets inside out
looking for spare change in a desperate attempt to re-gain
their early losses. The huge leverage has all the earmarks
of people addicted, and as smart as they might be addicted
gamblers always get blind sided, there is another faction of
professionals who makes it their life style to cure them
via pain.
When I was an errand boy more than once I saw the pros divide
up the take after a mullet was cleaned out.
Jim
PS
I bought into a hedge fund one time but didn't stay in it very
long, all in all the hedgers don't seem to do that good over
time. If they leverage they have a second nut to crack.
They get a little pie in the sky from time to time, but the
style once leveraged makes them prime targets for the pros.
If some one as far removed as me could see the huge bets
LTCM was making ( not that I knew who they were ) but you
can bet the pros did.
I'll have to hunt back for the post were I whistled.
It's just a best guess, but I think they got caught up
in "gamblers fever" and likely wound up lossing their
personal money as well, that's just based on what I've seen in
the human nature of addicted gamblers.
Jim |
