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Technology Stocks : Dell Technologies Inc.
DELL 133.78-0.1%Nov 14 9:30 AM EST
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To: BGR who wrote (81321)11/19/1998 12:36:00 PM
From: Chuzzlewit  Read Replies (3) of 176387
 
Apratim, what I presented was the result of an article in the NY Times last spring. Basically, the authors accompanied a group of US fund managers who were picking through the rubble of demolished Asian businesses looking for bargains. What they discovered was an eye-opener! Many of these businesses were in the interest rate arbitrage game, and not the businesses they were ostensibly running. They found that the core manufacturing business was not profitable, and had never been profitable. The profits all came from the interest rate plays.

While these countries were arrogantly critical of the US (Korea was a prime example) they were quietly using the fact that there were differential interest rates and that their local currencies were pegged to the dollar. All of this was pretty well known. But what wasn't known was that the underlying businesses were never profitable!

All parties were depending upon the ability of the central banks to defend their local currencies. When the currencies fell to the attack of short sellers the entire banking system imploded. So it wasn't a question of managing risk in the traditional sense. The function of a bank is to provide liquidity to legitimate businesses. But the Asian banks had pretty much abandoned that mission in favor of funding arbitraguers.

TTFN,
CTC
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