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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Lee Lichterman III who wrote (28237)	10/3/1999 2:15:00 AM
From: Lee Lichterman III	Read Replies (2) \| Respond to of 99985

First off, edit to my last post, I read so many I forgot whosaid what, my employment stuff should have been aimed to Haim not Heinz, Sorry about that. Second, just a little note I saw about LTCM going out of business. Doesn't appear that it will have any affect on the market but thought it would be nice for the thread to see they might disappear. It all depends if they can change their name and if anyone will ever do business with them again. ( also serves as a reminder as I ponder how many of these hedge funds might have been hurt by the strange spreads we have seen in treasuries, dollar foreign currency movements and the gold short squeeze ) egroups.com Noon EDT Saturday, October 2, 1999 Dear Friend of GATA and Gold: This item from Reuters foreshadows a funeral that we won't be invited to. Enjoy. CHRIS POWELL, Secretary Gold Anti-Trust Action Committee Inc. * * * LTCM may be out of business, Fed's McDonough says By Knut Engelmann CHICAGO, Oct. 1 (Reuters) -- Long-Term Capital Management, the huge U.S. investment fund that almost single-handedly threatened to bring down the world financial system last year, is about to fold, the U.S. central banker who oversaw its hurried rescue said on Friday. The near collapse of Long-Term Capital Management LP, which specialized in highly risky investment bets, last year prompted its main creditor banks to come up with a $3.5 billion dollar salvage package. The deal was arranged by New York Federal Reserve President William McDonough amid fears that the firm's demise could devastate the entire global finance system. "I'm happy to tell you that LTCM is very close to being out of business," McDonough told a top-level economic conference at the Chicago Federal Reserve Bank. "I can assure you that is a result that pleases me considerably." LTCM had borrowed heavily from large investment firms to make bets on risky financial instruments that ultimately proved to be faulty. The repercussions were wide as fears grew in world markets that major investment houses could suffer huge losses if LTCM were not able to repay its debts. That brought lending to private companies to a virtual halt for a few weeks. World markets recovered only after the U.S. Federal Reserve applied shock therapy in the form of three interest rate cuts in rapid-fire succession last fall to keep the financial system from seizing up completely. McDonough said the fund, headed by former Wall Street maven John Meriwether and based in Greenwich, Connecticut, had repaid most of the bailout money. People close to the situation have said Meriwether already is talking to wealthy individuals and other firms seeking fresh cash to start a new fund. "The firms that recapitalized it now have most of their money back," McDonough said. "The remaining management of LTCM cannot do anything at all new until they have repaid 90 percent of the equity that was being put into them and I think that if they continue in business at all, it will be by another name -- and they may not be in business at all, never mind by another name," he added. The hedge fund, started by star bond traders at Wall Street firm Salomon Brothers and including former Fed officials and academics, was estimated to have had about $100 billion in investments on a capital base of $5 billion. Financial markets around the world dissolved in panic after the LTCM debacle, which erupted just after Russia devalued its currency and defaulted on large parts of its debt. The crisis topped off months of turmoil in Asia's former "tiger economies," which had already sent shivers around the global economy. The LTCM case has spurred efforts by U.S. bank regulators as well as international supervisory bodies to improve the oversight of such funds. But officials say tighter control is difficult since many of these investment vehicles have their legal home base outside of their main countries of operation. -END- Good Luck, Lee