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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (49806)	5/11/2004 10:16:26 AM
From: George Dawson	Read Replies (1) \| Respond to of 74559

" the operative word is 'deleverage', and the guess is that pension/mutual funds and retail investors will be left holding the bag." They certainly have so far. I haven't seen much good performance data lately but 80% of mutual funds don't have far to go. I'll bet there are still many people locked into retirement fund accounts that are still underwater from the tech bubble. Can you say any more about the deleverage mechanisms and how things would get worse? George D.

To: TobagoJack who wrote (49806)	5/11/2004 11:16:00 AM
From: Elroy Jetson	Read Replies (2) \| Respond to of 74559

That's exactly the way I see things structured. Unlike 1990, the banks don't take the major hit on real estate losses. The loss on real estate loan defaults flow primarily through to Pension Funds. As a group they're basically under-funded as it is. From there that means big hits to corporate profitability. Then how big is the hit going to be to the PBGC (Pension Benefit Guaranty Corp) which is self-funded by member Pension Funds. The weak funds take down the big ones as well with the demands generated by their defaults.