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Politics : Sioux Nation -- Ignore unavailable to you. Want to Upgrade?

To: SiouxPal who wrote (16464)	5/10/2005 9:00:01 PM
From: Wharf Rat	Read Replies (2) \| Respond to of 361353

Hedge funds are highly exposed to GM debt: bankers Tue May 10, 2005 01:20 PM ET By Gerard Wynn LONDON, May 10 (Reuters) - Hedge funds have been building up stakes on the European debt of the U.S. auto firm General Motors (GM.N: Quote, Profile, Research) over the past six months, risking losses in a highly volatile situation, fund managers and bankers said. These risks came to the fore on Tuesday with talk of massive losses on debt instruments called CDOs (collateralised debt obligations), hugely popular among hedge funds. The talk was sparked by last week's downgrade by ratings agency Standard and Poor's of debt issued by automakers General Motors and Ford. "A lot of hedge funds are playing in GM," said a distressed debt trader at one investment bank. The S&P downgrade affected 23 billion euros ($29.52 billion) of European debt in GM (GM.N: Quote, Profile, Research) and Ford (F.N: Quote, Profile, Research) . Hedge funds and distressed debt specialists are likely buyers of GM debt that original investors are now selling in advance of expected further downgrades, Citigroup said in a research note last week. But funds looking for GM bargains were in danger of finding false protection in hedging strategies, analysts said. "There have been a lot of smart ideas around for the past six months, but a lot of people have lost a lot of money," said one investment bank analyst. In the meantime, some non-hedge fund investors have retreated to safer ground. "The last GM trade we did was in March," said Branko Jevtic, head of capital structure arbitrage at DrKW portfolio management. "The market is becoming extremely volatile in the entire autos sector." PROFIT STRATEGIES Hedge funds invest in CDO's to get a better return than in the regular bond market because they offer higher interest rates. Ford and GM debt have been included in a lot of CDO structures because they trade at wider spreads than similarly rated credits. Hedge funds also use so-called arbitrage bets, where they bet on several outcomes to increase the chance of being right. And the different arbitrage positions they have taken in GM has highlighted the unpredictability of the situation. For example, one popular GM deal has been to sell the parent company's bonds -- betting on a fall -- and buy the debt of GMAC, the financing arm -- betting on a rise -- because the fortunes of these entities are expected to diverge. Analysts are increasingly expecting GMAC to get a better rating than its parent company. But one hedge fund took the opposite view to the GM-GMAC trade, on Tuesday, highlighting the uncertain outlook. "Most arb (strategies) are positioned for a widening of GM and GMAC. We believe that their spreads may converge," said Louis Gargour, predicting that GM may sell GMAC assets, and then draw its finance unit in closer. "A significant proportion of GMAC's assets are non-core -- such as its mortgage business -- and we estimate by selling some of their non core assets they could raise 10 to 20 billion euros." reuters.com

To: SiouxPal who wrote (16464)	5/10/2005 9:11:21 PM
From: Wharf Rat	Read Replies (2) \| Respond to of 361353

Mission Accomplished, Captain Queeg? by Charley Reese Well, here we are, two years out (as they say in Washington) from "mission accomplished," the president's now-famous speech during the photo opportunity on an American carrier. The American death toll in Iraq is now 1,585, and the wounded exceed 10,000. The cost is about $300 billion. Somewhere between 140,000 and 150,000 Americans remain in Iraq. A third interim government has been partially formed after three months of wrangling. The insurgency is still going strong. Iraq is now an excellent training ground for terrorists. All of the reasons cited for going to war have been proven false. There were no weapons of mass destruction. There were no ties between Saddam Hussein and al-Qaeda. The Iraqis had nothing to do with the attacks of Sept. 11, 2001. Has it been worth it? I don't think so. The number of acts of terrorism has gone up, not down, which is no doubt why the Bush administration has decided to discontinue the annual reporting of such acts. Facts are nasty little buggers that play havoc with political rhetoric. It's best to keep them under wraps. Iraq was more stable under Saddam than it is today, and his wobbly regime never was a threat to the U.S., much less an imminent danger. The Pentagon has finally admitted that the wars in Afghanistan and Iraq have put such a strain on the U.S. military that any future actions will be longer, with higher casualties and higher collateral damage (that's the killing of innocent civilians). Iran and North Korea, well aware of the limits of American military power, are thumbing their noses at us, and the president's "my way or the highway" approach to diplomacy has yielded nothing but a loss of American prestige. I think we are adrift in a sea of troubles, and our captain, like the infamous fictional Captain Queeg, is more concerned about who ate the strawberries than saving the ship. If you doubt that, take this little test. The next time the president holds a press conference or makes a speech, turn off the sound and study his face. I'm not saying he isn't there. We are not there in whatever world he is occupying. Yes, he can certainly simulate congeniality, and yes, he has some of the best mind-gamers in the world writing his speeches and planning his political strategy, but is he genuinely interested in solving the problems facing the American people and the nation? I don't think so. The job of president ages most men, but Bush seems as healthy and content as a Georgia mule in a lush pasture. He's never admitted making a mistake. He has never held even one soul accountable for the intelligence failures or botching the Iraqi occupation. So far as he is concerned, he's the perfect man in the perfect job in a perfect world, just like the television commercial. In the meantime, the rest of us are stuck with going to Walgreens. I would feel better if he would just occasionally look worried. Unfortunately, he's accomplished all he wanted to accomplish. He's won two elections, he's cut taxes for his rich friends, and he toppled Saddam Hussein. I don't know why he had such a grudge against old Saddam, but it's clear from books written by insiders than he was planning to go to war against Iraq almost from the day he took office. He seems to be the most self-satisfied president in history. Well, we'll just have to follow the advice they give drunks and accept what can't be changed. He's our captain, and we're just the crew. Let's hope we can avoid the rocks and shoals on the way to 2008. antiwar.com