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To: Zardoz who wrote (16814)	8/28/1998 11:33:00 AM
From: Giraffe	Respond to of 116815

From financial times: Oil and metals not able to help in short term By Gary Mead Neither oil nor metals - exports of which together account for almost 70 per cent of Russia's total foreign revenue earnings - will be able to pull Russia out of the mire in the short term. Russian oil exports have recently been at their highest levels ever, at some 2.15m barrels a day; last year Russia exported 2.54m b/d, some 2.1m barrels going to countries outside the former Soviet Union. But these barrels are being sold into a market where the (dollar-denominated) global oil price has dropped by more than 30 per cent since the start of the year. Moreover, "around two-thirds of Russia's 2.15m b/d of crude [oil] exports are pledged as securities for foreign credits", according to Petroleum Argus, the industry newsletter. Russia's oil companies are therefore benefiting from only 700,000 b/d of foreign sales. Russia's oil industry is more closely interwoven with its banking sector than any other. As the banks totter, would-be foreign investors are already steering clear of closer involvement with Russian oil companies. Another handicap is that the Russian government has attempted to squeeze ever more taxes out of the oil industry to fill its empty coffers; the industry in turn has tried to boost exports to the maximum, thus inadvertently helping keep international oil prices low. And the banking crisis has almost paralysed interbank money transfers, with internal debts mounting. Oil companies are unable to meet VAT and excise arrears and are finding it difficult to maintain foreign sales. The outlook is equally worrying for Russia's base and precious metals sector. The price of gold hit an 18«-year low yesterday, partly on fears that Russia has pledged a significant amount of gold reserves, about 520 tonnes, as collateral against credits from Swiss banks. Norilsk, the world's biggest producer of nickel, is already working almost flat-out and has little potential to divert more metal on to the world market and take advantage of the devaluation. The country is also a big producer and exporter of aluminium, but here too there is little spare capacity to divert to exports.

To: Zardoz who wrote (16814)	8/28/1998 11:35:00 AM
From: Giraffe	Respond to of 116815

More from FT: MARKETS: Commodity price index at 21-year low By Gary Mead A sense of fin de siecle crisis hung over many commodity markets yesterday, symbolised by the Chicago-based Commodity Research Bureau index of 17 leading commodity prices falling to a 21-year low of 196.08 points, though the index has been reweighted several times since the last nadir of December 1977. Meanwhile, commodity specialists everywhere searched in vain for an obvious way out of the Russian crisis, which has begun to affect various markets. In crude oil markets dealers were aware that Russia may attempt to buy its way out of the crisis by exporting more barrels in the search for US dollars. Russia's long-standing unofficial policy has been to maximise its oil output, and the cutting-off of access to foreign investment may mean in the medium term it pumps less, not more oil. However, in the short term it is bound to seek to increase exports, adding to the glut that has produced a crash in oil prices of more than 30 per cent this year. Oil stocks in OECD countries are now 210m barrels bigger than at this time last year. At the same time, compliance with the promised cuts by the Organisation of Petroleum Exporting Countries seems to be very slack. According to the latest analysis from Merrill Lynch, "the promised reductions are totalling just one out of every two promised barrels". On the International Petroleum Exchange, October dated Brent was $12.12 a barrel in late trading, down 38 cents from the previous closing price. On New York's Mercantile Exchange the mood was even more bearish; Nymex October crude was down 49 cents to $13.09 a barrel in early trading. The London afternoon gold "fix" yesterday was down to an 18«-year low at $278.50 per troy ounce, against $280.90 in the morning, partly on growing suspicions in the market that Russia is increasingly using its reserves in swap deals. Some analysts suggest Russia may have lent as much as 200 tonnes of its 520 tonnes of reserves in the form of swaps with Swiss, US and German banks. The Association of Russian Banks yesterday proposed easing the regulations on purchasing gold, enabling the public to buy the precious metal as an alternative to foreign currency. "We must create an infrastructure for the population to buy not only dollars . . . but gold," said Sergei Yegorov, ARB president. Buyers of gold from commercial banks face VAT of 20 per cent, while the price of gold is established by the central bank at 1 per cent over the London daily fixes. On the London Metal Exchange the recent neutral trend persisted, with only three-month nickel registering much movement, closing $90 lower at $4,080 a tonne. The mood was also quiescent on the London International Financial Futures Exchange, where cocoa and coffee futures again made little ground. Also on Liffe October white sugar fell to its lowest since February 1988, at $277 a tonne. The International Grains Council said the world faced another bumper wheat crop, of an estimated 593m tonnes, in 1998. Prices fell again on all commodities markets.

To: Zardoz who wrote (16814)	8/28/1998 11:38:00 AM
From: IngotWeTrust	Read Replies (1) \| Respond to of 116815

You bet I'll go head to head wit'chu! Show me ONE post where I said deriv players "cause volatility?! Double dog dare ya!!! Hell, I've got you so rattled, you're making shit up as you go along. And, statistically, fool, you are the one with the risk...the PUT writer HAS your money, remember? That stuff you put up to buy your precious put option is in "HIS/HER" pocket...not in yours anymore! Next?

To: Zardoz who wrote (16814)	8/28/1998 8:46:00 PM
From: IngotWeTrust	Read Replies (2) \| Respond to of 116815

H sez: My reason 4 Au 2 fall has been out there 4 a long time. I'm presently defending myself in what is becoming a flaming war about derivatives. <--- Hutch posting today to some hapless soul on his new hideaway thread, "Cartaway Resources." Any relation to your deriv "profits" strategies and the name of that thread, Hutch? No, pooor ole Hutchie-pooh, you're doing a LOUSY job of defending your position about derivatives being the end-all/win-win joust du jour, and weapon of choice for all living breathing market players. I've torpedoed your little grey plastic battleship so many times, you should start bringing over a new game to play wid'me...how about UNO? I'm damn good at UNO! The most recent time I took you on, I reminded you THAT I WAS the first one for bringing the EURO to this thread's consciousness and sweet ole Alex backed me up and backed you down saying, "Yep, it was O/49r allright, Hutch." Before that, I went back and posted my price targets for gold and whupped yo'ass by about 7 months if SI's previous thread history can be relied upon... My calls were $325 was gonna fall... Then $265 was next, Then $250 Then ultimate bottom being in $198ish area if it gets really outta hand. You're a Hutchi-come lately with an over inflated opinion of derivatives. Anyone who plays in the deriv market knows you don't lead off by telling everyone the first strategy is "buy a call" or "buy a put"...that's the sucker's game, and is the first dead giveaway as to how green you really are! Take you green marbles and go home...you've got a long week ahead of you trying to figure out how to get your hands on more of our worthless US$ so that you can survive up there in canuck-ville

To: Zardoz who wrote (16814)	9/4/1998 10:18:00 AM
From: IngotWeTrust	Respond to of 116815

Hey, HUTCH...Betchadon'thavethecajonestoreadthiswithastraightface! ILLIQUIDITY DROWNS HEDGE FUND MANAGERS By JOHN DIZARD --------------------------------------------------------------------- WHAT happened? Those hedge fund managers still in possession of their capital and sanity are trying to figure how they, the smartest people in history, went wrong. People who are ordinarily little ladies and gentlemen have been edgy almost to the point of rudeness. Now that we all understand that the Russian bankers are actually crooks, and that the rest of the world is not run with the honesty and transparency of a Minnesota PTA, the question remains: What could we have done better? The crash in equity values really started with a crisis in the fixed income markets, so let's look there. There were failings on two levels. The worst - and it's important for those self-important Washington policy people to understand this - is that the crash started not with a market failure, but with a failure of government policy. Or a couple of failures. The first was one of the supposed foreign policy successes of the Clinton Administration, the Mexican bailout of a couple of years ago. Over the protests of cantankerous free market idealogues, Robert Rubin and his friends at the International Monetary Fund made it possible for the greedheads of the world to get their premium interest rates, and, when trouble hit, all their money back at the expense of the rich world's taxpayers. This introduced what is known as moral hazard. That means that you get the idea that there are no consequences for risky behavior. There were countries that were too sensitive to fail, such as Mexico, and countries that were dangerous to fail, such as Russia, and countries that were too important to fail, such as Korea. This was a really, really bad idea. Rubin and the rest of them should have let the investors in Mexico understand the meaning of the word fear, and of discipline, fear's master. The sense of invulnerability, of floating through the clouds above the mortals actually working for a living, was reinforced by fixed exchange rates, or a kind of fixed exchange rates (READ DERIVATIVES/SWAPS AND OTHER FOOLISH PRATTLE). This meant that if you put your money into a very dangerous place such as Russia, or a very speculative place, such as Thailand, you would not only be bailed out - always - but you could get your money back in dollars whenever you wanted it. Guess not. The fixed rates created an illusion of low risk and stability that had to be dispelled at some point. (Loss of 50% by the biggest hedgefund of all, Hutch...is that your heroic exemplary model?) The other failure was the crash of the valuation models that had created a delusion of total control among the managers. Jim Grant, the editor of Grant's Interest Rate Observer, adds that this all revealed that Wall Street sophisticates were just as naive as the Worth Magazine readers they sneered at. Also, as Grant says, The sophisticates believed that incremental returns were available for anyone who could tinker with the model. The model, ah, yes. This is the black box of a software package that will tell you when Greek drachma bonds are a better value than German Bunds. The problem with everybody's models of relative value - and they were all pretty similar - is that they would indeed be able to calculate the relative value of different fixed-income securities. But what they couldn't calculate was how prices would be affected by a drying up of market liquidity. The models might well be right in the long term, but with gigantic positions "leveraged up the wazoo," (gotcha here, Hutch) the losses and margin calls would eat up all the hedge fund's capital before the value was realized. This is what is known in statistics as gambler's ruin. As one very smart fixed income manager told me, The models are based on markets coming into equilibrium. They don't deal well with disequilibrium." Now we know. So there are now attempts being made to model the effect of illiquidity. In the end, though, the models will probably be inadequate, and the managers will have to apply better judgment. Because all models are based on the idea of liquid, continuous markets, and we've seen once again that they become illiquid and discontinuous really fast. ------------------------------------------------------------------ AHHHHHH....couldn't have said it better if I wrote the piece mahselfen. The winnah by virtue with a TKO: O/49r