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Non-Tech : Derivatives: Darth Vader's Revenge -- Ignore unavailable to you. Want to Upgrade?

To: Worswick who wrote (27)	9/3/1998 11:53:00 AM
From: Henry Volquardsen	Read Replies (1) \| Respond to of 2794

good article. I particularly like the line that they find the current market 'unusually attractive'. I guess if you like a position on July 31 you've got to love it on Aug 31 when it is 44% cheaper. The announcement yesterday attributed 18% of the loss to Russia, probably hedged GKOs or somesuch. The rumour is that much of the rest was in the mortgage backs and similar arb strategies. The TED spreads have widened out and the mortgage back sector is having troubles. Given the large amount of leverage they used this is what caused the massive loss. The article does point out one thing I have been saying for several weeks, though perhaps not on this thread. The losses that we are in seeing in the aftermath of Russia are different than we saw from Asia's difficulties. When Asia broke a lot of corporations suffered big losses while speculative money made big gains. In Russia however there is relatively little direct corporate exposure, at least compared to Asia. You are not going to see the kind of impact on the broader economy that Asia has caused. Where the losses have been focused is in the speculative money. A number of very high profile hedge funds have taken nasty hits. In addition the more speculative trading banks have been hit. This could cause a lot of speculative money to leave the table for a time while they reevaluate risk. I have been wondering if we see this develop over the next few months wether that might give some of the emerging economies a breathing space to get their acts together.