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

To: Worswick who wrote (30)	9/3/1998 12:33:00 PM
From: Henry Volquardsen	Read Replies (1) \| Respond to of 2794

excellent Clark. that is one of the best yet. I've printed off a bunch of copies to give people. I agree with almost every word. I particularly like the line In the west, those people now crying over their spilt milk, are a cosmopolitan mixture of the greedy and the dim. Man is that ever true.

To: Worswick who wrote (30)	9/3/1998 12:34:00 PM
From: Worswick	Respond to of 2794

Thanks to Bosco on the Asia Foruum who pointed me to this. My worries. Little Problems that won't go away.... For Private Use Only (C) Fortune Hedge Funds Get Bushwhacked Wednesday, September 2, 1998 What a bummer! Why? Well, the Dow was UP 124 points at one point, then the bond market closed and BOOM, stocks fell (i.e., the games ended). And so the Dow fell 45 points, to 7782. So much for the rally (you foolish things!). An interesting point: The NASDAQ held up!!!! Hooray! It climbed 17, to 1592. And there was even some strength in the poor miserable Russell!! Here's what we've been following today: CURRENT INDEXES Thu Sep 3 12:27 EDT Click for Graph DJIA 7686.34 -96.03 NASDAQ 1578.98 -13.87 S&P 500 981.80 -8.68 NYSE 489.52 -5.11 AMEX 597.54 -5.07 Cut to the Chase.... HEDGE FUNDS.... Okay, let's take this one from the top. Market mayhem reeked some SERIOUS havoc on these funds: You wouldn't believe what I have been through getting these stories. Man! OMEGA ADVISORS.... You know these guys? Mega-hedge fund run by Leon Cooperman, big cheese, formerly of Goldman Sachs. You may have heard they are in trouble. HERE is the scoop. Talked to Lee, and frankly it wasn't pretty. (He so NASTY!) Okay, Coop WAS up 12% for the year, was doin' fine. Then he got hit in the U.S., just like the rest of us in July and August. But, to be fair, he actually did better than the rest of us. But, he GOT CREAMED in emerging market equities and bonds. Now, Lee says he is down over 10%. Lee got very hot talking to me on the phone, telling me reporters were out of control. (Oh yeah, it's all my fault!) Telling me to invest a million in his fund or chill, etc. Okay, after the emerging markets fiasco, Lee told me that he dinged the guys in that group. "We parted ways because I didn't feel they were prudent in the risk management part of the business." Yeah baby! Zapped 'em! Just like I told YOU, Lee. So what's up with Omega? It's whole, but an excellent source tells me Lee needs to get back to 12% before he gets paid. There is a possibility that Lee shuts this fund down and returns money to investors. Start all over again. But Lee said he would never do that. LONG TERM CAPITAL MANAGEMENT.... Okay the letter! Have you heard? First of all, Long Term Capital is the black box hedge fund run by Jon Meriwether in Greenwich, CT--he was the BSD at Salomon Bros, the boss of the bond business there. He sent out a letter to clients on Wednesday that is an INCREDIBLE cry for help!!!! Incredible. I won't do it chapter and verse because it will be all over tomorrow. But, let me just say one big time trader I know who saw the letter said there is a chance this firm is dead!!!! Why? Because they are down 52% for the year. And they are leveraged. And they are BEGGING for money. I've been told that they just asked one of the biggest hedge fund managers in the world for a billion dollars today and he said, "Thanks, but that's really not our thing." Click. Also it looks like the employees will have to work for FREE for a year or so which is, uh, unlikely. Also, the letter said they returned $2.7 billion in cap on 1/1/98. My understanding is they were essentially forcing out the little guys--who were of course pissed off they were pushed out of the fund--so the principals could have more return. (Hee, hee, hee, little guys happy now!!!) Sooooo, what kicked the sit out of LTCM? My understanding is swap spreads. What are they? Basically these were, go long corporate bonds and short Treasuries. In August 1998. Oh. My. God. FREAKING KILLED!! So LTCM was down 44% for the month of August!! The other point is, I don't think these trades are completely unwound yet!! In other words that 52% could get WORSE!!!!! Check this out: "...invest [now] in LTCM with special terms relating to fees." Yeah RIGHT! Moral: You can be too smart. Or, never trust a black box!