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Strategies & Market Trends : The 56 Point TA; Charts With an Attitude -- Ignore unavailable to you. Want to Upgrade?

To: Magnatizer who wrote (21104)	9/8/1998 2:07:00 AM
From: Doug R	Respond to of 79444

David, 10X margin is typical of derivatives. I think that's what happened there. Extremely risky stuff because they are so difficult to unwind. Was it Orange County CA that got stung by derivatives a few years back? It CAN happen. "The derivatives holdings of U.S. commercial banks increased 26.5% over the first nine months of 1997, up 50% from 1996. Chase Manhattan's derivatives exposure is equal to U.S. GDP and the U.S. banking system as a whole has $62 in off-balance sheet derivatives for every dollar of equity capital and $5 for every dollar of assets on the banks' balance sheets. A loss of 1.6% on the banks' derivatives portfolio would be enough to wipe out the ENTIRE EQUITY CAPITAL OF THE U.S. BANKING SYSTEM. ( emphasis mine ) "The Bank for International Settlements reported in November that $82.6 trillion in derivatives were held by 79 selected financial institutions in major nations at the end of 1996. Chase Manhattan was tops on the list with $7.9 trillion or 31% of all U.S. bank derivatives. Chase had $364 of derivatives for every dollar of equity and $22 in derivatives for every dollar in assets. Next was J.P. Morgan with $6.2 trillion or $537 in derivatives for every dollar of equity. Seven top banks had $109 billion in equity and $1.7 trillion in assets compared to $24 trillion in derivatives, or $220 in derivatives for every dollar in equity and $14 in derivatives for every dollar in assets. They had 26% of all U.S. bank equity, 35% of U.S. bank assets and 95% of the derivatives. In the first nine months of 1997 about $190 billion of asset-backed securities were issued, up 23% from 1996. It should be noted that J.P. Morgan's final 1997 quarter reflected $54 million in derivative losses and they designated $587 million of assets as non-performing derivatives for a total possible loss of $659 million. Now, if this isn't enough to scare you, you have serious problems." ( As copied from The Reaper 4/9/98 p.10 ) The accuracy of this article may or may not be correct, Doug R

To: Magnatizer who wrote (21104)	9/8/1998 9:31:00 AM
From: Cube	Read Replies (1) \| Respond to of 79444

David, The CNBC guys were discussing that last week. I guess Russia was so in need of the foreign dollars, they made certain institutions an "offer they can't refuse." Nobody saw how valueless most Russian companies actually were (not quite the same 10K - 10Q filing requirements.) And nobody foresaw the crash of the Russian currency, which doubled the losses of the stocks in relation to the dollar. Couple that with the 10X margin, and the CNBC guys were talking about some of the balanced growth funds having gone to a net asset value of ZERO at different times last week! If you e-mail CNBC, they can give you the date and time of the interview segment in which the 10X margin deals were discussed. Cube