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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Wally Mastroly who wrote (1199)	9/24/1998 9:31:00 PM
From: MrGreenJeans	Read Replies (1) \| Respond to of 15132

Financial Times FRIDAY SEPTEMBER 25 1998 Lex Nobel explosion The near-collapse of Long-Term Capital Management is a stark reminder of Wall Street's talent for self-delusion. Yet again bankers have convinced themselves that it is possible to enjoy exceptional returns with little risk. LTCM's arbitrage trading strategy seemed just such a miracle money-spinner - particularly since the underlying assets, such as sovereign bonds, were high quality. Equally, its management, festooned with Nobel laureates, was seen as too smart to get into trouble. As a result, the world's top banks lent it huge sums, allowing LTCM to take $80bn worth of positions on capital of $4.8bn. But even Nobel laureates find it hard to separate risk and return. In essence, LTCM was functioning as a huge reinsurance company for Wall Street, taking on risk the big banks wanted to lay off. That these same banks were simultaneously lending it the money to do so defies logic. And now the emerging markets hurricane has blown LTCM over, they were left with little choice but to bail it out. Having bought valuable time, some of LTCM's trades should even end up making a profit - on the back of which the fund wants to raise fresh capital. That really is chutzpah.