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

To: Worswick who wrote (292)	10/2/1998 10:27:00 AM
From: Sam	Read Replies (1) \| Respond to of 2794

Clark, "...at that, as we sink, you have only to go back and survey the collateral received by many of the savings and loans.. to wonder if we aren't really dealing with fools not liars." My guess would be both. s.

To: Worswick who wrote (292)	10/2/1998 11:07:00 AM
From: Enigma	Read Replies (1) \| Respond to of 2794

Clark - I was thinking about it some more, and considering the fund which uses leveraged investments where margin is so skinny as to be almost non-existent. No collateral there! So the only collateral that the fund managers can offer, it seems to me, is the shares in their own company. If they get loans from many different banks one wonders how many times these shares could be pledged - or whether the stark truth is that the hedge funds often (usually) operate on unsecured lines of credit - demand loans. We're going to get to the bottom of the LTC business eventually - but for now it is 'don't rock the boat' Actually the small piece of AG's testimony I saw impressed me with it's openness - not so the bushy eyed head of the NY Fed. In Canada a mutual fund can secure a line of credit (at least I think so) but there are limits - the purpose might be to allow some liquidity between selling and buying securities - but to be in that position a fund would have to be 100 % invested - with no cash cushion - not a usual state of affairs - in any event if the fund buys and sells through the same broker for one switch it is using the broker's credit. In the event of the genuine fear and uncertainty in the market the risk/reward of being in equities is tilted the wrong way - there are as always special situations. Best to you. E