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To: Judy who wrote (8354)	10/10/1998 11:48:00 AM
From: Joseph G.	Respond to of 86076

<<The large hedge funds have placed vast sums of leveraged cash on the line in trades that they thought were liquid, such as dollar/yen and mark/yen. The problem that we are currently experiencing has to do with the crisis in liquidity and not a flight to quality. There is a subtle difference. A flight to quality is where capital is rushing from one investment to another. What we are witnessing is a crisis in liquidity caused by the liquidation of positions seeking to move to cash. While hedge funds like Tiger have made no public comment on their losses, they continue to make the headlines of even the evening ABC national news. The manner in which these positions are being liquidated is amaturistic at best because they are being thrown on the funeral fires in a manner that says, "just get me out!" However, if we assume that these portfolio managers are NOT amateurs, then the only explanation for such massive and relentless selling must be due to the fact that they are under the gun in order to meet margin calls or face forced liquidation by banks. In any event, liquidation by one fund causes action to be taken by others. We have argued for decades that ALL Panics are NOT caused by short selling but by long liquidation. This is precisely what is taking place and it is perhaps more visible now because those funds that are liquidating are so few. As liquidation begins, others are also forced to liquidate. The danger, is when this vast leveraged hoard of cash forces normal economic flows to take action. In this manner, the deflationary influences expand rapidly spreading from economy to economy until the entire world is engulfed in financial pain. The low comes about only when the liquidation finally ends.>>