Now that it appears that the financial system has escaped a Chernobyl meltdown, lines are being drawn in the sand to define the cast of characters who might be in a position to cause a financial nuclear winter in the future. It’s no surprise that the hedgies are front and center in the debate over who could pose a systemic risk to the US and the global financial system. As regulators on both side of the Atlantic draft legislation to determine just how tight the vice will be for the hedgies going forward, at least one guy who has a pretty good idea of what happens when a hedge fund meets its maker is taking up the ‘it’s not us’ campaign.
Former Long Term Capital Management partner and current GlobeOp CEO Hans Hufschmid argues that prime brokers would effectively act as regulators and ensure no one hedge fund winds up with the worst label that can befall any institution these days, too big to fail.
I find it hard to believe — I don’t think a hedge fund today is big enough to pose a systemic risk. Prime brokers would manage that — they would say ‘we’re not lending you that much money’… The market regulates it to some extent, you couldn’t have a situation where one hedge fund takes excessive risk with one prime broker.
A quick look at recent history shows that US hedge funds received the exorbitant, eye-popping, egregious sum of $0 from the government coffers to help prop up the ones issuing a distress call before they sunk. This is really hard to believe, but the funds that couldn’t make the grade were allowed to fail. I know, it’s shocking to be sure. Maybe there were widespread paper jams in Washington when the Hedgie Asset Relief Program (or HARP) was supposed to be drafted. But even though no one hedge fund ended us this time around, it doesn’t mean it couldn’t happen in the future and Mr. Hufschmid has probably jinxed the whole thing with his ‘you couldn’t have a situation where one hedge fund takes excessive risk with one prime broker’ remark.
No hedge fund now poses systemic risk: LTCM partner [Reuters]
put down the shovel and walk away
Smut, pure smut.
Is he fucking retarded? What happened in ’98 with LTCM?
Not arguing for regulation, just calling him, of all people, asinine for stating such a remark.
good article
Hmm… What ever happened to the systemic risk caused by cascading defaults? I’ll go fuck myself now.
@3 – GS beat up all of their trades (While the overall market rallied, LTCM’s positions sank).
For the full story read When Genius Fails.
That picture is what you have done to this site. Just quit now, Greg.
For the sake of continuity, I still have the same feelings for you, Greg, that I had yesterday. I hate you.
Sincerely,
Porker Stansberry
@3
Well, I think he was trying to say that because everybody knows what almost happened with LTCM, no prime broker would give a hedge the kind of haircut on repo arrangements that was given to LTCM, whose investment strategy was a black box to the banks until late in the game. The guy sounds like he still believes in EMH.
6,
Fair enough. I guess “systemic risk” is subjective.
where’s Cliffy? Surely he has something to say about this.
Call it picking nits, but a “vice” is not tight; you apparently mean a vise.
Greg, A word of advice. More stories about the Noel sisters = more love for you.
- Ruth Madoff
Dude, what did I tell you before about over-writing?
“I know, it’s shocking to be sure.”
You had already pointed out your blatant sarcasm in that ‘paragraph’ (if you can call it that) about 27 times. We didn’t need to be bashed over the head with your cleverness yet again before you moved on.
Then there’s this nugget:
“But even though no one hedge fund ended us this time around, it doesn’t mean it couldn’t happen in the future and Mr. Hufschmid has probably jinxed the whole thing with his ‘you couldn’t have a situation where one hedge fund takes excessive risk with one prime broker’ remark.”
Now by the time we get to the end here, WE ALREADY KNOW WHAT FUCKING REMARK YOU’RE TALKING ABOUT. Tell me he jinxed it by wearing an old pair of lederhosen and suspenders. Or better yet, think back to your SAT prep courses in whatever leafy suburb that spat you out and remember to restate your introduction as part of your conclusion. I mean, there’s a picture of a bomb at the top of this post and yet there’s only one mention (in the first sentence, no less) about anything remotely related to it.
I’m not just picking on you because you’re a new guy- I’m just genuinely annoyed with poor writing. They hired you for a reason, Michaels. Stop sucking and do what they brought you here to do.
-Ewp
Yes Herr Hans, and all hedge funds operate with just one prime broker too. They never play the brokers off each other and hide their other holdings from the brokers…..
I like my vice tight.
I would like to think that everyone on this site read When Genius Failed. Perhaps that should be part of the new registration requirements that the delectable duo were threatening.
@16: Is that you Elliot?
-Silda
I would like to think that after reading Greg’s stories over the past two days that I can call them “When Greg Failed”
@16 beat me to it, damn!
@ AB
There’s a few books that should be necessary, but come on, can’t even get any meaningful # of commentors to register, putting up registration requirements aint gonna happen, sigh…
I would like to think that after reading Greg’s stories over the past two days that I can call them “When Greg Failed”
17 Cliff’s Notes on When Genius Failed: the tails can be much fatter than you and your models ever imagined. And if they are, its hell.
one week moratorium on dicussing the merit of Greg’s writing/right to exist/value-add to DB etc… Sure he’s off to a bad start, but I’m assuming/hoping Bess hired him for a reason. Let’s give him a week to come into his own.
@ Anal_yst
I wouldn’t mind seeing Bess and EP’s list of required books. I would assume EP’s are:
Atlas Shrugged
Fountainhead
Anthem
We the Living
and Bess’
Karma Sutra
Truly Tasteless Jokes
The Rules
OK, AIG was a huge hedge fund (though not by name) and they got a big bailout. Not only were they TBTF, but they also made their regulators shit their pants. See, regulation was not such a bad thing after all for the gamblers at AIG. So the hedge funds (at least those who are not running Ponzis) would do themselves some good if they’d welcome more regulation. But if they keep whining, like Greg, they will get beat up to a pulp.
@AB- Do you have peephole into my bedroom or something? (Oh, and eat a dick.)
24 I’ve always felt that it was bad Karma to read said Indian guide to carnal pleasure.
@25 – Wow. That made zero sense.
@ 6
I think it was made pretty clear that GS wasn’t responsible for their positions plunging; they plunged because LTCM depended far too much on the probability of their models succeeding and on Haghani’s reckless bets. By the time GS was brought in to look at their books, they were already on the outs…hence why they were even allowed to do so in the first place. They probably took a few opportunities that anyone in their position would have capitalized on.
@24
EP, aka Marla Singer, don’t matter anymore.
@31- I hate her even more over there than I did here (and I loathed her here).
@28
Read some new books.
20
I would like to see a list of books that Anal_yst considers required reading.
greg, it is time to come with the funny, and soon. and chill out with the clip art, k?
@31, @32 – Snark, satire, and irony are tricky instruments, difficult enough to handle when the language you write them in is your native one. EP/Marla flubs it fairly frequently, which is why most people seem to miss her (apparently intended) humor so often. I admit that I usually have to read her stuff more than once to pick up her drift, but you can usually figure out when she meant to be funny or sarcastic.
Don’t call her out on a factual or language usage mistake, though. She will deny it, or claim you don’t understand what she was trying to get at. What she doesn’t seem to get is that most of us would easily forgive her if she admitted the occasional mistake. Oh well, we are all prisoner to our own personal demons.
32
Where can I find Marla Singer now?
If you have to ask…
38, 37 here
She owes me money; cheated on me with my best friend since high school; neutered my dog, then him out of a moving car over a bridge; drugged me, then sold my blood, hair, and teeth; and gave my boss polaroids of me making intense interspecies love to a Tiajuana donkey (which I do not recall doing). I’m sure after all that another dude can understand my need to find Marla.
Oh, in that case zerohedge
You know that whole Tyler Durden, Marla Singer thing
@34
The list is long and distinguished…
Yeah, so is my Johnson….
Is it something like
Ugly Americans
Rigged
Bringing Down The House
30 yr convergence trade leveraged @ 1 grillion, and, alas, correlation went to one. That’s genius? This guy should keep quiet and not draw any attention to his LTCM roots.
And then I saw the picture of a bomb blast and I thought I need to write a story about bombs but there is nothing to write about bombs for this site so I thought what is like a bomb and then I thought, those families that Bush couldn’t pronounce, what were they again, oh yeah, nukes, so I wrote story about nukes so I could put up a picture of a bomb blast, man, I’m much better at writing than trading derivative contracts.
-Greg’s Id
LOL @ 44!!! hahaha
Wait where did the EP/Marla Singer convergence come from?
Damn it get busy at work for two little weeks and all sorts of weird shit goes down…like this Greg Michaels fucker..fuck him
HARP => HERP