>But people are losing big money on LTCM--less than they would have
>without the bailout for sure, but the banks, investors, and partners are
>all taking big hits. Not that they're worth a tear, but you can't say no
>one's losing anything.
Public info is sketchy to say the least but it looks like LTCM only got into trouble because corporate-bond rates increased while the yields of Govts have fallen. The bet is that this is a temporary divergence. Apparently the bailout simply converts margin calls for cash into equity positions for new investors on this bet. If corporate-bond rates begin to fall (easier monetary policy anyone?) then the bet will still payoff, for the new equity investors as well as for Meriwether and Co. In other words, it seems a bit immature to say who's going to emerge from this thing fabulously rich. We basically have the Fed helping LTCM to continue to ante up until an easing of monetary policy can win the pot for Meriwether and Co..After all, it is reasonable to bet that interest rates move in tandum.
Edwin Dickens