This is a great story of avarice and greed! But it's amazing that at the level these guys are trading at, they are violating some of the most important rules: Never meet a margin call (unload your losing position and re-evaluate) or similarly, never "double-down."
Here's a portion of the WSJ article on this hedge fund: (9/24/98)
- - - - - - - - - - - - - - - - - - - - - - - The aim: give Long-Term Capital a respite from loan repayments and margin calls that it wouldn't have been able to meet otherwise. Once global markets calm down, Long-Term Capital could unwind some of its failed bets and repay some of its debts. But the firm's long-term future -- and
that of its legendary founder John Meriwether -- remains in serious doubt.
- - - - - - - - - - - - - - - - - - - - - - - - - Frankly, I think these guys are in denial, like any trader who goes through the fear and dread associated with a dramatically losing trade. The serious questions I have are: 1) does any of this bailout cost me, a taxpayer anything? 2) Isn't this the perfect spark for a *real* ripple effect in the financial sector?
I think it is interesting to see the reporting of these stories on day1,
day2, day3, etc. I remember the Nick Leeson (copper trader) story as it broke and the Robert Citron (Orange County/Merrill Lynch) story as it broke and all the quick blaming that came out. It took a while before a truer picture of where the breakdowns (root causes) occurred.
...and honestly, I'm glad John Meriwether has caught his tit in the wringer.
-steve grube