Goldman leveraged to the max?

[RedDuke]

Quote from ByLoSellHi:

No one can even figure out the leverage risks, whether CDOs or otherwise.

Their own risk managers have no idea as to how a LTCM situation would affect them.

That's how complicated the derivatives markets have become.

There are now derivatives of derivatives of derivatives markets, all extremely leveraged at each level.

Precisely.

 

[RedDuke]

Quote from Mup:

You should now by now that will Uncle Sam always comes to the rescue just as they did with LTCM

Very true, but imagine for a second horrific scenario where a hundred or so of LTCMs would need resque at the same time.

 

[E23]

Why does it matter?

Must the books balance?

Is it possible to bust the transactions that may start a chain reaction of bank defaults?

Is it possible to just look the other way?

Do all banks have the same fractional reserve requirements?

Are some banks not required to hold reserves?

 

[jficquette]

Quote from E23:

Why does it matter?

Must the books balance?

Is it possible to bust the transactions that may start a chain reaction of bank defaults?

Is it possible to just look the other way?

Do all banks have the same fractional reserve requirements?

Are some banks not required to hold reserves?

Not anymore. Fed effectively did way with it in 1999.

John

 

[myminitrading]

Quote from jbt:

If Goldman implodes will that cause the collapse of the whole financial system?

Good, thats how opportunities are created that can last a lifetime.

 

[empee]

with govt bailout, there is no risk. Thats why you can take whatever risks you want.

Monster risk and your right == genius (you only need 1 good year to make enough so you can retire anyway)

monster risk and wrong == "too big to fail", govt bailout no biggie.

its russian roulette on a grander scale, your failure rate might be 1%, but then your dead/"fired" but you've taken out enough in the up years cause your a genius.


So, its a riskless trade!

 

[AKUMATOTENSHI]

Who cares someone has to move the market, dope. Go GS go!!!

Akuma

 

[arealpissedgoy]

Quote from a529612:



One way Goldman ratcheted it up is through a joint venture with Bank of New York Co. involving repurchase, or "repo," agreements. Goldman uses stock from the accounts of its own traders

and its hedge-fund clients, selling the stock temporarily and agreeing to buy it back later.

In effect, the cash it receives is a temporary loan. Under the program, Goldman has effectively jacked up debt secured by stocks held for customers and its traders from 90% of the value of those shares to as high as 95% to 98%, people familiar with the program say. More than $50 billion of stocks is involved. -- WSJ 4/30/07

This is one aspect that bothers me. Every broker in the brokerage food chain is doing this. Never mind that the stock they hold for clients doesn't belong to them in the first place.

When things go sour, it won't matter how many billions a trader makes from his trades. He won't be able to take out any money since it'll be tied up by these shady practices.

I fear we're headed for a replay of REFCO, only 100 times larger in magnitude. No wonder Marty Schwartz keeps his Bullion at home.

 

[kowboy]

Quote from myminitrading:

I hope they implode greedy bastards, They should try to be more like Bank Of America, I love Bank Of America.

I read the 10k for Bac. Looks like the total derivatives portfolio is 200 times stock holder equity. They've assigned what looks like a .11% credit risk for the derivatives- 30 mill to cover 27 billion.