How do you lose $5 billion in one week?
- Thread starter OddTrader
- Start date
Thanks for recapitulating what we already know 
. So, with that logic, a speedboat would have easily navigated around the iceberg that sank the Titanic. But does that preclude its captain and crew of any responsibilities whatsoever? Could it be that their hubris, such as in their belief that their ship was invincible, (isn't it even more ironic, given the name of the hedgefund, derives from a greek word meaning "never fading", much like the name of the ship being mentioned here) or their lack of preparation for emergency situations contributed to its demise? I wonder if Amaranth even bothered to do stress testing on their investments.
In addition, I feel that Hunter's trading strategy itself was just downright reckless and deepply flawed - looking for the calendar spread to widen even further as they came closer and closer toward expiration, betting that big on such a purely speculative (and not at all "hedged" or arbitraging) trade. I wonder if he ever read the first chapter of The Market Wizards, or if he felt like just playing God.
. So, with that logic, a speedboat would have easily navigated around the iceberg that sank the Titanic. But does that preclude its captain and crew of any responsibilities whatsoever? Could it be that their hubris, such as in their belief that their ship was invincible, (isn't it even more ironic, given the name of the hedgefund, derives from a greek word meaning "never fading", much like the name of the ship being mentioned here) or their lack of preparation for emergency situations contributed to its demise? I wonder if Amaranth even bothered to do stress testing on their investments.In addition, I feel that Hunter's trading strategy itself was just downright reckless and deepply flawed - looking for the calendar spread to widen even further as they came closer and closer toward expiration, betting that big on such a purely speculative (and not at all "hedged" or arbitraging) trade. I wonder if he ever read the first chapter of The Market Wizards, or if he felt like just playing God.
There is more money available to funds than there are good traders who can manage that money. So the solution is logical and very simple: they hire âless giftedâ traders because they do not want to miss commissions and fees.
What the minimum standard for these â less giftedâ traders is depends on the unscrupulousness of the fund manager. It will be in the wide range between PhDâs and complete idiots.
Itâs funny that you get in jail for robbing a bank, but not if you lose in an irresponsible way 5 billion $. Money that was in a way stolen from the investors. You apparently can get away with these kinds of practices, although there are this like CFTC, SEC and NFA.
In Russia they have a more efficiently system: they kill him. This has two advantages: first of all the guy will never repeat his action again; and secondly other âtradersâ will think twice before taking real risks.
What the minimum standard for these â less giftedâ traders is depends on the unscrupulousness of the fund manager. It will be in the wide range between PhDâs and complete idiots.
Itâs funny that you get in jail for robbing a bank, but not if you lose in an irresponsible way 5 billion $. Money that was in a way stolen from the investors. You apparently can get away with these kinds of practices, although there are this like CFTC, SEC and NFA.
In Russia they have a more efficiently system: they kill him. This has two advantages: first of all the guy will never repeat his action again; and secondly other âtradersâ will think twice before taking real risks.
Q
http://www.theglobeandmail.com/serv...RAMARANTH23/TPStory/Business/?pageRequested=3
"Where were the hedges?" was the blunt assessment of one veteran fund manager in Greenwich.
Amaranth certainly looked like a hedge fund: It dabbled in the requisite exotic derivatives, placed complex trades in the energy market, reportedly took both long and short positions in the stock market, and charged clients expensive commission fees. Yet it was undone by a risky gamble that gas prices would move in only one direction.
In a conference call with investors yesterday, Mr. Maounis blamed his troubles on an unexpected shift in the price of natural gas, and also on other players on the market, who ganged up on the fund without offering it any chance to liquidate its energy stakes "economically."
"We had not expected that we would be faced with a market that would move so aggressively against our positions," he said. "We viewed the probability of market movements such as those that took place in September as highly remote . . . but sometimes even the highly improbable happens."
UQ
OPF (Other people's faults)!
http://www.theglobeandmail.com/serv...RAMARANTH23/TPStory/Business/?pageRequested=3
"Where were the hedges?" was the blunt assessment of one veteran fund manager in Greenwich.
Amaranth certainly looked like a hedge fund: It dabbled in the requisite exotic derivatives, placed complex trades in the energy market, reportedly took both long and short positions in the stock market, and charged clients expensive commission fees. Yet it was undone by a risky gamble that gas prices would move in only one direction.
In a conference call with investors yesterday, Mr. Maounis blamed his troubles on an unexpected shift in the price of natural gas, and also on other players on the market, who ganged up on the fund without offering it any chance to liquidate its energy stakes "economically."
"We had not expected that we would be faced with a market that would move so aggressively against our positions," he said. "We viewed the probability of market movements such as those that took place in September as highly remote . . . but sometimes even the highly improbable happens."
UQ
OPF (Other people's faults)!
Another 'sigma 6' move in the natural gas market? Another one couldn't happen in something like a billion years? Just wait until next year.