How do you lose $5 billion in one week?

This is very interesting:

Earlier this month, Amaranth bought a portfolio of gas trades from Amsterdam-based ABN Amro Holding NV, which itself had taken them over from MotherRock. It was Hunter, 32, who orchestrated the bets that triggered Amaranth's losses.

So we will now have a 3rd hedge fund group and 1 investment bank involved in holding these positions...
 
Quote from riskarb:

FWIW, Citadel will make a billion off this deal, minimum. They have the capital to ride out the shots the funds may take. WTF would attempt to run stops at $5.00 against Citadel?

Time to buy NatGas. I think it's going to be an abnormally cold Winter.
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Bastardi says colder than average for NE and Midwest, the natty guzzlers.
 
A more probably scenario is that the other funds and banks who take the trades, got a discount and re-sold the trades to customers who had the other side.

Keep in mind that a few firms know the positions, trades and value of the portfolio and this is probably more of an attempt to rescue the NG mkt than a blatant attempt to screw some guy.

If these firms didnt act, some regulator could attempt to step in and "fix" everything. After this incident, its going to be a tough sell for large investors to get involved in NG. Too much negative publicity due to one guy at one firm.
 
After a big 2005, an article or blog piece said he was down 1b in May, or around that time, and then recovered. That's the smoking gun when the fund knew or should have known something was wrong with this hotshot's approach, his supervision and/or their risk controls. Wonder what they reported to their investors then, if anything.

I'm seeing in reports today that some public or retirement money was lost. This fund and the principals have troubles coming. It's starting to feel like recklessness.
 
After the first billion or two, wouldn't something go off in your head telling you "GEE!, maybe I should get out of my position".

Does he still have his job with them?, if so thats amazing. He'll probably be in the "30 under 30" this coming issue.
 
Quote from MiamiHurricanes:

This is very interesting:

Earlier this month, Amaranth bought a portfolio of gas trades from Amsterdam-based ABN Amro Holding NV, which itself had taken them over from MotherRock. It was Hunter, 32, who orchestrated the bets that triggered Amaranth's losses.

So we will now have a 3rd hedge fund group and 1 investment bank involved in holding these positions...
More...

Looks like Citadel has bought Amaranth's portfolio of energy trades.
 
Quote from cashmoney69:

After the first billion or two, wouldn't something go off in your head telling you "GEE!, maybe I should get out of my position".

Does he still have his job with them?, if so thats amazing. He'll probably be in the "30 under 30" this coming issue.
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You would think so. That said, if you do the math, with so much leverage a move of just a small amount could be millions/billions oscilating back and forth as the market does the same.
 
Well, he made 75mill and they cant take that away from him if there is no fraud. What a racket.. Pretty good business model if you ask me. Raise money, make a big bet, hope for the best, take a big cut and retire.
 
I think this was a great lesson for Hunter and for those of us who one day plan to manage huge amounts of money.

Size really matters in this business.

Lucky him, he did it with OPM.
 
Quote from ravenglass:

Looks like Citadel has bought Amaranth's portfolio of energy trades.
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so, dependin' how much of the risk has been laid off, amro came out as a big winner, innit...carryin' the shorts from mom-rock' implosion.
 
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