Quote from flytiger:
Gretchen says $51bb in total exposure. This morning NYTimes. That works.
You sure mean this by Gretchen:
..."
For SAC, this figure, known as total regulatory assets, stood at $50.9 billion, according to an S.E.C. filing made by the fund last Tuesday.
There is a big difference between $14 billion and almost $51 billion, of course â and it is leverage. A wonderful tool that generates heightened profits when assets are rising, leverage can crush you when it comes time to sell.
Adding to the difficulty in unwinding a large portfolio is this fact: When Wall Street firms get a whiff of trouble at a fund whose holdings they know well, they are known to capitalize by front-running â buying and selling in advance of the fundâs forced trades, increasing its losses as it liquidates.
That is precisely what happened when Long-Term Capital Management hit the skids in 1998. Some brokerage firms that held the fundâs securities profited from such front-running after being allowed to pore over its books as regulators fashioned a rescue. These trades exacerbated Long-Term Capitalâs losses.
In other words, in a liquidation, Mr. Cohen may learn how loyal, or not, the firms on which he lavished such hefty commissions over the years will be. When it comes to unwinding a huge portfolio, these firms may make a notable 2004 art purchase by Mr. Cohen â of a tiger shark in formaldehyde, by Damien Hirst â look like a guppy.
Knowing a firmâs portfolio positions, especially if it is in distress, is a crucial edge, to use the governmentâs word, that Wall Street has over the rest of the world.
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http://www.nytimes.com/2013/07/28/b...richter-scale.html?ref=gretchenmorgenson&_r=0
