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Message from discussion Why Non-financial Taking a hard hit
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bookr...@yahoo.com  
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 More options Aug 16 2007, 1:40 pm
From: bookr...@yahoo.com
Date: Thu, 16 Aug 2007 10:40:45 -0700
Local: Thurs, Aug 16 2007 1:40 pm
Subject: Re: Why Non-financial Taking a hard hit
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praveen...@gmail.com wrote:
> This is making me sick
> I understand that the whole financial sector and all the subprime
> fallout is hurting the economy, but pulling down the whole market is
> just plain chaos & utterly embarrassing.
> This is for the People at Wall St. " Why don't you guys Stand Up for
> once, I understand that the whole Dot.com bubble has traumatized you
> people and you figure there's somewhat a similarity here, But stop for
> a moment analyze the situation & then react. don't just go freekin
> nuts cause you have the power to do so. Remember the Country's Economy
> is in your hands. And what ever happened to Honor and standing by your
> choices."

This has a simple explanation:
(a) hedge funds facing redemptions sell anything and everything in
their portfolios in order to raise cash, and
(b) "quantitative" hedge funds, which are about equally long and
short, close their positions to reduce leverage or pay redemptions or
avoid margin calls, which means they sell good companies (closing
their long positions) and buy bad companies (covering their shorts)

I hope this explains the counterintuitive price action.

As for the rest: Wall St insiders are hardly honorable, having created
(along with the Fed) the whole real estate bubble and mortgage
disaster that is in the process of unfolding.  Now that the game is
up, they are running for the exits since the last person out is the
one left holding the worhtless mortgage-backed CDO paper of the lower
tranches.

The little guys can either get out of the way, or understanding what
is happening get on for the ride down.  Just staying in bad positions
is pretty dumb once you see what's going on.

I personally regard this much volatility as a gift, it is a tough
trading environment but potentially extremely profitable.  Heck, if
you didn't have any better ideas, just buying VIX calls a few weeks
ago would have been great ;)  Not only is this profitable, but I can
rest easy knowing that I helped take down the scum at AHM, NFI, CFC,
IMB, ...  sorry for some of the house buyers who're gonna get burnt,
but the people working for those companies who helped con people into
unrepayable loans on horrible terms had it coming.


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