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How to lose $17 billion in a few days...

Recs

14

May 12, 2008 – Comments (6)

Convince yourself that your leveraged beta is great "alpha" and continue making overly risky bets with only a sliver of equity to absorb the losses. Oh yeah, and pass the blame when the bankers finally wise up and pull the plug on your margin.

How can anyone do that? Hey, if you're awesome enough, you don't even have to have more than a single web page for your multibillion-dollar fund. 

Read the whole thing at the WSJ. Here's a brief sample: 

peleton blowup

6 Comments – Post Your Own

#1) On May 12, 2008 at 10:06 AM, imobillc (< 20) wrote:

Great post!

I would highly recommend it!

Mars

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#2) On May 12, 2008 at 10:06 AM, imobillc (< 20) wrote:

Great post!

I would highly recommend it!

Mars

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#3) On May 12, 2008 at 10:13 AM, f3ihoty47gn9 (29.58) wrote:

Mmmh leverage..it's like Newton's evolution on steroids..like having 1 mutation every 10 people instead of every 10^8

How long until they realize they can actually multiply leverage multiples by borrowing with borrowed funds as margin? Now THAT is scary..

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#4) On May 12, 2008 at 10:14 AM, imobillc (< 20) wrote:

Great post!

I would highly recommend it!

Mars

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#5) On May 12, 2008 at 6:17 PM, FleaBagger (29.42) wrote:

Hey Markus, tilt your head to the right when you look at this:

Doesn't it look like a bearded man wearing a turban?

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#6) On May 13, 2008 at 10:49 AM, martinfrosa (56.37) wrote:

Beller must be the dumbest man in finance.  He supposedly has two decades of experience and yet, he seems not to have known that mortgage-backed securities are illiquid and that bids for this stuff can vaporize.  For those of us with memories, we can recall the 1995 collapse of David Askin's Granite Capital (a prominent mortgage fund) and the near collapse of Mike Vranos' mortgage fund and the near collapse of Appaloosa Capital, yet another mortgage fund, all in the same year.  History repeats itself and those who pay attention can learn something from it.  This stuff is toxic and always was.

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