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					They refused to admit
   - Read "Save the Wall Street"
   In the long-term capital management company has 4.3 billion huge losses, reached
the brink of bankruptcy and thus cause the whole to come to rescue Wall Street after
the LTCM partners is how to deal with this event for? They really know their failure
caused it?
   On the surface, these long-term capital management company partners on many
public occasions to show the attitude of a kind and responsible, apologize to their
investors. In fact, they never say clearly what is wrong with them! In their view, the
company's crisis is not occurring from the inside, but entirely by external
factors. The head of John Meriwether who had been denied, resulting in the crisis is
mainly because the excessive use of financial leverage, which leads to Zichanzuge
Guimokuozhang over. Therefore, they will be directed Merrill Lynch, Goldman Sachs,
traders and other companies, accusing them unconscionable and it is very bad deal,
that makes the company fell to such an extent. It seems that they are unwilling to
admit. They said that emerged in August 1998 a significant reduction in market
liquidity, and the resulting rush of cash in September, which makes the Long Term
Capital Management became the scapegoat for the market.
   The company's central figure, Nobel Laureate in Economics marlung
Scholes Fed rescue LTCM occasion of the anniversary meeting, a very
"pertinent" to justify long-term Capital Management, when low
interest credit rating of bonds poor level has expanded to just simply can not be
solved with the risk of default reached a point where. He therefore concluded that
there must be some sort of spread them "liquidity spread" exists,
that is, investors hold bonds with good mobility are willing to pay the premium. In
fact the market did take place at a certain event, leading to investors for fear of further
aggravating the situation and away from the market. So, Scholes criticism, both
academic and practical work department did not this "fear the loss of
market liquidity under pressure factor" into the model, nor on the factors
that may impact on the market price of depth. Which he was "very
sorry." However, Scholes and the company of other highly intelligent
people why is not the "fear of loss of market liquidity under pressure
factor" into the model, and may impact on the market price of depth it?
Clearly, liquidity is only an outward manifestation of the problem, not the
fundamental reason causing this problem. This Scholes avoided a crucial question,
that is why the academic and practical work departments that have long been ignored
and that was quite clearly the existence of liquidity risk. Scholes to strive to justify
themselves in, people can not see any long-term Capital Management Why do you
want to put themselves at great risk because of this analysis. Please note that a speed
of 30 miles per hour, people in cars, but also on the way to leave a Xue whine, but if a
100 miles per hour and drag racing, people simply do not have the right to find fault!
   Based on this understanding, in the Long Term Capital Management suffered a
major loss of historic, they still insisted that he had not committed any error of
principle. They have argued that long-term capital management company has a deep
crisis, mainly because they had a rare encounter financial storm - so the financial
crisis of 2008, we again heard, is too similar to what's familiar.
"I am convinced." Rumsfeld is such corporate heavyweights 艾
里 克 罗 森 explained, "I think we had some situations never before
encountered." Rosenfeld said such a thing as time, it seems that only his
company encountered such a "situation." In fact, this situation
has occurred many times, it is not "rare." Mexico happened,
happened on Wall Street, occurred in Thailand, Russia occurred, the stock market
occurred, occurred in the bond market, silver market has occurred. In a financial
history, prices have fallen too far in the "fat tail" phenomenon
after another. Only those who wish to historical price data, based on research carried
out transactions, their results can only be total crop failure. Of course, they do not feel
that Rosenfeld, who has always insisted that recognition, and now the market is too
big spreads, it is a great opportunity for investment, can not be a better investment
opportunity than now, because the model is so say!
   However, the market has already proven with irrefutable facts, they are completely
wrong. If the Wall Street rescue operations a year later, the market still can not prove
their view is correct, but Wall Street has been gradually recovering, the long-term
Capital Management hedge arbitrage is still no improvement. Therefore, LTCM the
problems, not just the liquidity issue, but its overall investment strategy there is a
clear error. There is evidence that at least two factors on the rout a huge role: first, the
company view of the market and deviation, and second, to protect themselves from
LTCM's drag, a significant reduction of other companies market trading
activities, resulting in the liquidity of the market disappeared.
   December 1999, LTCM lost a total of 45 billion U.S. dollars, and almost the entire
Wall Street dragged down. In early 2000, LTCM has finally started winding up of
cash, and generation of well-known hedge funds such as the camel has fallen meteor,
really is like food do birds cast forest, down a piece vast expanse of land really clean!
But the strange thing is that just 15 months later, after a thousand head of 约翰麦利
威瑟 grinding all kinds of hardships and some partners are easily, and from there to
raise investors 1.5 million reconstruction of a fund, to prepare again "sea
voyage."
?
   Related links: do not do "smart house"

				
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posted:8/27/2010
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