[FoRK] Reports from the war...
<jbone at place.org> on
Mon Aug 6 10:00:56 PDT 2007
On Aug 6, 2007, at 11:24 AM, Adam L Beberg wrote:
> Well since nobody has been doing it in the debt markets for years,
> we've got that real trouble now.
I seriously doubt that this particular issue is as common or
significant as you're making it out to be. I would imagine all those
asset managers with large debt holdings pay *very* close attention to
mark-to-market value. Otherwise, there's no way to hedge the risk,
much less trade it (which is of course what all those guys do.)
Agreed that we've got problems now, but I seriously doubt it's
because a whole *industry* full of guys woke up recently and said
"holy crap, I wasn't paying attention to the market and my giant
portfolio of debt just ran completely away from me." That isn't my
part of the business, though, so I can't speak authoritatively on
common practice. If what you say is true, it's (very) bad practice.
In any case, yes, there is a lot of bad paper out there --- paper
that should never have been written in the first place. But any real
collapses that occur as a result are going to be because the paper
holders were playing high-risk / high-reward games with said paper.
And yes, you're right, the net result is going to be some oddness in
the market over the next months and years.
It is worth noting, though, that *nobody* seems to have a handle on
the "right thing to do." Inflation rumors (and signs, and rumors of
signs ;-) abound, yet the scuttlebutt on the street is that the Fed
may well *lower* by 25 bp next time around.
Interesting times indeed.
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