For a few years, I've been preaching about our impending doom.... so many resons why the system will fail:
- US Federal Deficit
- US Trade Deficit
- Money Supply inflation
- Pension Shortfalls
- Consumer over-indebtment
- Real Estate Bubble
- High Tech Bubble.. (nah, that's so 2001)
- and... out-of-control derivatives.
Well, as we know the tech bubble burst. The real eastate bubble is showing signs of being about to burst.... what was that about the last item?
Some of you might not recall the Long-Term Capital Management debacle in 1998.... but here's a chance to catch up.
A large US company called Amaranth just lost 4.6 billion US$ playing natural gas futures.
Bloomberg reports this morning:
“Amaranth Advisors LLC, the hedge fund company that imploded after wrong-way bets on natural gas, said losses swelled by $1.4 billion this week because it had to unload assets at a discount to avoid a shutdown.
“Amaranth funds plunged 65%, or more than $6 billion, this month as of Sept. 19, founder Nicholas Maounis said in a letter to investors late yesterday. The Greenwich, Conn.-based firm handed over its energy-trading portfolio to outside investors and sold unidentified holdings to stem further losses and ‘avoid termination of our credit facilities and the risk of a consequent forced liquidation by our creditors,' he said.
Is this just the beginning? Are there others out there who will blow up? Futures are risky, but these guys are experts. What I am worried about mostly is financial derivatives. And the guys that hold the mortgage backed securities in their pensions or funds... what will happen when the "mortgage-backed"part, the home owner fails to pay up?
Here is a link to the Washington Post story:
http://www.washingtonpost.com/wp-dyn/content/article/2006/09/19/AR2006091900056.html
Comments