Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21
Last Chance to GET FREE Money Crypto Mining with Your Desktop PC - 2nd May 21
Will Powell Lull Gold Bulls to Sweet Sleep? - 2nd May 21
Stock Market Enough Consolidation Already! - 2nd May 21
Inflation or Deflation? (Not a silly question…) - 2nd May 21
What Are The Requirements For Applying For A Payday Loan Online? - 2nd May 21
How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part1 - 1st May 21
Are Technicals Pointing to New Gold Price Rally? - 1st May 21
US Dollar Index: Subtle Changes, Remarkable Outcomes - 1st May 21
Stock Market Correction Time Window - 30th Apr 21
Stock Market "Fastest Jump Since 2007": How Leveraged Investors are Courting "Doom" - 30th Apr 21
Three Reasons Why Waiting for "Cheaper Silver" Doesn't Make Cents - 30th Apr 21
Want To Invest In US Real Estate Market But Don’t Have The Down Payment? - 30th Apr 21
King Zuckerberg Tech Companies to Set up their own Governments! - 29th Apr 21
Silver Price Enters Acceleration Phase - 29th Apr 21
Financial Stocks Sector Appears Ready To Run Higher - 29th Apr 21
Stock Market Leverage Reaches New All-Time Highs As The Excess Phase Rally Continues - 29th Apr 21
Get Ready for the Fourth U.S. Central Bank - 29th Apr 21
Gold Mining Stock: Were Upswings Just an Exhausting Sprint? - 29th Apr 21
AI Tech Stocks Lead the Bull Market Charge - 28th Apr 21
AMD Ryzen Overclocking Guide - 5900x, 5950x, 5600x PPT, TDC, EDC, How to Best Settings Beyond PBO - 28th Apr 21
Stocks Bear Market / Crash Indicator - 28th Apr 21
No Upsetting the Apple Cart in Stocks or Gold - 28th Apr 21
Is The Covaids Insanity Actually Getting Worse? - 28th Apr 21
Dogecoin to the Moon! The Signs are Everywhere, but few will Heed them - 28th Apr 21
SPX Indicators Flashing Stock Market Caution - 28th Apr 21
Gold Prices – Don’t Get Too Excited - 28th Apr 21
6 Challenges Contract Managers Face When Handling Contractual Agreements - 28th Apr 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Over Leveraged Hedge Funds Dancing with the Devil

Stock-Markets / Credit Crisis 2008 Mar 15, 2008 - 04:52 AM GMT

By: Anthony_Cherniawski

Stock-Markets Best Financial Markets Analysis ArticleHedge funds are now facing their worst crisis since the 1998 Long Term Capital meltdown. Banks are now raising their collateral requirements even on hedge funds with the best (AAA-rated) assets. Many hedge funds have made money for their wealthy investors by borrowing heavily to buy high quality mortgage securities. Their earnings were made by exploiting the spread between the interest paid on shorter-term loans and the interest earned on the longer-term mortgages. However, they figured if a little debt could magnify returns, then a lot of debt would be that much better. Until, that is, the subprime market caused a hiccup in higher-quality bonds, too. Carlyle Capital , which leveraged its portfolio 32-to-1, collapsed on Thursday after failing to come up with additional capital to protect itself from creditors seizing its assets. One domino after another is falling after the turmoil is forcing other hedge funds to come up with extra capital. The problem is, their assets are also deteriorating, as they cannot find a market, even for their higher-quality debt instruments.

The Chicago Mercantile Exchange raised the margin limits for transacting five- and 10-year Treasury futures and currencies. Such action is to be expected whenever volatility increases, but it is a mark of the exceptional market conditions and will further add to the cost of trading. EDITOR'S CHOICE

Is the Fed taking bold steps or is it panicking?

The Bank of England, the key European central banks, and the Bank of Canada all joined in a co-ordinated move with the U.S. Federal Reserve in a mix of policies to halt the downward spiral in the credit markets, expanding on the "shock and awe" tactics used late last year.

The press is still under the impression that the Fed is soaking up subprime debt. This could not be further from the truth. Indeed, they are accepting AAA-rated mortgages from Fannie Mae and Freddie Mac as collateral for the loans that they are extending to the banks, even if it is being currently valued higher than what the market will bear. The intention of these short-term loans to the banks is simply to buy time until the market settles down.

Bernanke Flies his helicopter again.

The U.S. Treasury just released its latest paper on The President's Working Group on Financial Markets . Serious investors should read this update, which will tell you to what extremes Bernanke, Paulsen and Wall Street are willing to go to keep the markets afloat.

Jim Rogers, a prominent commodities trader says, “This man just goes from bad to worse…” in an interview at CNBC . He thinks we should abolish the Fed, because they only have one cure for all our ills…more debt.

WSJ – Recession confirmed.

The U.S. has finally slid into recession, according to the majority of economists in the latest Wall Street Journal economic-forecasting survey, a view that was reinforced by new data showing a sharp drop in retail sales last month.

The survey, conducted March 7 through 11, marked a precipitous shift to the negative from the previous survey conducted five weeks earlier. For example, the economists now expect nonfarm payrolls to grow by an average of only

9,000 jobs a month for the next 12 months--down from an expected 48,500 in the previous survey. Twenty economists now expect payrolls to shrink outright. And the average forecast for the unemployment rate was raised to 5.5% by December from 4.8% in the previous survey.


Treasuries Rally as market sells off.

NEW YORK ( MarketWatch ) – Treasuries soared Friday after news that the Federal Reserve and J.P. Morgan Chase agreed to provide funds for ailing investment firm Bear Stearns reminded investors of how deep the credit crisis is running.

The market takes the view that the Fed will aggressively cut interest rates next week by .75%.

The report on the Consumer Price Index was unbelievably low last month, mainly because of some quirky calculations on the price of fuel, which may show up in the following month. If the CPI numbers are being “staged,” then it appears that Bernanke now has permission to reduce interest rates aggressively again next week. Nothing like doctoring the numbers, eh?


Cashing in on the high price of gold.

Debt-laden consumers are cashing in on the high price of gold by selling their class rings, gold jewelry and knick-knacks for the gold content. "People are bringing in stuff their mother gave them, stuff they're not wearing, broken chains, broken rings, and walking out with $900, $1,000," says Richard Rozhko, owner of Howard Jewelry in Chicago. Silver, too. "They're bringing in knives, forks, spoons," Rozhko says. Sign of a top?




The Nikkei hits a 2-½ year low. 

Japan's Nikkei index hit a 2 ½ year low this morning. The main reason for the sell-off was that traders were unloading Japanese companies dependent on exports to the U.S. There is a slew of data due to be announced next week, so trading in the Nikkei was thin, as investors were waiting the economic announcements to see the direction of the economy.





China Shares fall on fears of a tighter economy.

SHANGHAI , China (AP) — Chinese stocks fell to nearly an eight-month low on Thursday as investors unloaded shares on fears over monetary tight-ening and lower corporate earnings growth.

The decline below the psychological level of 4,000 points prompted waves of panic selling, analysts said. They said the market would likely look to Wall Street for cues in coming days.




White House, Treasury support strong Dollar.

WASHINGTON ( Thomson Financial ) - US President George W. Bush and Treasury Secretary Henry Paulson today repeated their standard strong-dollar statements as the greenback continued its slide to successive record lows.

'A strong dollar is in our national interest,' Paulson said in response to a question after delivering a major speech on financial sector regulatory reforms. Yeah, right, uh-huh.




Fed's actions helping the banks, not the homeowners.

NEW YORK ( Fortune ) -- The government is showing considerable ingenuity in devising new tactics to fight the credit crunch. But some observers fear that the innovations risk making matters worse - by fueling inflation and insulating executives who made reckless bets from the full wrath of the market. The Fed's actions are keeping banks from having to show the true extent of their bad bets. Meanwhile, homeowners face foreclosure and savers see their purchasing power erode. This is a toxic combination for the economy.




Is the Midwest getting preferential treatment? 

The Energy Information Administration's This Week In Petroleum asserts that, “The U.S. monthly average retail regular gasoline price is projected to peak near $3.50 per gallon in May and June. It is important to note, however, that even if the national average monthly gasoline price peaks near that level, it is possible that prices during part of a month, or in some region or at some stations, will cross the $4 per gallon threshold.” Even now, gasoline prices are at historically high levels.




Cold weather alone wouldn't cause this spike. 

The Natural Gas Weekly Update reports, “Even though the weather in much of the country has become warmer in the past several days, a significant winter storm moved through the middle of the country and buried the Ohio Valley in snow this report week, likely providing price support in consuming areas in the Northeast and Midwest .” At this point, I think it's more than just the weather causing higher natural gas prices.

Greenspan's Legacy

In his latest book, Bill Fleckenstein pints out that Alan Greenspan didn't do us any favors when he bailed us out of the stock market decline in 2002. Instead of curing the problem, in the attached article , Ian Pressley suggests that Bernanke ought to read about Greenspan's mistakes so that he can cure his own. Maybe we all should read the book Here's a quote,

``Greenspan bailed out the world's largest equity bubble with the world's largest real-estate bubble,'' he writes. ``That combination easily equates to the biggest orgy of speculation and debt creation the United States (and the world) has ever seen.''

Now Congress is trying to step in and offer $15,000.00 to all new home buyers to support the market. Fellas, why not do nothing at all and let the average price of a home drop by that much instead? Then we can keep the crooks trying to get a piece of the action out of the picture.

We're on the air every Friday.

Tim Wood of , John Grant and I are back in our weekly session on the markets. This week should be fascinating. You will be able to access the interview by clicking here .

New IPTV program starting in March.

I am now a regular guest on every Thursday at 4:00 pm EDT . The first two show is archived. Look for Archives, March 6 and 13, segments 1 & 2.

Please make an appointment to discuss our investment strategies by calling Claire or Tony at (517) 699-1554, ext 10 or 11. Or e-mail us at .


Anthony M. Cherniawski,
President and CIO

As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

Anthony M. Cherniawski Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in