From the WSJ. Looks like we're not out of the woods yet, not by a long shot.
Murt
"Another Bear Stearns Hedge Fund Is in Trouble
By Kate Kelly
Bear Stearns Cos., already forced to shut two hedge funds that bet heavily on the risky subprime-mortgage market, is now facing big losses in a third fund that has roughly $900 million in mortgage investments, according to people familiar with the matter.
The fund, known as the Bear Stearns Asset-Backed Securities Fund, ran into trouble in July and has refused to return investors' money for the moment, according ..."
http://online.wsj.com/article/SB118591963252683893.html?mod=home_whats_news_us?mod=djemalert
Given all the talk in the media about subprime,I thought I would post a few insights on industry.I work in the sector,so I am hoping to dispel some of the myths about subprime.I have no sinister motive here,just trying to spread some knowledge.
more the general portrayal that everyone anyway exposed to subprime is going broke
Not so much 'crunch' as 'freeze' according to today's New York Times lead story http://www.nytimes.com/2007/08/10/b...=th&adxnnlx=1186744051-8/71bzkFmLcVNcAkPZh60w
It is rather optimistic to think there will be any 'doddles' or 'waddles'.....more like a stampede! The problem is during the past decade cheap money and unsupported borrowings have seduced the public into a false sense of security. Initial low introductory rates or fixed-rate terms on many mortgage loans which a few years ago were affordable to borrowers are ending and thousands of borrowers will be shifted onto higher variable rates. In the impending conditions of 'credit freeze' if they don't have considerable savings to tide them through they are in trouble.
Much of the sell-off in stock markets around the world is related to the uncertainty surrounding the true extent of the impact of sub-prime lending in the US.
Does anyone have any info around what the best-guess estimate for this at this time?
tia
M
From what I can see whatever has been rising consistently for the last 6 months (anything, gold/euro/comodities/specific shares) and so is what people have lots of high risk / highly leveraged open positions on, and are now being forced to close them, sometimes to non-intuitive conclusions: Dollar is now rising against the Euro even though it's banking system is bankjaxed and the market is pricing in cuts in the $ interest rate, which ordinarily would cause the dollar to fall.
Conversely you would imagine that anything which has been falling consistently for the past 6 months would also have lots of open short-sell positions against them and I wouldn't be surprised to start seeing a number of stocks which have been in the doldrums start rising dramatically for no aparent reason.
A good time for the contrarian investor.
I think your analysis is spot on here and some great opportunities are emerging as hedge funds are having to sell successful positions to meet margin calls on recently marked down securities.
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