Anorak Scoops Washington Post On Sovereign Funds Debt
FIVE days ago Anorak reader Chenier doubted whether the US could:
“persuade the sovereign funds, which are about the only source of that much capital, that they should throw yet more good money after bad”
The Washington Post has finally noticed, and reports today that
“…the sovereign wealth funds of Asian and oil-rich Middle Eastern nations, which have come to the rescue of U.S. firms before only to see these investments erode, showed little interest in taking a similar gamble”.
What odds Manchester City owning Manchesterr United’s sponsors..?
Posted: 25th, September 2008 | In: Money Comments (4) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink
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Regular Features
September 25th, 2008 at 3:46 pm
…hedges….bush…. it’s all horticulture to me….
September 25th, 2008 at 2:12 pm
I wish I could make hedge fund bets and short sell. Can one start with a tenner?
September 25th, 2008 at 1:48 pm
Can’t argue with that, Lone.
What they did was persuade themselves that the market would come up with a solution, and the market did.
Unfortunately, the solution consisted of the ratings agencies agreeing that garbage loans, packaged with other garbage loans, would be transmuted into the gold of Triple A Rated bonds.
The ratings agencies were, of course, paid by the people doing the packaging.
And then there was the whole hedging debacle, where the market created the credit default swap which was supposed to be a form of insurance.
It wasn’t insurance, and it wasn’t a security, and it was completely unregulated, with unsurprising results.
The Credit Default Swaps markets are huge because they are an excellent way to speculate at little initial cost.
There was no requirement for anyone to have an insurable interest in the assets underlying the swaps.
Ok, for the benefit of those at the back who are waking up from their slumbers long enough to ask what an insurable interest is, it goes something like this:
Anorak could take out a vast insurance policy on Anorak Towers, and if it burned down Anorak would get lots of dosh but no Anorak Towers.
Insurers won’t let me take out a vast insurance policy on Anorak Towers, because I would have a clear interest in setting fire to Anorak Towers and collecting lots of dosh.
Of course, I wouldn’t have Anorak Towers, but then I didn’t have Anorak Towers in the first place.
It was the credit default swaps as well as its Troubled Assets which took AIG down, and there are vast numbers of the things out there because Lesson 1 in hedging is that hedging reduces risks.
Unfortunately Lesson 2 in hedging is no, it doesn’t, but most people only stayed awake for Lesson 1…
September 25th, 2008 at 1:15 pm
In 1998 the world suffered from the Asian crisis. At the time Gordon Brown, chancellor, was also president of the G7 group of finance ministers. Guess what he said then :-
‘We will not let high risk hedge fund speculation by the few translate into a wider risk for the many and destabilise the financial system on which we depend for prosperity’
What has he achieved on the last 10 years ? Exactly that what he said shouldnt’ happen. He is rubbish.