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Department of Whatever
Posted by Tyler Cowen on October 28, 2008 at 04:26 PM in Current Affairs | Permalink
Comments
Hedge Funds unwinding due to the VW short squeeze. You have to unload something.
Posted by: nelsonal at Oct 28, 2008 4:39:48 PM
Now there's something you don't see every day.
Posted by: Mercutio.Mont at Oct 28, 2008 4:55:33 PM
@Mercutio.Mont
No, it is more like every other week.
Posted by: Tony at Oct 28, 2008 5:56:52 PM
Hedge Funds unwinding due to the VW short squeeze. You have to unload something.
Wouldn't the down go down if that were the case?
Posted by: Jorge Landivar at Oct 28, 2008 6:23:00 PM
Bah, s/down/DOW/
Posted by: Jorge Landivar at Oct 28, 2008 6:23:47 PM
Future News, 10/29/2008:
Dow down 900
Posted by: a person at Oct 28, 2008 6:37:19 PM
They're short VW, and likely short most of the financials as well, very poor performing banks (think NCC were some of the best performers of the day, while BUD was only up 2% which I interpret as means short focus hedge funds and risk arb trades were unwinding. They were net short US equities so they go up as they reduce leverage to face the VW margin call.
Posted by: nelsonal at Oct 28, 2008 6:50:50 PM
I love the title of this post, Tyler! So much better than the ridiculous headlines used in the media to describe what happened in the stock market on any given day. My favorites are variants of "a surge of buyers send the Dow up XXX points," as if buyers can somehow outnumber sellers. Or "Dow falls 20 points on poor earnings from GE." My favorite from today: "Dow jumps nearly 900 as investors seek bargains." In a couple weeks, if the Dow is down 1,000, they'll be calling the same stocks over-priced.
Posted by: dave at Oct 28, 2008 9:08:31 PM
I believe in the semi-strong efficient markets hypothesis. That is, around 2pm EDT today, something happened to make the fair value of equities 8% higher.
Posted by: Paul N at Oct 28, 2008 9:23:20 PM
If I had to guess, I'd have to guess that McCain's odds got a lot
better today.
Posted by: indiana jim at Oct 28, 2008 9:31:11 PM
Nelsonal - If a hedge fund gets a margin call, is it the same equity to stock ratio that triggers an individual account margin call? For individuals, that means that leveraged portfolio net equity has declined to 25% or less of the portfolio, down from a 50% minimum initial equity. If true, that means at least a 50% loss (from 50% to 25%), or is it not against the whole hedge fund assets?
Posted by: liberalarts at Oct 28, 2008 9:39:55 PM
Yep, the Drudge page shows McCain rising and Obama sinking among likely
voters with the margin too close to be significant. If McCain goes up
among likely voters another 2% and Obama falls another 2%, expect another
10%+ day for the Dow.
Posted by: indiana jim at Oct 28, 2008 9:46:16 PM
Drudge?? Really? How about 538.com?
Posted by: Cliff at Oct 28, 2008 9:54:25 PM
I can't seem to get my email to accept your
email address link. But this might be a
useful piece of information in the ongoing
debate about whether there's really a
credit crunch.
http://macroblog.typepad.com/macroblog/
2008/10/a-home-price-in.html
It's a piece in the Atlanta Fed's Macroblog,
and, among other things, it shows the
amount of commercial paper outstanding
over the recent past, including a
precipitous decline in the past coulpe
of months.
Posted by: Donald A. Coffin at Oct 28, 2008 10:15:20 PM
LIBOR OIS & TED spreads ended the week down 21% and 27%CP Yields on 90day paper increased to 4.9% on Firday, posting a 14% decrease for the week
5 year spreads on A-rated corporate bond increasing 4.9% and B-rated bonds increased 3.7% for the week.
Posted by: yoyo at Oct 28, 2008 11:04:32 PM
So, since they brought it up, we are about to elect a Marxist, a very likable Marxist, the kind of Marxist my boys could shoot hoops with, but a Marxist.
Anyway, we are going to elect a Marxist because the last guy was so bad. Is anyone willing to admit that this reflects poorly on the system?
Posted by: Andrew at Oct 29, 2008 4:58:02 AM
Andrew, I think things are so bad we should go back to slime-based government, like back when Vladimir Slimen ruled in 30,000,000 BC. I hear you, I hear you, slime rule doesn't work, much like it hasn't ever worked in the past, but that won't stop the march of the brainless two-celled slimes. After all, we've never had a *real* system of slime rule.
Posted by: super at Oct 29, 2008 5:32:02 AM
Anyway, we are going to elect a Marxist because the last guy was so bad. Is anyone willing to admit that this reflects poorly on the system?
And what system do you propose? (And no, I don't think the slime-based system will work better. At least not in the longer short term....)
Posted by: at Oct 29, 2008 6:23:25 AM
Liberalartists
No, most hedge funds are on portfolio margin which takes their equity, option, and futures position and nets the risk of all of them together to set a margin.
Here's optionsexpress' portfolio margin page:
http://www.optionsxpress.com/welcome/tour/account/portfolio_margin.aspx
Posted by: nelsonal at Oct 29, 2008 6:26:53 AM
Okay, I see. Not ready yet. Talk to you again in 4 years.
Posted by: Andrew at Oct 29, 2008 7:12:35 AM
Indiana Jim, your causation arrow is pointing in the wrong direction.
Posted by: meter at Oct 29, 2008 8:58:13 AM
