[A-List] Europe: snowballing financial mayhem

["Charles Brown" <cbrown@xxxxxxxxxxxxxxxxx>]

Snowball traders playing loose in high-risk leverage game
By Gillian Tett
Financial Times: March 9 2007

It is a truth almost universally acknowledged that a hedge fund in
possession of a vast pile of finance will eventually start pursuing
risky strategies when markets look too boring for too long.

^^^^^
CB: The sounds like another tale that has reached the author. I speculate
that the richest don't do much risking, but rather go for guaranteed money
making , like the Casino owners , in the main. It is absolutely guaranteed
that the house wins overall at a casino.

The very name "hedge" fund implies a strategy to reduce risk,"hedge bets".



Furthermore, as with the big hedge fund   
failure of Long-Term Capital Management (LTCM) in 1998 which was bailed out
by the U.S. Fed and central banking system when it failed, if  hedgefunds
have the US government as guarantor when they fail, that means they are
_not_ taking  risks.  That's state-monopoly, finance capital 2007 style for
ya. The state guarantees the finance monopolies their gargantuan profits.
The state is a trustee and guardian for finance institutions, saving them
from their own "excesses".


So, what gives ? Is it that with the vast pile of cash, they might as well
loan/invest some of it riskily, because one thing capitalists don't want to
do is let their capital just sit around ? 


^^^^^^^

Thus it should be no surprise that the era of ultra-low volatility that
existed until last week has produced endless rumours about hedge funds
using high-octane gambits to create returns. But could this gamble with
risk have seeped into some corners of the corporate world as well?

Until now, it has been presumed that the answer was "no". After all,
outside the private equity sector, there has been precious little
evidence that the corporate world has been loading itself up with excess
leverage.

But in recent weeks, a tale has reached me about the emergence of some
high-risk funding antics involving mid-sized companies in places such as
Gemany and Italy.

Clip-

I would hazard a guess that the actual number of snowball deals in the
markets is still relatively small though it is impossible to tell: such
deals are apparently being placed, in great secrecy, in private markets
and often involve privately held companies, such as the German
Mittelstand. Indeed, the bulge-bracket banks often only learn about them
as a result of associated hedging.

^^^^^
CB; Private Property is significantly Secret Property.