Futures Down Triple Digits on Hedge Fund Collapse

Yet another shoe(s) has dropped, as several large hedge funds imploded, leading to global bourses being pressured overnight.

According to the Times of London, several hedge funds with assets of more than $4 billion (£2 billion) were on the brink of collapse last night or had halted withdrawals, despite moves by the US Federal Reserve this week to ease America’s deteriorating credit crisis with a $200 billion collateral lending facility.

Note that the British Financial Press has had a much better handle on the credit/derivative situation than have much of the American press. I’m not sure if its the distance, or perhaps a greater degree of objectivity. My own pet theory is that overseas editors are less impacted by the various scolds who work the refs, i.e., complain the the media is too pessimistic . . .   

Global markets dropped on the news. The FTSE 100 was done almost 2%, while the XETRA-DAX and the CAC40 each lost more than 2.25%. Asia markets were down even more, as the HANG SENG dropped -4.79%, and Japan’s NIKKEI 225 fell 3.33%

Dow Futures were off 150 points as of this writing, with Nasdaq off 23 and SPX futures lower by 15.

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More later . . .

>

Sources:
Hedge funds on the brink as US Federal Reserve cash fails to ease crisis   
The Times, March 13, 2008   
Suzy Jagger
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3542723.ece

Despite the Federal Reserve’s efforts Wall Street fears a big US bank is in trouble
Siobhan Kennedy and Suzy Jagger   
The Times, March 13, 2008   
http://business.timesonline.co.uk/tol/business/economics/article3542775.ece

Carlyle Capital Nears Collapse
PETER LATTMAN
WSJ, March 13, 2008; Page C2 
http://online.wsj.com/article/SB120537974320632835.html

In Dealing With Bear Stearns, Wall Street Plays Guardedly
KATE KELLY, SERENA NG and JENNY STRASBURG
WSJ, March 13, 2008; Page C1
http://online.wsj.com/article/SB120537606195632655.html

Dow Retreats As Doubts Rise Over Fed’s Move
LIZ RAPPAPORT and PETER A. MCKAY
WSJ, March 13, 2008; Page C1
http://online.wsj.com/article/SB120537790851532753.html

Category: Credit, Derivatives, Markets, Trading

Paul A. Volcker Address on Future Challenges

And now, a word from a distinguished central banker:

Monetary Policy Transmission:  Past and Future Challenges
Distinguished Address by Paul A. Volcker
To Conference on Financial Innovation and Monetary Transmission
Sponsored by the Federal Reserve Bank of New York, April 2002

The subject of this conference — innovation and monetary policy transmission — is something that has naturally concerned me over the years. Historically, the issue has appeared in somewhat different guises. I never thought I had really adequate answers, but somehow the system has worked. Moreover, I am afraid that as far as current technological and financial innovations go, I should be listening rather than speaking. I am not a big user of new technologies. My main experience with technology as president of this Bank and then as chairman of the Federal Reserve Board was asking why staff needed new computers every four years. I always had the feeling that capacity was expanding exponentially over time, but I did not know that monetary policy was becoming any better.

Nonetheless, I believe you are onto an intriguing subject. Indeed, some of the topics covered in your papers remind me of questions I have thought about before. For example, when I was here and when I was in Washington in the late 1970s and early 1980s, we embarked on some new approaches to monetary policy that depended upon control of money by the means of quantitative control of the reserve base.

Hat tip: Money: What it is and how it works

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