Deutsche Bank toxic derivative losses

Thrugelmir

Malthusian wrote: »

Nobody watches films about hedge fund managers striking it lucky.

Read the book. There was no luck. Likewise asking their investors for further funding to maintain their positions wasn't plain sailing. When you are against the might of the open market.

AG47

Where are all the DB cheerleaders now, all gone very quiet

They are on very shakground with more than 50trillion toxic derivatives weapons of mass financial destruction

Malthusian

Very quiet indeed. I've just got back from holiday, has Deutsche Bank collapsed yet?

Thrugelmir wrote: »

Read the book. There was no luck.

When I have read every decent novel in the corpus of human literature I might consider resorting to books about how rich people struck it lucky during the last crash.

Everyone knew a crash was coming, as that's a truism, and everyone who read The Economist knew there was a sub-prime debt bubble. Thousands of traders called the bursting of the sub prime bubble, lost their investors' money and now work in a provincial bank in Iowa because they called it too early.

The guy from the Big Short had no more insight than the rest did, they were just one of the tiny minority that manages to stay solvent longer than the market stays irrational. Every dope who wins on the horses is convinced that they had a special insight into the winning geegee's form.

Malthusian

ilovehouses wrote: »

They later wrote a book about how to be good at calling coin tosses.

The Big Short is essentially about the very rare case of someone who employed the Martingale Strategy successfully. (Where you sink ever-increasing amounts of money in a bet, knowing that it must eventually pay off.)

Thrugelmir

ilovehouses wrote: »

They were lucky the market stopped being irrational whilst they were still solvent.

Only was ever matter of time. Was ultimately a French bank that rattled everyones cages. Causing the house of cards to finally implode. When you are playing poker for high stakes no one shows their hands or any emotion.

antrobus

Thrugelmir wrote: »

Only was ever matter of time. Was ultimately a French bank that rattled everyone's cages. Causing the house of cards to finally implode. When you are playing poker for high stakes no one shows their hands or any emotion.

BNP Paribas, 9th August 2007

https://www.reuters.com/article/us-bnpparibas-subprime-funds-idUSWEB612920070809

Malthusian

God, that takes me back.

As the article says though, that wasn't the start of the crisis, as the market for loans to people who couldn't pay them back had already evaporated, and investors were already running for the exits.

!!!8220;The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly, regardless of their quality or credit rating,!!!8221; it said in a statement.

!!!8220;... BNP Paribas Investment Partners has decided to temporarily suspend the calculation of the net asset value as well as subscriptions/redemptions, in strict compliance with regulations, for these funds,!!!8221; it added.

BNP Paribas said the three funds had declined rapidly in size in the past few weeks to 1.593 billion euros ($2.19 billion) at August 7, down from 2.075 billion at July 27. [...] Most of the decline was due to investors pulling out of the funds, said Alain Papiasse, head of asset management and services at BNP Paribas.

And the hilarious thing is that these were supposed to be money market (i.e. cash) funds.

AG47

Malthusian wrote: »

The Big Short is essentially about the very rare case of someone who employed the Martingale Strategy successfully. (Where you sink ever-increasing amounts of money in a bet, knowing that it must eventually pay off.)

The question is what will happen next time this happens?

Thrugelmir

ilovehouses wrote: »

That's the point Malthusian was making earlier though.

Cash is King not the markets. You can value a piece of paper at any price you wish. Ultimately though if you don't have money in the bank you cannot trade or do business. Many a profitable business goes under.

Malthusian

AG47 wrote: »

The question is what will happen next time this happens?

Next time what happens? Traders betting on an imminent crash? It's happening right now (as there are millions of traders and they have to bet on something). When a crash does eventually happen, whichever trader made the most money out of guessing the right date will have books and probably a film made about him (or her) and his amazing clairvoyant abilities.

The thousands of traders who called the crash too early and couldn't stay solvent longer than the market stayed irrational will be sacked and end up in provincial banks in Iowa, or become maths teachers, or join the priesthood, or one of the other traditional jobs for failed traders.

If the trader who gets all the books written about them has any sense, they will retire on a high, as Burry has. (His firm, Scion Asset Management, technically still exists, but according to their filings has only $177m under management, which given Burry's fame is basically nothing.)

Oh and Deutsche Bank will still be there.