OT - Anatomy of a collapse

http://business.smh.com.au/anatomy-of-a-collapse/20080404-23r2.html

"In most margin loans, investors borrow against the value of their existing
shares to buy more shares, but they retain ownership of the whole stake. In the
fundamentally flawed business model pioneered by Tricom and picked up by Opes,
the loan was made on condition that investors signed over ownership of all their
shares as security."

This stockbroking firm used clients' stock as security, and when it hit the fan,
the stock was sold by their bankers to cover their (the bank's) positions WITHOUT
the clients receiving a margin call. WTF?????

And to make matters worse, these pricks moved investors' stock into the
portfolios of their richest clients to shore up those rich clients' accounts.

Now this stockbroking firm are/were relatively small, yet the impact on the local
market has and will be substantial.

Think of the leverage in corporate derivatives (about USD$63 trillion in the US
market) and what would happen if *that* *** imploded. It doesn't bear thinking
about.

Without wanting to sound like Chicken Little, if you're in the market and have a
highly leveraged portfolio, now might be a good time to cash your chips
in....before someone else does it for you, doesn't tell you they've done it,
*and* asks you for 10x your net worth to cover the frikkin' shortfall.


GDS

"Let's roll!"



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