QuoteOriginally posted by: meteorthe info you are talking about (except if you were working there) and even more funny because you do that commentI find your signature line even more funny:QuoteOn m'a toujours dit qu'c'etait les meilleurs qui partaient en premiers, j'ai donc choisi d'etre pourri pour rester.Keep in mind, I don't speak your language either...

QuoteKeep in mind, I don't speak your language either...I don't expect an average joe to speak french anyway.

QuoteOriginally posted by: meteorQuoteKeep in mind, I don't speak your language either...I don't expect an average joe to speak french anyway.No relation...

QuoteOriginally posted by: farmerQuoteOriginally posted by: meteorI am 100% confident that if I had asked these people what they were doing, I could have proven to anyone that their chances of making money were no better than luck.If you are so smart, why didn't you trade against them then?To take the other side of a coin flip? indeed, and a coin flip in which they evidently got to say "double or nothing" every time they lost

from my weekly update from prmia, written in prmia's best pigeon english:QuoteAnother sad week for hedge funds: Archeus closesNY Times and Wall Street Journal report the following as of October 31st, 2006. Archeus closes.Archeus Capital, a New York-based fund whose assets under management have shrunk to $700 million from more than $3 billion. Archeus told investors on Monday that it will close, due to too many investor withdrawals, accounting mistakes and inaccuracies with third-party administrator. Those book-keeping issues delayed Archeus’s financial reporting, and many investors were not willing to wait around.Also, wrt regulation:QuoteJohn Snow, the former U.S. Treasury secretary named chairman of Cerberus Capital Management this month, said investors, not policy makers, are the best regulators of hedge funds. Mr. Snow, who left Bush 43’s administration in June after 3 1/2 years, told Bloomberg News he came to favor a “lighter” touch for hedge funds because the industry, which oversees $1.3 trillion in assets, was too big for the government to monitor effectively.

QuoteOriginally posted by: meteorQuoteOriginally posted by: farmerQuoteOriginally posted by: meteorQuoteOriginally posted by: farmerI am 100% confident that if I had asked these people what they were doing, I could have proven to anyone that their chances of making money were no better than luck.If you are so smart, why didn't you trade against them then?To take the other side of a coin flip? I mean, other than the practical fact that I didn't actually know their exact positions or order timing, or have $10 billion...Yes a flip coin, knowing the fact the the coin is fair (since you assume Amaranth business was pure luck) and landed tail far more often than head (or vice versa), as Amaranth was making some big bucks before it collapsed.Anyway, I think your comment is pretty funny, espcially since there wouldn't have been any chance you could have access to the info you are talking about (except if you were working there) and even more funny because you do that comment after they collapsed. So my question is now what will be the next HF which will collapse?...I get the sense that the Amaranth's failure was not due to losing a fair coin flip based on some random fluctuations in energy prices. Instead, other participants in the market could tell that someone (they didn't even need to know it was Amaranth specifically although they may have heard gossip to that effect) was taking on large positions that they would need to liquidate before the contracts came due. I'm sure that some people, far closer to the futures markets than I, can tell when there are anomalous volumes of trade or open interest put on by speculators (read "The Predictors" for a fun example of this).In knowing/suspecting that someone would need to sell a large volume of contracts by some deadline, they profited just by waiting until Amaranth was desperate -- it was not a fair coin flip. Amaranth's loss wasn't bad luck, it was a failure to recognize that price movements are not a stochastic function that's wholly independent of the actions of market participants.

QuoteOriginally posted by: Traden4AlphaI get the sense that the Amaranth's failure was not due to losing a fair coin flip based on some random fluctuations in energy prices. Instead, other participants in the market could tell that someone (they didn't even need to know it was Amaranth specifically although they may have heard gossip to that effect) was taking on large positions that they would need to liquidate before the contracts came due. I'm sure that some people, far closer to the futures markets than I, can tell when there are anomalous volumes of trade or open interest put on by speculators (read "The Predictors" for a fun example of this).In knowing/suspecting that someone would need to sell a large volume of contracts by some deadline, they profited just by waiting until Amaranth was desperate -- it was not a fair coin flip. Amaranth's loss wasn't bad luck, it was a failure to recognize that price movements are not a stochastic function that's wholly independent of the actions of market participants.I have no idea whether this is true about Amaranth or not,but that more or less is what happened to Metellegeshaft a few years back.

The Amaranth meltdown is another example of Trading 101 where a spread trade goes bad but the position was disproportionate to the capital base. The old reason of, "a highly unlikely event took place" is the blame. In other words, the spread did something I never expected it to do and I blew up because I was trading too many contracts. How many times have you seen this from personal traders to large instos. It's the same old song.The Metellegeshaft meltdown was an issue relating to the short term funding risk of a long-term hedge. They were short physical oil 10 years out but had short term long oil futures position as a hedge. When oil crapped out they had to fund their futures hedge but their profits were sitting in an unrealised physical delivery of oil 10 years out. On paper the 10y delivery made money to offset the cash needed to fund the long futures position, so in the end the "oil exposure" was zero. However, you gotta fund your hedges today with the cash in the bank. Eventually, Metellegeshaft ran out of cash to fund the hedge.Amaranth and Metellegeshaft blew up for different reasons, however, when the market smells the blood, it goes in for the kill. I look forward to see the finger pointing from the ex-Amaranth traders when the dust settles.

QuoteOriginally posted by: UnderTheRadarThe old reason of, "a highly unlikely event took place" is the blame. In other words, the spread did something I never expected it to do and I blew up because I was trading too many contracts. ........however, when the market smells the blood, it goes in for the kill.I'm keenly interested in the connection between these two statements. Did the spreads on Amaranth's trades diverge for reasons wholly based on the fundamentals of the underlying? Or did the spreads diverge or fail to converge because other market participants knew that someone had put on too large a spread trade? If it was the first, then Amaranth was the unlucky victim of a 1-in-a-million fluke event. If it was the second, then Amaranth was doomed to fail with near 100% probability.Keynes said that the markets can remain irrational longer than you can remain solvent. But I'd argue that other market participants might trade in a way that systematically holds the market in an "irrational" state because they know they can profit from others that have made bad bets. What seems irrational to one "unlucky" player is actually optimal trading strategy for another.

Funny,We were successfully against Amaranth.

QuoteOriginally posted by: CBFunny,We were successfully against Amaranth.Congratulations! Can you give us any insight as to why you put on that trade? Was it based strictly on an analysis of the fundamentals? Or did you have a sense that Amaranth/someone had a weak hand that would enable high profits?

OH, Dear:They were gambling! We have a trading plan. VaR model shows we were breaching the limit if we took Amaranth's direction. Therefore we took the reverse direction.

QuoteOriginally posted by: CBVaR model shows we were breaching the limit if we took Amaranth's direction. Therefore we took the reverse direction.that seems strange reasoning.If you'd taken Amaranth's direction with less leverage, would not that too have got you under the VaR limit ?

QuoteOriginally posted by: ppauperQuoteOriginally posted by: CBVaR model shows we were breaching the limit if we took Amaranth's direction. Therefore we took the reverse direction.that seems strange reasoning.If you'd taken Amaranth's direction with less leverage, would not that too have got you under the VaR limit ?OH, dear, We were lucky to reverse our transaction and made more positions agaist Amaranth's direction. The important thing is our VaR model is preditable.

Here is one of the latest Amaranth articles from Bloomberg.http://quote.bloomberg.com/apps/news?pi ... LaijlpyfEA