From: the.wise.one@abel.co.uk   
      
   Turn of the fork   
      
      
   I was visiting Nero in London.  He was now in charge of all sales to   
   hedge funds.  'How are you, you f****** weasel?'  He had almost forgiven   
   me for crossing over to the buy side.  I told him that everything I knew   
   I had learned from him: it was a standing joke.  I think he believed it.   
      
        A trader was on the phone.  There were a lot of four letter words.   
     'The f****** are querying the mark.  They want to talk to you.'  The   
   baby-faced trader was speaking to Nero.  'It's them,' Nero winked at me.   
      
        'Them' was then a premiere hedge fund.  When hedge funds deal in   
   derivatives with banks, they have to post collateral.  Every day the   
   bank works out the profit or loss on the deal at today's prices.  If the   
   bank is owed money if the deal is closed out, then the hedge fund must   
   post cash or government bonds to cover the potential loss.  In this way,   
   the dealer protects itself from the risk that the hedge fund is unable   
   to perform.  The argument was over the loss that Nero's bank had   
   calculated on trades with 'them' -- the bank was demanding too much cover.   
      
        The hedge fund had been the darling of the banks.  They traded a   
   lot, the volumes alone made them a prized client, they had a mystique,   
   and they seemed canny in the way they made money.  Traders liked trading   
   with them to know what they were up to.  They could move prices.  Also,   
   if you could figure out what the hedge fund was doing then you could do   
   the same trades yourself.   
      
        The hedge fund needed the banks but they nickled and dimed on every   
   trade, squeezing the banks' profits to a minimum.  They would tell you   
   they were going to do $100 million trade; you later found out that they   
   had done many times that with the rest of the market at the same time,   
   making it impossible for you to get out of your position.  The hedge   
   fund were secretive, ruthless and arrogant.  They behaved just like a   
   dealer.   
      
        There were rumours that 'they' were experiencing problems.  Nero   
   picked up the line.  'Listen, you motherf*****,' he spoke in his most   
   polite manner reserved for prized clients.  'The mark stands.  That's   
   where the market is /for you/.  You don't like it?  F*** off.  If you   
   don't like it, then close out all the f****** trades.  I will get the   
   guys to give you the number that you owe us.'  There were pained   
   objections from the other of the phone.   
      
        'Are you deaf, c***?' Nero winked at me.  'The mark stands. You   
   come up with the f****** money now or I am going to cut all the trades   
   and close you out now, right now.'  Anguished screams from the other   
   side.  Now hear this, hear this loud and clear you motherf******.  You   
   post the dough or we cut your positions.  I promise you I will ring   
   every guy on the street and we will close you down.  Got it?'  Nero was   
   having a whale of a good time.  'Have a nice day, dude.'   
      
        Nero turned to me: 'They are gone, babe.  Put the fork in, they're   
   done.  Too fancy pants and clever for their own good.'  A few months   
   later the hedge fund collapsed and the banks made a lot of money closing   
   out their huge positions.  The hedge fund had, it seemed, believed their   
   own lies.  The corporations and investors that inhabit the buy side   
   succumb all too frequently to true lies.   
      
      
   from:   
   "Traders, Guns & Money: Knowns and unknowns in the dazzling world of   
   derivatives"   
   by Satyajit Das   
   FT Prentice Hall, 2006   
   Chapter 3: True lies -- the 'buy' side   
   pages 88-89   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)