Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Friday, September 22, 2006

Hoisted from Comments: Amaranth and Blackstone

Crank writes:

Brad DeLong's Semi-Daily Journal: What's the Most Important Thing in Finance?: Talk about character:

After a huge one-month energy gain earlier this year, investment-advisory firm Blackstone Group sent representatives to Mr. Hunter's Calgary offices to discuss his trading, a person familiar with the matter said. What they learned made them nervous, this person said, so Blackstone pulled all its clients' money out.

It takes quite a bit to suggest pulling out because of a huge gain.

And Ian Whitchurch replies:

To steal a line out of Iain M. Banks... that's what separates the sophisticates from the simians.

My respect for Ian Whitchurch, and for Blackstone, is at a high point. Everyone else seems to have gone to New York after a big loss, and been soothed by Nick Maounis, who told them that the situation was under control, that risk had already been reduced, and that risk-management protocols were--despite appearances--sound and in place.

Blackstone sent people to Calgary after a big gain, and what they learned them caused them and their clients to flee in haste in the middle of the night.

A general rule: if you have to pay a stiff fee to get out of an investment, that makes it more and not less important to act on your belief that you should be out of this investment

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