Tuesday, Jun 04, 2019

History doesn't repeat it rhymes

BBC: What went wrong for Woodford and why it matters

BNP freezes $2.2 bln of funds over subprime https://www.reuters.com/article/us-bnpparibas-subprime-funds-idUSWEB612920070809
This was the precursor in Aug 2007 when BNP barred investors money due to illiquidity of the funds.
Interesting how reading the two articles, how similar words have been used to explain the situation

Posted by deepak @ 06:00 PM (638 views)
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2 Comments

1. stillthinking said...

The BBC aren't direct enough. For years the suggestion is that people have been willing to accept pennies while ignoring principal risk, the analogy often being picking up pennies in front of a steam roller, and lo and behold.
However, as far as this being the beginning of the also oft-touted crash, I don't this is. The fund just did badly, and did badly by itself, so no rescuing policies from the BoE.

Sunday, June 9, 2019 01:56AM Report Comment
 

2. deepak said...

@stillthinking

I don't think this is either but what this shows that the best rated investments are illiquid and when push comes to shove they are a basket case.
Its the domino effect of one failing leading to other funds/investments who have to now confirm/crystallise the losses that is the interesting factor.

So were those funds by BNP which were covered by illiquid assets were only $2.2 Billions.

Snippet from the article "The £10bn-plus fund now only holds £3.7bn of investors' money."
Forced seller for £6.3 billion, what do you think is the expected loss? It is said that he was buying shares in smaller or private companies.

Now widen the horizon, what other funds have such illiquid assets behind it. Or funds where the investments behind it have no returns?
Look towards multi billion dollar valuation companies Uber, Lyft, Pinterest, Etsy Netflix, Gopro, Spotiify, Snap etc publicly traded stocks that produce negative returns.

Once those start getting questioned, a lot more funds and banks will become suspect.

Sunday, June 9, 2019 10:11PM Report Comment
 

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