Stock Research – Amaranth Hedge Fund Collapse What Happens When Your Friendly Banker Becomes Predator
You might be familiar with Amaranth LLC, the giant hedge fund that collapsed last fall, after blowing up $6 billion of investors money. It now comes out that the circumstances under which they self-destructed are worth studying.
But first A METAPHOR
What would happen if you had a pain in your chest, and you had tests taken at your doctor on a Monday who you have known and trusted for 30 years? He tells you that the results will tell you if you are going to live or die, no in between. You now visit the doctor on a Friday to discuss the results. The doctor says to you how would you like to bet on the results.
You offer to bet $1 million that you are going to live. The doctor says, I will take your bet myself. Would you still make the bet? The answer is no, of course you wouldnt because the doctor already knows the result. and you dont. Its like betting against the house in Las Vegas when the house already KNOWS how the results will turn out.
This is the same situation in our opinion that Amaranth the hedge fund faced during its trading...
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