4 ms·

reminds me of LTCM...they were making bank until the Asian bank crisis and Russia defaulting on their debt https://www.dailymotion.com/video/x225si7 https://ww

by jti107 4y ago

reminds me of LTCM...they were making bank until the Asian bank crisis and Russia defaulting on their debt https://www.dailymotion.com/video/x225si7 https://www.dailymotion.com/video/x225si7

oldgradstudent 4y ago
Very different. LTCM was making massive, very risky bets while pretending they were safe. They were making insanely leveraged bets on real assets. FTX seems to me to much closer to Madoff. They were printing their own Monopoly money and pretending it was worth billions.
- mumbisChungo 4y ago
  The core of the issue here was not ponzinomics, it was the exchange gambling directly with user funds, by way of unsecured loans to a hedge fund controlled by the founders. Fraud? Yes. But users weren’t buying into a ponzi, they were using a centralized exchange product with the understanding that reserves were whole, when in reality they were secretly fractional reserves.
  - lizknope 4y ago
    SBF literally describes a magic ponzi box https://www.youtube.com/watch?v=C6nAxiym9oc https://www.youtube.com/watch?v=C6nAxiym9oc
- jeffreyrogers 4y ago
  LTCM actually was doing a lot of the risk management people later said they should do. Their problem was the trades they were doing were more crowded than the realized and they couldn't unwind them cheaply because everyone else was doing the same thing. Plus once people realized they were struggling other market participants started betting against them. There have been other similar situations since then. In August 2007 most of the big quant funds lost double digit percentages in a few days when someone had to unwind a portfolio and statarb strategies stopped working.
  - oldgradstudent 4y ago
    That's the point. Their models showed their strategies to be safe, while in reality, their strategy was risky enough to bankrupt the fund, and scare the entire financial system. > In August 2007 most of the big quant funds lost double digit percentages in a few days when someone had to unwind a portfolio and statarb strategies stopped working. If your strategy works for years and then a single event erases all the historical profits and puts you in the red, your strategy always sucked because it ignored tail events.
    - sgerenser 4y ago
      See for example, ARKK.
    - lanstin 4y ago
      A lesson that few understand, which explains so much of the economic surprises of the past thirty years.
  - kwere 4y ago
    legends say they could have been saved by Warren Buffet, who was interested to buy them at a certain price, but the deal never went on bcs he was in vacation where satellite phone wasnt working. wikipedia says he turned it down due to risks involved
- pclmulqdq 4y ago
  FTX was the next iteration of beanie babies. They held a huge supply of an illiquid asset that they made the market on. No surprise that they would offer a high price and then say "these are worth a lot." This happened with beanie baby sellers: they would corner the market on one model and the jack the price. The problem is that nobody else thought they were worth that much. Then, FTX made it worse by allowing people to borrow against them at the valuation of "a lot," and borrowing against them at the same valuation.

by jti107 4y ago

reminds me of LTCM...they were making bank until the Asian bank crisis and Russia defaulting on their debt https://www.dailymotion.com/video/x225si7 https://www.dailymotion.com/video/x225si7

oldgradstudent 4y ago

Very different. LTCM was making massive, very risky bets while pretending they were safe. They were making insanely leveraged bets on real assets. FTX seems to me to much closer to Madoff. They were printing their own Monopoly money and pretending it was worth billions.

mumbisChungo 4y ago
The core of the issue here was not ponzinomics, it was the exchange gambling directly with user funds, by way of unsecured loans to a hedge fund controlled by the founders. Fraud? Yes. But users weren’t buying into a ponzi, they were using a centralized exchange product with the understanding that reserves were whole, when in reality they were secretly fractional reserves.
- lizknope 4y ago
  SBF literally describes a magic ponzi box https://www.youtube.com/watch?v=C6nAxiym9oc https://www.youtube.com/watch?v=C6nAxiym9oc
jeffreyrogers 4y ago
LTCM actually was doing a lot of the risk management people later said they should do. Their problem was the trades they were doing were more crowded than the realized and they couldn't unwind them cheaply because everyone else was doing the same thing. Plus once people realized they were struggling other market participants started betting against them. There have been other similar situations since then. In August 2007 most of the big quant funds lost double digit percentages in a few days when someone had to unwind a portfolio and statarb strategies stopped working.
- oldgradstudent 4y ago
  That's the point. Their models showed their strategies to be safe, while in reality, their strategy was risky enough to bankrupt the fund, and scare the entire financial system. > In August 2007 most of the big quant funds lost double digit percentages in a few days when someone had to unwind a portfolio and statarb strategies stopped working. If your strategy works for years and then a single event erases all the historical profits and puts you in the red, your strategy always sucked because it ignored tail events.
  - sgerenser 4y ago
    See for example, ARKK.
  - lanstin 4y ago
    A lesson that few understand, which explains so much of the economic surprises of the past thirty years.
- kwere 4y ago
  legends say they could have been saved by Warren Buffet, who was interested to buy them at a certain price, but the deal never went on bcs he was in vacation where satellite phone wasnt working. wikipedia says he turned it down due to risks involved
pclmulqdq 4y ago
FTX was the next iteration of beanie babies. They held a huge supply of an illiquid asset that they made the market on. No surprise that they would offer a high price and then say "these are worth a lot." This happened with beanie baby sellers: they would corner the market on one model and the jack the price. The problem is that nobody else thought they were worth that much. Then, FTX made it worse by allowing people to borrow against them at the valuation of "a lot," and borrowing against them at the same valuation.