Amaranth's Mistake, JP Morgan's Scandal?
We’re back on the Amaranth beat this morning, and as long-time readers know, once we get our jaws around something, it takes awhile for us to let it go. After writing a bit about Amaranth’s lawsuit against JP Morgan this morning, we decided to take another look at an item published on the suit by BreakingViews, a subscription-only financial news site. It’s written as if it’s uncovering a new strategic mistake by Amaranth but we can squint our eyes a little bit and see it as a bold attack on JP Morgan.
The thrust of the BreakingView’s piece was that Amaranth had blundered by using JP Morgan as its principal broker.
“In the wake of the 1998 near-collapse of hedge fund Long-Term Capital Management, many funds that used only one prime broker found those banks pulled their credit lines, forcing the funds out of business,” Breaking Views explains. “It’s now standard practice to use several prime brokers in the hope of avoiding such a fate, and to ensure no one institution can see a fund’s entire trading strategy. Amaranth itself had a dozen prime broker relationships. But it put the bulk of its trades for its main energy strategy through only one.”
Relying too heavily on JP Morgan may well have been a mistake on Amaranth’s part. But we expect that’s not an argument that JP Morgan’s prime brokerage business would like to hear made too loudly. After all, they hardly market themselves to clients with the warning: don’t give us too much business or we’ll hold you hostage and capitalize on knowledge of your strategies. But that’s exactly the danger Breaking Views is saying Amaranth ought to have recognized.
Double whammy [BreakingViews; subscription required]
Comments
Are there any hot chicks associated with this 'scandal' whose pictures you'd could post with the articles so they would have some redeeming value?
Posted by: Anonymous | November 15, 2007 10:13 AM
These boys really liked to put all their eggs in one basket, huh?
Posted by: Drano | November 15, 2007 10:23 AM
Two posts on Amaranth and 0 pictures of Brian Hunter with a fish. I'm dissapointed in you DB.
Posted by: Anonymous | November 15, 2007 10:44 AM
Bloomberg ran a pic last summer of an Amaranth gas trader who was appearing at some Congressional hearing. It wasn't BH though. I still think the fish fondler is BH even though those in the know (and who were contemplating a business relationship with him early in the year) say it isn't. And, whomever the photographed western Canadian salmon squeezer might be, there have been no denials from him to the blog world as to whether or not he used to be employed by Douche Bank or Amarank.
Mr. Hunter's visage continues to elude cameras, digital or otherwise.
Posted by: Bad Leg Quezada | November 15, 2007 10:55 AM
Melissa Francis definitely just said crude was "collapsing like a wet taco." Take this and run with it
Posted by: Analyst | November 15, 2007 11:02 AM
I miss Bess
Posted by: ksql | November 15, 2007 11:03 AM
This is the most boring financial scandal so why follow it at all? No trannies or female hormones of pot smoking CEOs. I might as well read the WSJ. Carney - are you trying to get BS IT to look at your legit postings? Shame on you for pandering.
Posted by: boredtotears | November 15, 2007 11:17 AM
Hey now, let's not snatch the word "taco" and start using it in veiled financial/anatomical inuendos! The "Muffin Board" went through that last travesty year because some cunning linguist...probably among you "commenters".... started a similar discussion. And don't even think about using a "beard"! Clam up, OK? We don't pussy foot around or beat around the bush. Let's start thinking "outside the box" on this use of the word "taco".
Thank you.
Posted by: The National Taco Board | November 15, 2007 11:34 AM
@ Nat'l Taco Board -
I just snarfed hot sauce, damn you!!!!!!
Butt Mel Francis' hot wet taco, well thats something that definitely needs more coverage
Posted by: Anal_yst | November 15, 2007 01:21 PM
..on a more serious note, having read the complaint, if JPM do lose a lot of Prime Brokers & Clearers will be reading the small print in their documents!
Posted by: Prime Broker | November 15, 2007 04:30 PM