How Long Term Rates Bottomed in 1998 - Long Term Cap Mgmt

When a market moves further and faster than you can imagine, usually there is someone with a large position that is losing in the market and everyone else knows it and is trading against them.

I've seen it too many times before. The biggest one is when Long Term Capital Management owned lower quality bonds and sold short high quality US Treasury Bonds to finance the position. The goal being to earn the spread between the two different securities.

The market ultimately blew out LTCM on the formal announcement that the Fed engineered a buyout by a group of banks. Note that even Warren Buffet offered to buy LTCM.

Enjoy this bit of history and note how strongly that interest rates fell over the 9 weeks prior to this story surfacing.

This could be similar to what is going on in the $USOIL Crude Oil market at the moment with the drop in crude oil from $71 to $57 so quickly. Perhaps a hedge fund or collection of hedge funds is long crude oil and taking a beating. This is how the market is acting with this persistent weakness.

Tim 11/13/2018. 10:38AM EST