Deja vu all over again? Hedge Fund Shifts to Salvage Mode - New York Times

As Yogi Berra would say "Deja vu all over again." Amaranth's troubles may be more serious than previously thought. Indeed, they have the potential of being the next Long Term Capital Management.

Hedge Fund Shifts to Salvage Mode - New York Times:

"Last night, as it had been since the weekend, Amaranth was locked in negotiations...in an effort to sell its energy portfolio to try to keep the fund company afloat.

At the same time, it was working with commodity exchange officials to reassign trades to try to minimize disruptions to the market.

The fund’s investors, locked into their holdings by Amaranth’s stringent liquidation terms, awaited further word on the status of the fund’s holdings, while regulators and traders watched for signs that the hedge fund’s losses might disrupt markets beyond those relating to energy"

Sound familiar? Hedge fund does well, then bets go bad, and suddenly the fund (and possibly market) is in trouble. Sure sounds like we've seen this one before.

Another similarity? Among the reported causes is the fact that it looks like El Nino is returning which keeps temperatures lower and hence leads to less demand. Once again, something that many people would have left out of their models.