Word: illiquid
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...liquidating their holdings. In addition, highly leveraged funds are being forced by their bankers to come up with more collateral as the value of their holdings falls, forcing managers to sell more shares to raise more cash. It's a vicious circle: funds are rushing to sell the same illiquid securities, driving stock prices down and triggering new waves of selling. This mass deleveraging by the industry has been cited as one of the causes of recent record volatility in world markets...
...government bonds. Long Term Capital Management was heavily leveraged. It had equity equaling only 3% of its assets. That's the equivalent of a $3.3 million home-equity loan on a $100,000 house. When the market turned skittish after the Russian default, the fund had to rapidly unwind illiquid positions, sustaining huge losses in the process. Only a bailout brokered by the Federal Reserve Bank of New York staved off a wider collapse of the U.S. financial system...
...Asset Relief Program, or TARP - rather than as a straightforward recapitalization of troubled banks. Treasury has since switched to the latter approach, so far putting $216 billion of the TARP hoard into capital injections. On Wednesday, Paulson said that Treasury has concluded that, for the moment at least, buying illiquid mortgage securities "is not the most effective way to use TARP funds." Instead, Treasury will look to help nonbank lenders involved with credit cards, auto loans and other forms of consumer finance...
...shareholder redemptions, forcing them to sell investments to raise cash. Yet amid the panic, Weiss admits he's turning bullish: "People are freaking out, and it's a good time to make money when everybody is freaking out." One shell-shocked area where he's finding extraordinary bargains: illiquid funds with troubled investments in property. "You might very well lose all your money," says Weiss, "but there's a chance of making enormous returns...
...wasn't until last week when the markets were literally coming unglued that we needed to take a number of other emergency short-term actions, that we knew that we had to do something to get at the heart of that problem which was the housing correction and the illiquid assets...