Spooking the markets this week has been Carlyle Capital, vehicle of the mighty
Carlyle (motto: "a disciplined and conservative investment approach") thought it was safe enough with a portfolio of AAA mortgage- backed securities issued by US-government sponsored companies, the so-called Fannie Mae and Freddie Mac. Yes, government- sponsored … AAA.
And perhaps Ron Beller also thought he was on firm ground. He’s the husband of Gordon Brown’s newly-appointed adviser Jennifer Moses: but his highly-geared Peloton Partners collapsed last week, valueless after being completely wiped out by margin calls.
Dangerous things, margin calls – remember Trading Places ? The good guys thwart the bad guys by engineering a run on the Orange Juice market that the latter have been trying to corner. And it’s margin that does the damage.
We are destined to find out just how much exposure to rapidly-downgrading asset-backed instruments is held by a vast swathe of highly-leveraged investment vehicles. The margin will find them out – and the dominos will keep on falling.
A good weekend to all !