It must be nice to be a JPMorgan prime brokerage client. First they squeeze you on the margin call, then scoop up your assets and make $750 million by selling them. Wonder how Amaranth founder Nick Maounis feels about JPMorgan these days.
The Bloomberg piece reports that, when it came time to meet margin calls
Amaranth's paper profits in natural gas were significant, yet it couldn't realize all of the gains selling. Traders and hedge funds knew Amaranth was desperate to get out of its trades, so they wouldn't pay current prices....
Brad seems to think the journalists are in error here. Perhaps it is shocking to an academic that markets aren't perfectly liquid ;-) The comment below clears things up.
[DeLong] ''I have to confess to some puzzlement over the statement that Amaranth "was desperate to get out of its trades" but couldn't because its counterparties "wouldn't pay current prices." The current price--the price at which you should mark to market--is the price at which you can sell, not a price at which you cannot sell.''
Untrue. And one of Amaranth's biggest problems was that this is not so... The "last trade" price is not necessarily the "market-clearing price for my whole stake" price. Indeed there are often discounts for block trades -- that is, for liquidity -- even for things with a heck of a lot more underlying value than some out-years natural gas futures contracts.
