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Minyan Mailbag: Further Thoughts on Refco

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Prof. Succo

I agree with your comments. I remember some years ago, actually it was in 1968 (I think), when I first started in the business with Salomon Bros., the stock market had to be shut down for most of the day, because they couldn't handle the paper work. I have no doubt that most of Refco's (RFX) book is OK, in fact it might all be legit. However it is the uncertainty that creates the doubt, and with so many 3rd party transactions not accounted for, no one knows exactly what they have.

Maybe there has to be a moratorium world wide so "we can catch up" to what has been actually written. I understand that in the meeting with the Fed a few weeks ago, the banks thought that they would need 6 months to catch up. In the meantime, this is a very, very, very scary market place.

Does this make sense or am I way off base in my thought pattern?

I did buy some RFX yesterday, not enough to stop me from having a great year, but enough to hurt. But then again the journey of life is full of bumps, some are just more enjoyable than others.

Mahalo

Duke

I just commented to another that I am mystified as to why the SEC and/or the Justice Department do not look into the whole underwriting business. Why does Goldman Sachs (GS) (or others) seem to miss their fiduciary responsibility in these things?

I doubt it is stupidity. Perhaps cronyism?

I did not mention that my "flyer" in RFX was in part justified by my position in GS: my small loss when RFX goes down will be offset 3 times by my gain in GS today (and I built it even more when the stock did not react initially to RFX news).

Few realize how fragile our financial system really is, how much leverage there is in it.

The Fed can control, and must, any individual situation, but cannot let it cascade for the whole system is fraught with peril.

-Succo

No positions in stocks mentioned.

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