🚀 go-pugleaf

My prediction is the final loss in Orange County, will probably be at
least twice as large as what has been initially said already.  Maybe
THREE BILLION DOLLARS.  No small change for this County of 2 million+
residents.

Why I say this, is these brokerages had to sell in the past couple of
days 9 billion dollars in securities to satisfy margin calls, in the
fund.  It would have been close to 12 billion, if Merrill Lynch had
the guts to do the same.  That's a huge amount of sales for a 1.5 
billion loss in this derivitive/margin fund, or whatever it was.  It
was also disclosed that these sales were done at fire-sale prices,
due to the poor market for bonds this week.  That along with transaction
fees, and the large amount of margin interest they had to pay while
these positions were open (maybe over a year) further heightens my
suspicion that the Orange County Board of Supervisors is low-balling
the loss estimate.

I'm also convinced that the Orange County Board of Supervisors really
isn't aware of the types of investments, and risks, that Mr. Citron
was making.  Obviously, if they knew, they may have stopped him a
long time ago.  I'm also not sure if the Board is aware of some of
the principles of options, derivitives, or margin trading.  They've
stated they want to sue these brokerages for selling all these
securities during bankruptcy.  While I'm no expert on the law,
probably the brokerages were within their rights.  I hope the Board
realizes that if you have a margin loan in a brokerage account (which
the fund was borrowing short term money backed by securities in the
account to invest in longer-term bonds) that you must pay margin
interest every day the position is open.  This works OK if your
investments are appreciating at a faster rate than your interest and
transaction costs, but it compounds your losses if your investments
are going the wrong way.  The brokerages might have done the County
a favor, by closing out some of these positions, thus stopping any
further interest costs on bond investments that are already going
bad on them.  If I had a brokerage account and bought on margin,
and the securities lost value to a point, I would have received
a margin call from my brokerage, to add more money to my account.
If I didn't, the brokerage would sell part of my position to
satisfy the call.  This is what probably happened in Orange County.
Probably Mr. Citron did add more funds to the account to satisfy
margin requirements.  But he probably kept these huge positions
open for a long time.  Maybe a year.  When buying on margin, an
investor has to have discipline to set a fairly narrow loss limit.
As your losses are magnified by the leverage you have and margin
interest.  Obviously, Mr. Citron kept believing the market would
turn around.  Unfortunately, the stockmarket will play havoc with
one's portfolio if an investor gets emotionally stuck in a position,
and isn't ready to realize to cut his losses quick on a bad investment.
Mr. Citron, thus, did an error that tens of thousands of investors
do every year, although your average Joe investor doesn't try to
invest 20 billion.
  
So this just leaves all the people in County Government pointing the
finger at everyone else.  The Board of Supervisors will obviously
say, they didn't know what Mr. Citron was doing, so they aren't to
blame.  In my opinion, they absolutely are!  If they are the
Board of Supervisors, aren't they supposed to "Supervise"?  I can
also see Republicans blaming Democrats and the other way around.
The truth is, they're all incompetent.  Politicians are only concerned
about one thing:  Themselves.  They'll say anything to stay in power,
so I wouldn't believe anything at this point.  

In any event, I live in L.A. County, and literally see glee in people's
faces as they talk about how that rich County to the South of us
screws things up, and can't even count.  Orange County has no one to
blame but themselves.  They're the one's who elected this whole group
of bumbling politicians, so they'll have to accept the consequences.