"Run on the Bank?" That Sounds Serious

I had no idea this thing existed until they stopped redemptions today.

Sentinel, like Goldman Sachs (GS) when referring to their Global
Equities Opportunities firm, now says they own securities selling at "deep
discounts to their fair value" and that would cause their investors "unnecessary
losses." So, the bottom line is they don't want to sell those assets and
give investors back their money. Yes, no one likes to sell things for a
loss. Of course, markets care nothing about "fair value."
Fair value is what someone is willing to pay, not what an investor deserves to
receive.

These securites may have been those illiquid mortgaged backed securities (or bundles of these securities) that they couldn't unload when people came looking for their money.

This seems to be what made Goldman pour that $3 billion into their Global Equity Opportunities (GEO) fund. They had 30% losses on their books in that fund from in just 6 days of wild market swings. They also had about 3.5 times leverage in place on the thing. Goldman perhaps couldn't get rid of their mortgaged backed debt obligations to pay redemptions (or margin calls) so they were forced to sell their equities instead. They then had to inject an extra $3 billion into the fund to keep the thing from going the way of those Bear Sterns funds.

Hmm, I wonder how bad this credit mess is going to get? The idea of an entire class of credit obligations that are stuck in limbo because you can't sell them (or put a value on them) is crazy. I know it is time to avoid the financials like the plague but what industries won't get hit by this credit crunch stuff?

This article says the sectors to be in are biotech and telecom. Isn't biotech the realm of the companies that are financed almost totally by debt? If the credit market dries up or bankers become more risk adverse maybe they will pull the plug on financing some of these long shot drugs that may or may not get FDA approval. That may lead to mass bankruptcies in those small one shot biotech names and maybe even big problems at the big guys as well.

I guess that leaves only telecom which will probably be pretty strong unless the consumer truly gives up the ghost and cancels his cell phone plan or something. Or you can go to accumulating cash which I have been doing. I think when things blow over it will be a great time to buy good stocks cheap.