You could also say that hedge funds and other investment banks had an army of decent lawyers that can draw up agreements to limit counterparty risk, but that still didn’t really help them when Lehman Brothers went down the sh!tter and took everyone’s money with them. When the other party busts and doesn’t have money to pay you, you’re basically screwed no matter how good your lawyer is.
Lawyers routinely hold securities for individuals in escrow accounts so I’m sure they’d be a fine intermediary and, knowing what greedy bloodsucker they are, would welcome the biz.
KJH pinging an attorney for assistance! THE BOTTOM!
KJH Wrote: ------------------------------------------------------- > RTQ! quote: “with a bank” > > $1 million is enough to efficiently do a swap with > another private investor if the stock is > shortable. And where will he find one? Craigslist? We’re talking about a small, relatively illiquid, likely closely held security. There’s not much demand for this stock in the active markets (no options) so why will there be demand in the OTC market? And the market is still in somewhat of a fear mode. Is he going to sit unhedged for 2 months looking for a counterparty? And what happens when he finds one? Who wants to trade market returns for some small company they never heard of - and more importantly - don’t understand. He will have to trade the stock return for market less 400 bps. ANd that doesn’t include transaction cost in terms of time, brokering and lawyers.
You guys are nitpicky. I said “assuming the stock is shortable.” That’s all the counterparty needs to make it a risk free investment. Even an ambulance chasing 1-800 number craigslist lawyer is capable of holding security for both parties.