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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (23923)12/31/2004 11:15:00 AM
From: russwinter  Read Replies (1) of 110194
 
Doug Gillespie excerpt on hedge funds:

Something I think you can attribute it to, at least partially, is the creed of greed that is driving many of the thousands of hedge funds that are trying desperately to recoup some lousy performance in a mere couple months. The thousands of hedge funds that do exist but shouldn't. And, in due course, many of which likely will no longer exist.

There's certainly nothing wrong with hedge funds. Actually, there is plenty right with them, just not in the numbers to which they have grown. As was the case with too many mutual funds a few years back, the time of a substantial contraction in the number of hedge funds draws ever closer.

Of course, the huge difference between the two vehicles -- hedge funds and mutual funds -- is hedge-fund leverage and the danger it poses to the financial system. If according to none other than Alan Greenspan the failure of Long-Term Capital Management a few years back posed a "systemic risk," what, in the aggregate, does today's plethora of hedge funds pose? Ironically, a plethora that has put in place some very serious systemic risk that not only been hugely encouraged but also enabled by none other than -- "Maestro" Greenspan!

Which I believe creates a couple more themes for next year and going forward, to wit:

(1) Are the large number of abhorrent (as opposed to the far smaller number of totally responsible) hedge funds going to be allowed to further jeopardize the functioning of US and world capital markets?

(2) When the hedge-fund debacle begins to unfold in earnest, will more people finally come to realize that this guy Greenspan simply is not and never was all that his sycophants cracked him up to be?
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