Liquidity agreements endangering Hedge Funds :
This is inviting a run...like that one in Spain.
**********from Jim Cramer************
With General Motors (GM:NYSE) in the shape it is, so many managers are long GM converts and short GM common that you have to think someone's been torched by the Kerkorian gambit.
That's not the issue, though. The issue is liquidity. It isn't that hedge funds have been performing poorly of late, it is the quality of the money in hedge funds and the gates that they play by.
Hedge fund managers used to make it impossible to withdraw. Funds that used to be in hedge funds were individual monies. Now the "in" thing is to provide liquidity, meaning they are open all of the time. And now the new thing, on the client side, is the pooled fund of funds. These folks take money in and out if you are getting divorced or if you have a sick kid. They would not hesitate to pull out if they thought your style, low-risk, now showed high single-digit losses.
That's why, this time around, things have gotten a little more combustible. And a lot uglier, just on the rumor, without the news.
But the rumors are never completely bogus. They always contain a kernel of truth. This time, the kernel feels like one of those malignant types that morphs into something bigger, blacker and uglier.
In other words, we could get uglier before we get prettier.
Think defense!
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Throw in reports of a device thrown at GW Bush, and we have a reciepe for the contagation of panic... |
