....."In Newest Crisis, Hedge Funds Face Chaos"
"In Newest Crisis, Hedge Funds Face Chaos," see http://www.nytimes.com/2008/09/22/business/22hedge.html. Part of the article is below.
"LONDON — Hedge funds usually thrive when markets turn volatile. But even these fast-money investors are struggling to cope with the wild swings in the markets, raising concerns that some may not survive.
Even before the Bush administration proposed its vast bailout for financial institutions, the hedge funds — those secretive, sometimes volatile investment vehicles for the rich — were on course for their worst year on record. The average fund is down nearly 5 percent so far this year.
One major hedge fund investor said that he had started to buy Morgan Stanley at $23 on Wednesday, convinced that the rumors of Morgan Stanley’s demise were unfounded. But as the stock began to plummet, he canceled his trade and watched with amazement as the stock sank to a low of $12 on Thursday.
And he stayed on the sidelines as the stock more than doubled that day and ended the week at $27 a share.
Volumes were high, fear was higher — but conviction, the final and most crucial ingredient, was lacking.
“With this kind of fear you can’t do anything,” the hedge fund investor said. “You never have heroes when you get these kinds of violent moves. The heroes only come out when the stock is down and stays down.”
While it is too early to know for sure, interviews with industry experts and investors suggest that few hedge funds had the foresight, dexterity and most of all the courage to counter conventional wisdom and go long on financial stocks last week.
On the other side of the equation, various large funds — no names have yet surfaced — appear to have been hit hard by betting against financial stocks. Market participants say it was the frantic covering of the short positions by these funds that propelled stocks up late last week.
Some funds were already down for the year. One of the main funds for Atticus was down 30 percent through August. Other big funds down for the year include GLG Partners, down close to 15 percent so far this year.
In London, some managers have whispered that they may sue the Financial Services Authority, the British regulator, for temporarily outlawing short-selling against financial firms, one of their basic investment tools.
But hedge fund investors also say that with many funds nursing negative returns of as much as 30 percent this year, the appetite for taking bold, risky bets and losing everything has waned.
“Why would you take the risk of not getting paid 2 and 20 percent next year?” asked one fund executive, referring to the lush pay structure of a 2 percent fee on all money invested and 20 percent of all profit that successful hedge funds award themselves."
.......http://www.JoeFRocks.com/
NEM XAU HUI
"LONDON — Hedge funds usually thrive when markets turn volatile. But even these fast-money investors are struggling to cope with the wild swings in the markets, raising concerns that some may not survive.
Even before the Bush administration proposed its vast bailout for financial institutions, the hedge funds — those secretive, sometimes volatile investment vehicles for the rich — were on course for their worst year on record. The average fund is down nearly 5 percent so far this year.
One major hedge fund investor said that he had started to buy Morgan Stanley at $23 on Wednesday, convinced that the rumors of Morgan Stanley’s demise were unfounded. But as the stock began to plummet, he canceled his trade and watched with amazement as the stock sank to a low of $12 on Thursday.
And he stayed on the sidelines as the stock more than doubled that day and ended the week at $27 a share.
Volumes were high, fear was higher — but conviction, the final and most crucial ingredient, was lacking.
“With this kind of fear you can’t do anything,” the hedge fund investor said. “You never have heroes when you get these kinds of violent moves. The heroes only come out when the stock is down and stays down.”
While it is too early to know for sure, interviews with industry experts and investors suggest that few hedge funds had the foresight, dexterity and most of all the courage to counter conventional wisdom and go long on financial stocks last week.
On the other side of the equation, various large funds — no names have yet surfaced — appear to have been hit hard by betting against financial stocks. Market participants say it was the frantic covering of the short positions by these funds that propelled stocks up late last week.
Some funds were already down for the year. One of the main funds for Atticus was down 30 percent through August. Other big funds down for the year include GLG Partners, down close to 15 percent so far this year.
In London, some managers have whispered that they may sue the Financial Services Authority, the British regulator, for temporarily outlawing short-selling against financial firms, one of their basic investment tools.
But hedge fund investors also say that with many funds nursing negative returns of as much as 30 percent this year, the appetite for taking bold, risky bets and losing everything has waned.
“Why would you take the risk of not getting paid 2 and 20 percent next year?” asked one fund executive, referring to the lush pay structure of a 2 percent fee on all money invested and 20 percent of all profit that successful hedge funds award themselves."
.......http://www.JoeFRocks.com/
NEM XAU HUI
Labels: Gold, Gold Stocks, HUI, NEM, Silver, Silver Stocks, SPX, XAU
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