Posted on 09/07/2008 4:59:56 AM PDT by TigerLikesRooster
Hedge funds ready to blow as positions liquidated
Adele Ferguson | September 06, 2008
DEBT-GORGED hedge funds are the next ticking bomb in the global credit crisis as they liquidate their positions in equities and commodities ahead of an expected spike in quarterly redemptions by investors throughout September.
The first hedge fund victim was Ospraie Management, which announced earlier this week it would close its flagship hedge fund and liquidate its stock after it plunged 27 per cent in August due to losses in energy, mining and natural resources equity holdings.
Other hedge funds are expected to topple as investors seize an opportunity to withdraw their poorly performing investments at the end of the September quarter. If there are too many redemptions, it will cause a run on hedge funds and create mayhem.
Some hedge funds are trying to pre-empt a run on their funds by liquidating their stock positions ahead of some of their rivals, or are trying to make money shorting stocks held by other struggling hedge funds.
(Excerpt) Read more at theaustralian.news.com.au ...
Ping!
I shed a tear.
If you humble yourself to the market, it will exault you. If you exault yourself to the market, it will humble you.
Next week is “statement shock” week. Their quarterly charges plus piss poor performance might be a perfect storm climaxing in stupid selling. So sharpen your pencils and know good stocks will be cheap for no good reason.
Right.
I thought hedge funds would be hedging against the future no matter which way things went.
Someone with plenty of skill and knowledge about investments may be able to clarify this - but I think only a select group of people can invest in a hedge fund. These people are very rich and their investment would be a tiny portion of all they have at risk or they are fools for taking too big a protion of their money and putting it in a hedge fund. So if the hedge funds die - only the gamblers will be hurt. If banks are putting money there that is not even remotely wise... their money is little old lady money and should never ever ever be at risk.
You only have to win once. Unlike most of us stiffs that have to spend years tooling at our careers knowing that one goof may cost us our paycheck forever, and never getting the one time - for life paycheck.
The banks , debt, mortgages, credit system is rotten to the core.
Bullseye, Broker. On the upside, overselling will eventually create a true buyers market (which is much the case now). But first the mortgage/credit/hedge fund static needs to clear out. I see a nice rally next spring. Maybe sooner.
I am a portfolio manager for a hedge fund in Chicago, so I’ll give an insider’s view on Ospraie: A number of weeks before Ospraie went under, the CFTC issued a statement that a large player with huge positions had its commercial status revoked in a number of commodities. What this means is that the firm had the status that its actions in the futures market were to hedge its exposures as a commodities producer or processor. This would allow it to get around the legal position limits.
The rumor going around in some circles in the market is that firm was Ospraie. They had to liquidate their huge commodities positions, and since the market couldn’t absorb such a huge liquidation, the prices tanked and Ospraie got killed.
The banks , debt, mortgages, credit system is rotten to the core.
You aren't jealous are you?
I am not jealous of folks who need an asbestos suit when they die.
I would not care if they government did not have to come along now and bail all these institutions out.
Here is the pattern...
1. Banks way overlend - pay them selves countless millions
2. People quit paying, and the countless millions in bonuses are sitting in bank accounts for the super genious bankers.
3. Government bails out all the banks because the economy cannot take the hit.
That is not jealuosy, but rather a little outrage.
PS the hedgefunds got all their money from the banks so they could leverage the crap out of all their positions.
Your understanding is somewhat idealized. The truth of the matter is that "funds of funds" have invested in hedge funds, state pensions have invested in hedge funds ... it's not contained within a certain class of investor. With a mass liquidation looming to cover redemptions, everyone who holds investments, in equities or commodities, is going to take a hit, and it could be a rather large one.
What was it Greenspan said about a new financial era with better mechanisms to handle risk?
I'd guess a good number. Clarium was up something like 60% at one point this year. But with the drop in commodities, they're only up like 30%.
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