Hedge Fund Redemptions May Crash Q1 Markets 70 comments
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When reading about the $50 billion Madoff hedge fund fraud, it hit me on the head: hedge fund redemptions at the end of this year are going to be absolutely huge, and that will mean a massive sell-off in global capital markets in the first quarter.
That would also mean a further rally for the the US dollar, as assets sold are redeemed largely in US dollars and thus boost demand for the greenback. Gold might take a slight set back, although it will more likely be in increasing demand as a safe haven asset and diversification against the coming dollar crash.
Inflationary stimulus
All this turmoil would really put the pressure on the incoming US president and his team, who will respond with bigger than expected stimulus packages and bailouts. That will make the upcoming and inevitable inflation even larger when it hits, and at the first whiff of inflation the bond market will tank and with it the US dollar.
Investors face a double whammy in 2009 - from hedge fund withdrawals crashing the stock market and later a dollar collapse. That would take capital markets to a real bottom.
Market bottom
My prediction of the Dow at 4-5,000 and gold at $4-5,000 an ounce for later next year still stands, and hedge fund redemptions followed by a dollar collapse will be the driving forces to achieve that bottom. It might take until 2010 to get that far but no longer.
Now try to argue the reverse: will there be sellers or buyers in capital markets after year-end redemptions come in? What is the chance of a positive tally for redemptions? Zero chance! Is the dollar bond market at a top or about to go higher? Is it hell!
Actually this will offer a great point to buy up the finest US stocks at rock bottom prices, but who will have the cash to buy by then? Certainly not anybody taking an optimistic view of the market outlook now.
I can empathize with those who feel the Madoff fraud is some kind of a warning of things to come. These frauds do not usually happen in isolation and are a symptom of the underlying malaise.
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That's truly a johnny-come-lately, if there ever was one.
Are you aware that you usually cannot just ask for redemption of your hedge fund whenever you like or a Madoff hits? There are redemption periods and advanced notice requirements. which, btw. were the main drivers behind the huge selloffs in sep-november. most hedge funds have annual or quarterly redemption schedules with a 30-45 day advance notice. that means that anyone who wanted to redeem a hedgefund with annual redemption schedule per calender year would have to notify the fund by mid-November. If you didn't - then gl, you will have to wait for another year. similar with quarterly schedules.
ther will be soem Madoff-effekt, no doubt. but the expectation voiuced in this silly article is nothing but a moronic guess that displays the author's lack of knowledge and perhaps his whishes. but certainly it adds TERO alpha to anyone's portfolio.
what a complete joke
Lol
On Dec 22 08:09 AM User 305589 wrote:
> oh my god.
> That's truly a johnny-come-lately, if there ever was one.
> Are you aware that you usually cannot just ask for redemption of
> your hedge fund whenever you like or a Madoff hits? There are redemption
> periods and advanced notice requirements. which, btw. were the main
> drivers behind the huge selloffs in sep-november. most hedge funds
> have annual or quarterly redemption schedules with a 30-45 day advance
> notice. that means that anyone who wanted to redeem a hedgefund with
> annual redemption schedule per calender year would have to notify
> the fund by mid-November. If you didn't - then gl, you will have
> to wait for another year. similar with quarterly schedules.
>
> ther will be soem Madoff-effekt, no doubt. but the expectation voiuced
> in this silly article is nothing but a moronic guess that displays
> the author's lack of knowledge and perhaps his whishes. but certainly
> it adds TERO alpha to anyone's portfolio.
>
> what a complete joke
Secondly, for tax reasons if for nothing else, I would have already done my hedge fund withdrawal.
thirdly, there are a lot of stocks that have extremely low pe ratios and pay good dividends. What is your alternative? 0% T-Bills? I think that selective stocks look pretty good in this environment.
not guaranteed that will happen, but certainly something to consider
even w/an obama stimulus coming up
we'll see i guess :-)
On Dec 22 08:48 AM birder wrote:
> There is quite a lot of negative criticism of this post here, but
> I am not too sure that all of it is justified. I do believe he did
> mention 1st quarter withdrawals. That does allow sufficient time
> for a 45 day notice. Certainly, there have already been plenty of
> hedge fund withdrawals, but the point here is that as bad as everything
> is, the Madoff affair might very well make a few people wonder whether
> their money is safe anywhere other than under their matress. It makes
> me wonder that. I believe I read that Madoff is going to bankrupt
> the SIPC fund. Sort of makes one wonder whether one should remove
> ones funds from every brokerage account out there.
Tudor Investment Group had $5.7 billion invested at June 30 as disclosed in its 13-F. Its September 30 filing shows only $453 million.
Atticus Capital, another much-celebrated hedge fund, went from $8.1 billion to $510 million.
SAC Capital, run by the Steven Cohen, went from $14.4 billion to $7.7 billion.
Vinik Asset Management, led by Jeffrey Vinik, who once ran Fidelity Magellan, went from $11.8 billion to $1.8 billion!
These numbers are as of September 30. So they do not include the awful months of October or November, so current assets at these funds would be even lower now, but if you are already down 90% .... who cares?
The reduction is of course the combination of selling to meet redemption requests, and a decline in market value of existing positions, if these funds are anywhere close to "typical" I have to conclude that downward pressure on the market on a go-forward basis has got to be minimal as ... well as they are all pretty much out of money....?
We're - ALL FREAKIN DOOMED!!!!
The incoming USA Federal Government administrators are talking about pitching pennies into the welfare pot and building negative yield assets with them
Good Luck
and short term treasuries pay zippo but are selling out. This will provide cover for Obama and company to spend over another trillion to stimulate"
the economy throwing cash to friends and family in the first 90 days in office, then the hangover starts and inflation will come back with a heartless and rapid vengence.
So the 'cash on the sidelines' is not such a huge consideration.
"Thirdly, there are a lot of stocks that have extremely low pe ratios and pay good dividends. What is your alternative? 0% T-Bills? I think that selective stocks look pretty good in this environment."
The answer is bank CDs. The whole reason for zirp is to recapitalize the banking system by driving the money market holders into CDs.
You Best have already gotten your Gold and Silver NOW. The inflated balloon is going to start up and Folks I really do not see it coming down for a long, long time.
Oh and get some guns before the new Prez makes it so FREAKIN hard to get one you won't be able to fend off the others wanting to take it from ya.
What a mess - Helicopter Ben and his warped views on money and now a new Prez that is trying to out do him - with hedge funds imploding to boot and would not be surprized to see a freeze on pulling out funds or a staggering limit put on that.
Geeezzzzzzz
You Best have already gotten your Gold and Silver NOW. The inflated balloon is going to start up and Folks I really do not see it coming down for a long, long time.
Oh and get some guns before the new Prez makes it so FREAKIN hard to get one you won't be able to fend off the others wanting to take it from ya.
What a mess - Helicopter Ben and his warped views on money and now a new Prez that is trying to out do him - with hedge funds imploding to boot and would not be surprized to see a freeze on pulling out funds or a staggering limit put on that.
Geeezzzzzzz
When hedge funds receive redemption requests, does that obligate them to sell holdings immediately? Or can they cover the redemptions with cash on hand and sell when the timing is more beneficial to them?
I'm just wondering if all of the YE selling is done, even though all of the YE redemptions are done.