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    • A Reprieve for Hedge Funds - But Challenges Remain [view article]
      Hedge Funds used to be run by a few particularly brilliant people, and were few in number. Their unique approaches actually contributed to the smooth functioning of the markets. After the Tech Rout of 2000-2003, hedge funds heavily shorted the very companies they shot up to the sky, took many individual buy and holders' money, and became the saviors of the world. It was no longer "plastics" for young, ethically-challenged youth, but "hedge funds". Their explosive growth led to more and more leming-like behavior, with more followers than leaders. They attracted money by maintaining they were necessary to the orderliness of the markets by taking the other side of the trade. The problem is they WERE and ARE the trade. They claimed superior intelligence to deliver Alpha, and it is only now that the Wizard's curtain has been torn away to reveal ordinary folk with extraordinary greed. Many of the their gimmicks, i.e., CDO's, SIV's, quantitative arbitrage, "distort and short" schemes, after-hours trading, naked short selling, taking short positions prior to PIPE deals they participated in, and simply the massive amount of speculation (that has hurt U.S. consumers at the gas pump and the grocery store), have swamped the financial and commodity markets in general, and has sucked capital out of the system, from the masses into the hands of a few. Their financial gimmickry has produced profits for their firms, and for the investment and commercial banks they have been in bed with, but have not contributed to the growth of the economy. Jobs from long-term investment in U.S. corporations have not been created. Fledgling companies have been snuffed out by short-sellers selling more shares than the companies' float. That is counterfeiting! The SEC has been the great enabler, by initially instituting the "grandfather clause" in Reg SHO, then allowing Fails-to-Deliver to continue for months and years on end. Try buying a stock and not paying for it for years. When Gary Aquirre, an SEC attorney tried to supoena John Mack, he was fired. Finally, last summer, they dropped the uptick rule created in 1934 to curb the short attacks prevalent today, for the feeble reason that they didn't think it was necessary any more, so "old-fashioned&qu... It is so "vanilla" to actually invest in a company for the long-term, to take one's fiduciary duty seriously. Nascent rallies since 2000 have been snuffed out, as short interest contiues its upward trend. As John Bogle put it, we must recapture the soul of capitalism, as contrasted to the short-term casino mentality by the very institutions that should maintain a steady hand on the trigger. Apr 27 01:38 AM
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