The Hedge Fund Headache
The Hedge Fund HeadacheByHedge Funds are dangerous. They play with the D-bomb and Hedge Fund managersdon't know what they are doing. They are like children playing with alandmine in a sandbox. It's fun and exciting until the darn thing goes off.A D-bomb explosion would have the same impact on the global financialmarket, as an H-bomb would have denoted over Salt Lake City. The resultwould be a multi-century wasteland after the explosion.
A D-bomb explosionmeans that our Civilization will be facing a new multi-century Dark Age.The D-bomb is the Derivatives Market. In theory, derivatives are balancedrisk investments that allow Hedge Funds, banks, insurance companies andothers to profit from the spread created by the bet. The three designproblems with D-bombs are that the risk is usually an either or option thatdoesn't factor in a third alternative. Many bundled derivatives havecomponents that don't represent outside financial instruments that mighthave value after a D-bomb explosion. The Derivatives Market represents aboutforty times the total value of all world currencies combined.
If the D-bombgoes off, all world currencies would be worthless about forty times over.There simply isn't enough money to cover a D-bomb meltdown.In simple terms, a derivative is merely a bet. And it can be a bet onanything: interest rates, exchange rates, stocks, commodities, etc.Find acounter-party willing to wager against you, and you havecreated aderivative. And to make the bet you usually only have to put downa smallfraction of the bet amount. However, if their bet explodes, the Hedge Fundmust cover the leveraged amount of their bets. It's this coveragerequirement for dangerous bets that puts the global financial market atrisk.
The D-bomb risk/reward ratio doesn't make sense to anyone whounderstands it.Consider Long Term Capital Management. In 1998, it was the largestHedge Fund in the world. It's derivatives shenanigans almost triggered thecollapse of the entire global financial system. It careened to the brink offailure and would have gone under if the U.S. Government had not organizedan emergency bailout.
That bailout took the taxpayers of twenty countries tocut the timer to D-bomb denotation. And, Long Term Capital Management wasn'teven an American Hedge Fund.The global derivatives market is around $272 trillion, according to therecent figures from the Bank of International Settlements. And three bigAmerican banks' JP Morgan Chase, Bank of America and Citicorp - account for$77.6 trillion of the money being bet.European banks are at risk for over $100 trillion and are the global centerfor D-bomb development. However, America is racing to close the D-bomb gap.Because they aren't regulated like banks, U.S. Hedge Funds are on thecutting edge of D-bomb development.
American Hedge Funds manage over onetrillion dollars, up from thirty nine billion in 1990. In the first quarterof 2005, wealthy investors added twenty seven billion dollars to the capitalof Hedge Funds. These Funds are borrowing billions of dollars from majorbrokerage firms and others. With the help of Hedge Funds, America is closingthe D- bomb development gap. A small bad bet can easily bring down thelargest financial institution.
Hedge Fund trading may account for up to 50%of the trading volume on the NYSE. A few bad bets would collapse the DowIndustrial Average. Because there are no reporting requirements, nobodyknows how well or badly Hedge Funds are doing. However, I've never met aHedge Fund manager who wasn't seeking new blood for their operations. Ifthey were doing so well, they wouldn't need a constant influx of newcapital.GM is in financial trouble.
The company is planning to layoff 25,000 U.S.employees. The troubles were evident to the investment community for over ayear. Hedge Fund managers made a simple bet on GM. Funds bought GM'scorporate bonds and hedged the risk of default by shorting GM stock. Theplan was to hold the bonds and the Hedge Funds would lock in the interestrate spread between the coupon on the debt and the dividend on the commonstock.
This was a simple either or bet. If GM defaulted on the bonds, theshorted GM stock would cover the bond loss and allow for a profit. If theCompany strengthened its financial position, the interest on the bonds wouldcover any losses sustained by the short position. As with many D-bombs, itappeared the Hedge Funds couldn't lose.The D bomb exploded when GM debt was downgraded (causing its bonds to godown) and Kirk Kerkorian made a tender offer for 3% of GM's stock, causingGM shares to rise. Hedge funds got shredded in this little D-bomb explosion.A similar thing happened with Ford stock and debt.
And, it happens oftenwith no one the wiser.The fact is those betting on Derivatives are betting on the future ofCivilization. At some turning point in the economic situation, whether it bea recession or double-digit inflation, the Hedge Funds will lose sufficientbets to create a cascading explosion that will destroy Civilization. The sadfact is most people don't see that the D-bomb is in play and will eventuallyexplode..
He has been the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/] since 1981 and is the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]Hedge Fund Email and IM Archiving with Amicus? Email Archive 6.0 Plus for Hedge Funds
Austin, TX (ContentDesk) October 27, 2005 -- Amicus, Inc., the leading application service provider (ASP) of compliance technology solutions to securities broker dealers and registered investment advisors, introduces Amicus? Email Archive 6.0 Plus for Hedge Funds. Combining EMC Centera? storage technology and acclaimed Amicus? training and support, this powerful but economical compliance package meets the critical archiving needs of large and small hedge fund firms, whether they are preparing to register with the SEC by Feb 1, 2006, or simply seeking a more reliable and economical long term email solution. Especially attractive to hedge funds and fund of funds stung by the cost of achieving their registration and compliance goals in a short time frame are Amicus low setup fee and favorable terms. As a result, "We're experiencing record RIA and broker dealer sign-ups for Amicus? archiving solutions this year," said Marshall Huwe, CEO of Amicus, Inc. But easy implementation alone is not...
Hedge Fund Email and IM Archiving with Amicus? Email Archive 6.0 Plus for Hedge Funds
Hedge funds > Hedge Fund Email and IM Archiving with Amicus? Email Archive 6.0 Plus for Hedge Funds
The Exchange Traded Fund Alternative
(ContentDesk) October 13, 2005 -- The earth under the investing landscape is shifting quickly. Buy and holding stocks and investments in traditional mutual funds are no longer providing the investment returns they once did. Many investors do not have the time or knowledge to be constantly buying and selling stocks on a short term basis. Exchange Traded funds provide a major alternative to mutual funds and index funds. Exchange Traded Funds provide major advantages over Mutual Funds.
Rather then being priced at the end of the day, their price is updated during the day like stocks. They can be bought and sold like stocks. Unlike Mutual Funds, Exchange Traded Funds can also be shorted like stocks.Their expense ratios are much lower then mutual funds, thus saving investors money. The numbers and types of exchange traded funds are constantly growing. You can invest in indexes, Gold and Silver, Energy, specific countries such as Mexico and Brazil, Bonds, and exchange traded funds made...
The Exchange Traded Fund Alternative
Hedge funds > The Exchange Traded Fund Alternative
Alpha Hedged Strategies Fund Passes the $100 Million in Net Assets Mark and Continues to Attract New Investors
Alternative Investment Partners, LLC (AIP) is pleased to announce a number of significant milestones for its Alpha Hedged Strategies Fund (Ticker: ALPHX). The Alpha Hedged Strategies Fund is an innovative, open-end mutual fund designed to minimize equity market exposure and volatility by employing a variety of absolute return strategies.
The Fund represents the next generation of product for hedged alternative strategies investing, and is open to all investors.The Alpha Hedged Strategies Fund continues to attract new investors, and recently passed the $100 million mark in net assets.
The Fund has also recently qualified to be listed daily in print publications such as the Wall Street Journal, Barron's and The New York Times."The registered advisor community has really warmed up to...
Hedge funds > Alpha Hedged Strategies Fund Passes the $100 Million in Net Assets Mark and Continues to Attract New Investors
Altegris Investments Announces New Director of Hedge Fund Research
La Jolla, CA (ContentDesk) July 6, 2006 Altegris Investments Inc. is pleased to announce that Michael Ding has joined the firm as the Director of Hedge Fund Research. Mr. Ding was previously Vice President, Research and Investment Management, for Abria Alternative Investments, Inc. in Toronto, Canada, where he worked since June of 2003.
Prior to this, he was a Senior Investment Analyst in Alternative Investments for the National Bank of Canada, and a Hedge Fund Research Analyst for the Northern Trust Company, in addition to several financial analyst roles.