Kass: Baby, It's Cold Outside
The Great Hedge Fund Unwind
"I sent the club a wire stating, Please accept my resignation. I don't want to belong to any club that will accept me as a member."
-- Groucho Marx
The economic impact of the debt and derivative buildup as well as an almost coordinated push by hedge funds into the popular and crowded commodities and energy trades (from 2005 to mid 2008) is now causing irreparable damage to the markets and to the investment returns, serving to force many of those hedge-hoggers to collectively panic in an attempt to preserve capital (and, in some cases, their businesses). The massive sell orders from the hedge fund cabal, many of whom saw the glass half-full and dismissed the concerns expressed by the splenetic minority have accelerated in recent weeks -- despite the appearance of emerging stock market values.Even some of the most sizeable and prestigious hedge funds, which have delivered a decade or more of impressive performance, are faced with large investment losses and client redemptions that could undercut their very existence. This is leading to the "great hedge fund unwind," a vicious vortex of selling that, for now, is unresponsive to the possible relief found in rescue packages or in expansive monetary or fiscal initiatives.
It Was Different This Time
The wild and windy nightIt truly was different this time: Stocks were not, as the case has been for a decade, a buy on dips. Mr. Market has left a pool of tears, and it will be a long, winding and difficult road back to the restoration of stock market health. The investment, economic, political and social implications of the market and economic turmoil will be legion and broadly felt for years.
That the rain washed away
Has left a pool of tears
Crying for the day.
Why leave me standing here?
Let me know the way. -- The Beatles, "The Long and Winding Road"
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV