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10/27/2008

End of the road for hedge funds?

The end is near. Hedge funds, the plague of modern financial world is coming to its near death. Over the years these funds have wielded tremendous power to move stock markets across the world, bringing joy when they push up markets and leaving behind shattered dreams and destruction of lives when they depart. That is how powerful when funds, arms with hoards of money, working in collusion, could be. They can literally mow down countries with their selfish and singlemindedness, to make profit at all cost, with no qualms about responsibility to the rest that fell victims to their actions. Will countries wise up to the untold damage and consequences that hedge funds can inflict on them to stop them from resurrecting themselves again? Greed of the past, thinking that hedge funds can bring good, must be relook at. The goodness that hedge funds brought along is incidental and only for their own benefits. When their benefits are no longer there, they will turnaround to bite the countries and tear them apart. Unfortunately hedge funds will not go away and will morph into something else and will be wooed back to repeat what they had done before. The lessons of the Asian financial crisis was not learnt. That's why we are facing this second crisis in more severe manner. A retribution for greed and stupidity. Though they cannot go away, their activities can be curbed if regulators are doing their jobs and not fallen to greed. The juicy carrots dangle by hedge funds are tempting. Don't go for it. Limit their activities, limit the damages they can cause. They are the thieves and thugs of modern world, armed with Ivy League degrees and wearing the most expensive suits and ties.

5 comments:

Matilah_Singapura said...

You'll find that the hedge funds run along the principles of Austrian economics are doing fine.

One in particular has been shorting Fannie and Freddie since 2005, and hence made massive amounts of money.

Hedge funds are a necessary part of global capitalism, for many reasons but the fundamental one that they are (more or less) "immune" from govt-employed motherfuckers interfering and trying to regulate them.

redbean said...

hedge funds have no moral restraints and use their financial powers to squeeze or pressurise organisations for profits. they are destructive in nature. in small and manageable scale they are ok. in big scale and in collusion, they can make or break companies and countries. it is like free market or capitalism without restraints.

in extreme cases, govt can be just as destructive without restraints on their power. hedge funds are just another beast, devoid of moral responsibility except to the managers and their investors.

they should be banned.

Matilah_Singapura said...

It is true that govts can do what they like. They an usurp rights, spend money, go into deficit... and stay in business.

However when private enterprises behave badly, the lose money. When they lose their customers money, the private firms in question lose their reputations — as LHL has indicated recently — he called it a "repetitional risk".

Many hedge funds got hammered because they were long on mortgage-backed securities.

The hedge funds run by fans of Austrian economics SHORTED mortgage-backed securities (for the most part)

No fund seeks to lose money. It's bad for business.

Anonymous said...

What are some hedge funds which run by Austrian principles?

Matilah_Singapura said...

Man Financial, Barings AM, and http://mises.org/story/1767

Frank Shostak (Man Financial, Sydney)
http://mises.org/multimedia/mp3/interviews/Shostak_10-13-2008.mp3
http://mises.org/multimedia/mp3/interviews/Shostak_10-22-2008.mp3

Kevin Duffy (Barings)
http://mises.org/multimedia/mp3/interviews/Duffy_10-08-2008.mp3