Hedge Fund Redemptions

The question that gets asked everyday and of every Tom, Dick, and Henry Blodget Financial commentator is “when will the bottom be reached “in the current rollercoastering  yet consistently swooning stock markets. And without fail, the Financial commentators fill the airwaves with incredible financial mumbo jumbo that even a voodo witch doctor would not lay claim to. Thus  I suspect the following words taken from a Financial Post article courtesy of  Hedge Funder Barton Biggs are closer to the mark:
“Biggs, a New York-based hedge fund manager, doesn’t expect, as some fear, ‘a tsunami of redemptions from disillusioned investors.’ His view is in part because ‘the panic has abated’…. Biggs, former chief global strategist for Morgan Stanley, conceded, ‘Nobody, and I mean nobody, really knows what hedge-fund liquidity is or what redemptions are or will be.'”

And like those still-unevaluated $54 trillion of Credit Default Swaps, Hedge Fund Redemptions still overhang a Greedy-Gutted market.  So maybe the current OECD predictions of a  downturn of 0.3% world wide for 2009 and 2.8% for the US are still optimistic as momentum is draining fast from the economic engine while basic Financial market valuations remain murky and/or frozen. And this should not be a surprise as a)nobody admits to knowing how to evaluate all those overhanging CDS and b) consumers 0% savings rate, decline of 20-30% in in their house values , 20-50% declines in their 401K and other equity holdings plus rapidly increasing unemployment may have sidelined those very same  US consumers longer than presumed.

What I find worth a 5th of contemplation is that the Hedge Fund managers that appeared before the US House committee this past week  collectively pocket at least $1billion each for the past two years.  Yet despite this plunder, they could shed no light on the market’s future fate. Second, that kind of pay presumes that they are worth 5000 times as much as the average Wall Street commentator (average of $200,000/year in wages). Or from a statistical point of view these anointed Hedge Fund managers  are compensated  2500 standard deviations better than their Financial commentator counterparts in making  decisions and calling the shots on the markets. In effect, these anointed Hedge Fund managers are more infallible than the Pope. Or conversely, the current breed of Financial commentators are dumber than the dumbest Monkey or his Uncle.

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