Titanic

Hedge funds, who can borrow to "short" stocks and again leverage themselves further, will be the next shock (most have three to 12 month "lock ups" on investor withdrawal allowing a delay to now's market). These "liquid" vehicles have been forced to sell aggressively driving the collapse in equities; further revealing, the stocks where hedge funds hold the largest stakes massively under-perform the wider market: the 50 stocks where hedge funds are most exposed, for instance, slumped 19% in September while the S&P 500 fell 9%. Hedge managers are today forced to liquidate hundreds of billions of positions as thousands of investors, particularly high-wealth individuals, redeem together in fear. The effect intensified by the ongoing withdrawal of credit by prime brokers, further forcing funds to cut positions. Funds-of-hedge funds, who pool capital for the industry, are also a problem thanks to their own leverage which juices returns on the up. Such gearing means that halving the hedge fund industry to $1 trillion will net larger asset sales still. The party continues.

photo from British Film Institute

"Maybe all one can do is hope to end up with the right regrets."
Arthur Miller

"Ever noticed that 'what the hell' is always the right decision?"
Marilyn Monroe in the Daily Telegraph