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davepamn

M¢37 Funded By Mahalo ? | September 18, 2009 03:13 PM

Are hedge funds opportunistic or smart?

Many people think hedge funds are evil. Do hedge funds take advantage of margins and discounts? Is the buying smart or opportunistic?

Was the over priced housing market due to correct? Did the hedge funds capitalize on the over valuation?

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cheapgamer

September 18, 2009 04:01 PM

Well, the answer is both. Sometimes the smart move for an individual investor (Or limited number of wealthy investors) is not the best move for a business or the nation. There are huge risks of insider trading within these funds and they should be watched . . .

Just for the record I am not a hedge fund investor myself. I like a good buy and hold myself particularly if I can find nice dividend paying stocks.

One of cornerstones of capitalism is simply Greed is Good . . .
http://www.americanrhetoric.com/MovieSpeeches/moviespeechwallstreet.html

This can lead to a brutal environment for businesses but brutality can trim the fat and make things run better. To answer your question, yes the housing market was overdue for a correction IMHO. People were paying many times their annual income for even a modest home.

Did hedge funds take advantage of this? I would say so, you may want to read this . . . http://www.sec.gov/news/speech/2009/spch061809laa.htm I found it very interesting.

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davepamn

September 18, 2009 05:54 PM

Should Hedge funds be governed to prevent exploitation? Did Hedge funds exploit a margin created by the artificial low interest rates promoted by the fed? Profits were taken. What could have been done?

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cheapgamer

September 18, 2009 09:23 PM

Should Hedge funds be governed to prevent exploitation?
It pains me to say so but I do think there should be improved oversight There are existing laws that address market manipulation and I think some Hedge Funds walk a fine line and some times cross it. (the sec link mentions an increase in manipulation via insider trading.)

Did Hedge funds exploit a margin created by the artificial low interest rates promoted by the fed?
Hmmm . . . . Was this an exploitation of artificial low interest rates or just recognition of a pricing bubble? Honestly I am torn. Seeing what is the case may require a bigger microscope then I happen to have on Hedge Funds.

What could have been done?
That is the trillion dollar question, and honestly I would want to do a ton more research before I hit that answer.

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