Are Hedge funds destroying the economy?

[CitricAcid]

Quote:

Originally Posted by Art G Well besides the fact that it's a complete manipulation of the market and causes the average investor to lose confidence in not only the stock market, but the economy as well; taking a stock down to a reasonable price is one thing, but destroying them is another. Let's use FNM as a good example.....do you not think naked shorting of this stock to....oh say....$2 might cause a concern? These massive hedge funds are making certain people incredibly wealthy at the expense of many, many others. Assume you own a restaurant and I patronize it every day, but I never pay my check....

This has some merit of truth to it, but if the company continues to post earnings after earnings with solid dividends and revenue growth, I see no reason why a hedge fund would be able to take it to the ground. I feel that the mass of investors who find the good deals outweigh the hedge funds, who do have SOME pricing power, but not to overweigh the key fundamentals of a company.

Also, I feel it adds more confidence to many in the stock market... just start shorting instead of going long!

[Hamlet]

I don't think of short selling as manipulating the market any more than I think buying a stock is.

People can do the same thing on the long side, buying a stock at any price, driving it irrationally high. That can be just as damaging when prices come back down to earth. Nobody complains about the hedge funds manipulating the market by driving the price up, though.

Quote:

Originally Posted by Art G Well besides the fact that it's a complete manipulation of the market and causes the average investor to lose confidence in not only the stock market, but the economy as well; taking a stock down to a reasonable price is one thing, but destroying them is another. Let's use FNM as a good example.....do you not think naked shorting of this stock to....oh say....$2 might cause a concern? These massive hedge funds are making certain people incredibly wealthy at the expense of many, many others. Assume you own a restaurant and I patronize it every day, but I never pay my check....

[Art G]

Hamlet, I believe you're confusing the issue of shorting a stock vs. naked shorting a stock. The problem isn't with the shorting, it's with the lack or rules for hedge funds. Let's look at the other side, assume for a second they could buy a stock without ever having to pay for it. Don't you think the share price would rise? Would this distress you at all?

[MichaelB]

Quote:

Originally Posted by Art G Hamlet, I believe you're confusing the issue of shorting a stock vs. naked shorting a stock. The problem isn't with the shorting, it's with the lack or rules for hedge funds. Let's look at the other side, assume for a second they could buy a stock without ever having to pay for it. Don't you think the share price would rise? Would this distress you at all?

As soon as another hedge fund or investment house determined this was happening they would be free to implement a counter-strategy.

Short selling may cause some problems, but the lack of short selling causes more. As to rules, the problem to enforce the ones that already exist.

[Art G]

Again, there is a whole different story between shorting a stock vs. naked shorting a stock. The whole naked short issue was allowed by brokerages in order to make a more liquid and efficient market. Hedge funds have totally manipulated that rule for their own benefit, and humongous hedge funds have used the rule to create one sided trading. The uptick rule was at least in place to try and control drastic price falls, the lifting of that rule creates an open window for those same funds to do as they please.
Give it time, you all will understand what I'm saying soon enough.

[FinanceDude]

Quote:

Originally Posted by Art G Again, there is a whole different story between shorting a stock vs. naked shorting a stock. The whole naked short issue was allowed by brokerages in order to make a more liquid and efficient market. Hedge funds have totally manipulated that rule for their own benefit, and humongous hedge funds have used the rule to create one sided trading. The uptick rule was at least in place to try and control drastic price falls, the lifting of that rule creates an open window for those same funds to do as they please. Give it time, you all will understand what I'm saying soon enough.

Hedge funds won't be regulated anytime soon.........too many influential folks have money in them..........

[Art G]

Quote:

Originally Posted by FinanceDude Hedge funds won't be regulated anytime soon.........too many influential folks have money in them..........

Exactly! And that's why the uptick rule was removed.

[FinanceDude]

Quote:

Originally Posted by Art G Exactly! And that's why the uptick rule was removed.

It's pretty simple..........if the hedge funds had the same rules as everyone else, there would be no competitive advantage, and money would flow back into mutuals and stocks and other things..........

[Art G]

I don't know that it is that simple, but there are definitely people in New York that are privy to info that the rest of us aren't, and they have the ability to use that info for huge gains. The rest of us are just hoping to get our little share.

[FinanceDude]

Quote:

Originally Posted by Art G I don't know that it is that simple, but there are definitely people in New York that are privy to info that the rest of us aren't, and they have the ability to use that info for huge gains. The rest of us are just hoping to get our little share.

Fuhgeddaboutit!!

[Art G]

And worst of all, are the hedge fund employees, with no remorse, who chastise other far less damaging products.

[73ss454]

So Art, there's no annuity sales people that chastise hedge fund people?

[FinanceDude]

Quote:

Originally Posted by 73ss454 So Art, there's no annuity sales people that chastise hedge fund people?

Some annuity companies use hedging strategies in their subaccounts............

[Art G]

Quote:

Originally Posted by 73ss454 So Art, there's no annuity sales people that chastise hedge fund people?

LOL! Thank you for being the conscience of the hedging industry. In my opinion, the difference is that annuities are not destroying the market. One might just say that they are protecting you from the pitfalls of it.

[73ss454]

Yeah, that's me, the conscience of the hedging industry.

Let's go back and just say the same thing, buyer beware. No one is bending anyones arm to buy anything. That's what our economy was built on, it's an open market.

Now, to talk about annuity salespeople. They mostly rip off the older amongst us. Hedge fund people don't go to older folks houses and sell products that are total rip offs as our friends the annuity salespeople do. But you know what, I'm OK with that because sales are sales.

For every buyer there's a seller, get over it.

[Art G]

Quote:

Originally Posted by 73ss454 Yeah, that's me, the conscience of the hedging industry. Let's go back and just say the same thing, buyer beware. No one is bending anyones arm to buy anything. That's what our economy was built on, it's an open market. Now, to talk about annuity salespeople. They mostly rip off the older amongst us. Hedge fund people don't go to older folks houses and sell products that are total rip offs as our friends the annuity salespeople do. But you know what, I'm OK with that because sales are sales. For every buyer there's a seller, get over it.

Sorry, but you couldn't be more wrong. If you are invested in the market, in all likelihood you are getting screwed over by a large hedge fund, and they're not even coming to your door to sell you anything. At least with the annuity, you have a 10 day free look period.
Here's in a nutshell, the hedge fund is totally and without regard looking to make money via inappropriate means, they only help those who are invested in them, while costing many others. They are using a small loophole in the system in order to manipulate a rule created to help the market to run more efficiently.
The annuity has added insurance fees that may or may not work to your benefit, but can give you peace of mind in down markets, and give your loved ones some security.
Yeah, I can see how they're similar.

[FinanceDude]

Quote:

Originally Posted by 73ss454 Yeah, that's me, the conscience of the hedging industry. Let's go back and just say the same thing, buyer beware. No one is bending anyones arm to buy anything. That's what our economy was built on, it's an open market. Now, to talk about annuity salespeople. They mostly rip off the older amongst us. Hedge fund people don't go to older folks houses and sell products that are total rip offs as our friends the annuity salespeople do. But you know what, I'm OK with that because sales are sales. For every buyer there's a seller, get over it.

You have to quit watching Dateline and attending free dinner investment seminars at your local steakhouse...........

[Art G]

Tuesday’s D-Day for SEC – and Banks
The Securities and Exchange Commission will decide Tuesday whether or not it will continue its “emergency rule” against naked short-selling a list of 19 banks.
The irony, of course, as Cramer points out, is that naked short-selling any stock is illegal and not just the banks. So there was no need for this special action by Chairman Cox and his cohort.

But here we are, and the SEC’s decision is looming and it’s of tremendous importance. The hedge funds that relentlessly hammered down the banks before Cox stepped in have been put in check only by the attention brought on them by enforcement of this rule. If the SEC decides to let go of its focus on naked short selling, the bear raids would return and everyday investors – and the market – would be in a house of pain.
There’s no doubt the rule was effective, even though at least one of the SEC commissioners doubts its efficacy. But a quick glance at the banks in question shows the never-ending spiral they were in came to a halt once the rule was (re)implemented, and they even went higher. Sure, the bank stocks dropped 4% Monday, most of them, including Lehman Brothers LEHMAN BROTHERS HLDGS INC
LEH


are still trading up where they were before the SEC got involved. As for the banks that were left of that list of 19 names – Washington Mutual WASHINGTON MUTUAL INC
WM


, American International Group AMERICAN INTL GROUP INC
AIG


and National City NATIONAL CITY CORP
NCC


, for instance – they all took a hit.

The bottom line is that no stock should be the target of naked shorting. The SEC needs to do the right thing and make sure that rule continues to be enforced.
“As bad as these prices for the banks were today,” Cramer said, “believe me we will see much lower ones for the financials Wednesday if the SEC does the wrong thing [Tuesday].”

Mad Money: Tuesday’s D-Day for SEC – and Banks - Mad Cap Recap - CNBC.com

[harley]

OK, now I'm convinced. If Cramer's saying it, it's gotta be true!

[Art G]

Well sometimes the guy makes sense. If he and I say it, it must be true.