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03-26-2008, 05:31 PM
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#1
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Recycles dryer sheets
Join Date: May 2005
Posts: 323
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Not Your Father's Market
Mutual Funds Abandon Stock Market as Volatility Jumps (Update4)
Most Since 1938
By Eric Martin and Alexis Lydia, Bloomberg News March 26, 2008
"Daily changes of 1 percent or more in the Standard & Poor's 500 Index, the benchmark index for American equities, have occurred on 54 percent of trading days this year, according to S&P. That's the most since 1938, as hedge funds and other speculators use borrowed money to magnify returns from rapid-fire trading.
One consequence is that volume on the New York Stock Exchange has ballooned to an average 1.75 billion shares a day, the highest on record and 11 percent above last year. More than half of the 10 busiest days in U.S. options markets have occurred in 2008, fueled by strategies designed to profit from rising volatility."
Apart from this quote what I'm hearing is that the hedge funds are basically moving the market themselves. With leverage giving them Trillions of Dollars to invest they alone are able to rachet the market up or down for financial gain.
This is not "your father's stock market", so to speak. This is a different animal.
boont
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03-26-2008, 06:20 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 1,543
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i've read that half the daily trading volume on the NYSE is hedge funds
i remember reading Charlie Gasparino's When Genius Failed. i was expecting LTCM to invest in some crazy things, but in the end they bought a bunch of bonds returning very low rates but leveraging yourself 100 to 1 can give you some nice returns
same thing with Cramer. his stock picking record wasn't that stellar. but with 3 to 1 leverage he easily beat the SP500
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03-26-2008, 06:24 PM
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#3
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Full time employment: Posting here.
Join Date: Mar 2005
Location: Northern, Florida
Posts: 925
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Someone's got to be on the other side of all these trades. Who's taking it on the chin?
__________________
Retired in 2006 at age 49.
"Who among us is smart enough to learn from the mistakes of others?" - Voltaire
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03-26-2008, 06:44 PM
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#4
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Recycles dryer sheets
Join Date: Nov 2005
Posts: 355
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Some other hedge fund.
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03-26-2008, 07:35 PM
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#5
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Recycles dryer sheets
Join Date: May 2005
Posts: 323
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Along For The Ride
"This is how hedge funds and the big proprietary trading desks on Wall Street make their money," said Peter Cohen, president of Massachusetts-based consulting and venture capital firm Peter S. Cohen & Associates. "For the individual investors, they are completely out of the loop and along for the ride."
That I don't like. That is not investing, that is gambling.
boont
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03-26-2008, 08:34 PM
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#6
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Full time employment: Posting here.
Join Date: Jan 2008
Posts: 798
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Quote:
Originally Posted by boont
Apart from this quote what I'm hearing is that the hedge funds are basically moving the market themselves. With leverage giving them Trillions of Dollars to invest they alone are able to rachet the market up or down for financial gain.
This is not "your father's stock market", so to speak. This is a different animal.
boont
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I know market timing doesn't cut it with the ER'ers, but I did make significant money trading trends in the last 30 years. Today the probability is higher for a trend to change than to continue. Several people have studied and found that result. It reached the point that every idea I tried for timing didn't work. Luckily I stopped before the damage was significant. Maybe I was just lucky trading but it seemed to me that following trends did work. At least my account value shows it did for many years. I could have been wiped out in the last 5 years if I continued what I was doing. I don't try to time the market anymore, even though I do try to make some timely trades on out of favor assets.
I think the OP is the reason. Very insightful and correct I believe.
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03-27-2008, 01:52 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2007
Posts: 5,072
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There is a fairly constant source of money coming into the markets from pension funds, 401ks and IRAs. Some try to time. But much of it is just put into the market through DCA from small investors.
There are quite a number of traders also. They will be back.
I think part of the problem is the sustained weakness of the USD. Plus, there are other viable investments in the world competing for the money.
Stay diversified (with some international exposure), rebalance, and sit tight.
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03-27-2008, 07:19 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Those who have a cast-iron stomach, diversify their holdings, rebalance their assets occasionally and are putting new money into the market on a regular basis are taking advantage of the volatility the hedgies and others are adding to the market.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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