. January 9, 2006 SouthAmerica: Regarding the current state of the United States financial markets and the number of hedge funds that are going out business and being terminated - a book published in 2003 comes to mind: "After the Empire - The Breakdown of the American Order" by Emmanuel Todd (Columbia University Press - February 2004), this book was a best seller in Europe in 2003. Among a number of interesting facts that he mentions on his book; Mr. Todd wrote: âWall Street, where the leading indexes seem now to directly influence the trend of markets worldwide (up yesterday, down today), has become the endpoint of this security seeking mechanism â 3,059 billion dollars invested in US markets in 1990 - 13,451 billion in 1998. But none of this has much to do with the notion of economic performance considered in terms of real, physical productivity â even if the mantra of ânew technologiesâ is a part of the process. This increase in stock market capitalization that is totally disproportionate to the real growth of the American economy is nothing more than a sort of inflation of the rich. The extraction of profits swells incomes that are then poured into the market where the relative scarcity of the âgoodsâ to be bought â stocks â produce increases in their nominal value. â¦And one must not forget the constant lowering of interest rates â now to practically zero â which means in a speculative economy the free distribution of currency. But if we agree that the American economy is weak when it comes to real, physical productivity, as the massive and still growing levels of imports of consumer goods would suggest, then one has to conclude that the capitalization of the American stock and bond markets is a fiction and therefore the money that is traveling to the United States is literally traveling to a mirage and not the true oasis that many take it for. â¦We cannot yet say whether the decline of the dollar that began in April of 2002 in the wake of the Enron-Andersen affair is just a small hiccup in the system or the beginning of the end. Nothing of the kind was either wished or planned, and surely the breakdown of the machine will be just as surprising as was its emergence.â *** SouthAmerica: How all this can add up to something that makes sense? Today I have the feeling that the US financial markets became a âFantasylandâ. This is just an over simplification of the entire mess â but do we have more investment funds than stock of companies available for investment? For all practical purposes: The New York Stock Exchange lists 2,800 companies. The Nasdaq lists 3,300 companies. For a total of 6,100 public traded companies that other mutual funds and hedge funds can invest on. There are 13,000 Mutual Funds and 11,362 Hedge Funds. For an estimated 24,362 investment types of companies chasing some kind of returns on their investments. Consider the following: Out of the 11,362 Hedge Funds â an industry not as regulated as the Mutual Funds industry â there are probably 10 percent or even more that are like a minefield hiding losses and manipulating the figures until they blow up like Refco and many others. There are many Refcoâs out there waiting to go of. There are many incompetent people among the people managing all these companies. And no one should be surprised to find out that there are a lot of greedy and unethical people among the people running these companies. Just look at the scandals we had in the last ten years and many of them involved billions of US dollars. Today the Hedge Fund industry is like a minefield with a number of time bombs ready and waiting to blow out at any time. And today many of the major American companies traded on the major exchanges â the way they are managed is nothing to right home about. *** 1) The New York Stock Exchange: NYSE-listed companies are among the worldâs best. They range from âblue-chipâ companies, to world-leaders in technology, to young, high-growth enterprises. They meet and adhere to the most stringent listing and governance requirements. New listings at the Exchange include transfers from other U.S. markets, initial public offerings, and cross-listing by non-U.S. companies listed on other global exchanges. In November 2005 the NYSE lists close to 2,800 companies. *** 2) Nasdaq: NASDAQ is the largest U.S. electronic stock market. With approximately 3,300 companies, it lists more companies and, on average, trades more shares per day than any other U.S. market. It is home to category-defining companies that are leaders across all areas of business including technology, retail, communications, financial services, transportation, media and biotechnology. NASDAQ is the primary market for trading NASDAQ-listed stocks. *** 3) Mutual Funds: Today âMorningstarâ provides information on more than 13,000 mutual funds. *** 4) Hedge Funds: The amount of money managed by funds that can be termed hedge funds passed the $1 trillion mark during 2004, according to the Alternative Fund Services Review â and the total number of funds has broken the 10,000 barrier, reaching the grand total of 11,362. The New York Times reported on January 7, 2006 that hedge funds assets have more than doubled, to $ 1.1 trillion dollars since 2000 â and hedge funds had an average return of 7.42 percent in 2005 through November. .