Why should rates plummet, people lose their homes, and people lose their jobs just because some large hedge funds and banks made: some bad trades, over leveraged themselves, didn't understand risk, didn't cut their losses, averaged down, and then ended up doing a clearance sale that brings down the entire world markets and economies? I'm only calling for regulation of large hedge funds with over 500 million aum. And all that I ask is that they clearly state their leverage and state how illuquid the securities they are dealing with. As for banks - any lender that gives a minimum wage toilet bowl cleaner a jumbo loan, with no money down, no income verification, and no documentation ought to be made a criminal - because these actions endanger the assets of all the other responsible depositors at the bank.
Its called flight to quality - people buy the safest assets (T-Bonds) pushing prices up and rates down.
These huge hedge fund mofos are a huge threat to the stability of the markets and the world economy because we know they are all in the same trades and they all can't get out at the same time. This whole 9.6% selloff in only 20 days is just the tip of the iceburg. What if the yen carry trade begins to get unwound everywhere at once? Even Simons at Rentech got caught with his pants down along with Griffin, Cohen, and the rest as it turns out they are all running the same algos. Algos that predicted that an event that would happen once every 10000 years happened 3 days in a row (see www.dealbreaker.com for Lehman's explanation of the quant meltdown). I would add that the large hedge funds should have to disclose their positions just like mutual funds have to do - so that investors know whether they are investing in a lemming or not.
The more time I spend in this game the more I realize just how corrupt it is - now watch people with barely a penny to their name be forced to subsidize the gambling habits of billionaires.
First take some economics lessons. Things like Hedge funds (and derivatives trading) take risk out of the system. You have a lot of it backwards. Traders assume the risk that others want. Otherwise WE would assume the risk. So no, regulation is not the answer. You will just push it offshore and increase the risk for US
First take your head out of your ass. All these banks and funds put on the same trades - and have been going thru forced liquidations in the past 20 days because they don't have the cash on hand to meet the margin calls.
Imo, regulating hedge funds is regulating money. What they trade or invest in is immaterial, its all about the ways to structure money to make money. If they regulate hedge funds I'm sure it would be regulating margin. If they disclose what they invest in what will change? How will that change risk? It still is about the borrowing costs of money.
I wonder if its possible to create a strategy based on consciously adding volatility to the Market and profiting... Some sort of buy / sell activity to create froth in the Market and then profit when that volatility mean reverts... it would work either way, long or short... The basis of the profits coming from buy and holders giving up their shares or overpaying for them... I wonder if people figured out a way to do this on a large scale. Just an idea...