Wednesday, November 07, 2007

What's a hedge fund again?

For those of you who don't quite get what this "hedge fund" problem is all about, and why it is having such a bad effect on the stock market, I read today a very grade-school level explanation that makes a lot of sense.

The article gives some good, down to earth analogies, and near the end is this quote which I have pasted below, the long and short of the whole big mess.

Charles Hugh Smith
Empire of Debt I: The Great Unraveling Begins
(November 5, 2007)

...The whole risk-management model depends on somebody being able to pay off the hedge. If they can't-- the game is over. the game is now over, and the players shuffling losses can only last a few more days or weeks...

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