HowardKiss and Tell on the Hedge Fund Blowout and Blowjob
February 21st 2007 02:06
Met Life Building New York
Another bomb in the hedge fund, is the lawsuits involving Stuyvesant Town, the Manhattan middle-class housing sold by Met Life to a bunch of hounds including the Blackstone Group. They are illegally getting rid of many apartment's rent control. This could be overturned in court, killing their looting scheme.
In the Senate on Feb. 17, Carl Levin, Norm Coleman (R-Minn.), and Barack Obama introduced legislation to target what they estimated is $100 billion in annual Federal corporate
tax-revenue losses to overseas tax havens. A key part of their legislation targets hedge funds: It requires hedge funds to report their investors--exactly what the SEC refuses to do--and to report to the Treasury, any investments that come to the hedge
funds from these havens.
[source: Barron's, 2-12-07] THE `GREAT UNWIND' BANK REPORT CONTAINED A VERY DEFINITIVE FORECAST WARNING OF A HEDGE FUND--AND GENERAL MARKETS--BLOWOUT. More on what the so-called ``Great Unwind'' bank-clients' report
of Dresdner Kleinwort said, was reported in {Barron's}, which apparently stuck that moniker on the report. It explains that ``70% of all the assets managed by hedge funds globally, are
invested in a spread-based long-short strategy''--that is, some form of arbitrage bets, and bets on arbitrage bets, on the spread between short and long-term interest rates, and between high-rated bonds and junk bonds. These spreads have become abnormally small, and almost all the hedge funds' strategies bet on them staying that way, or even becoming smaller. This includes hedge funds' hedging of default risk in the leveraged takeovers
done by the same hedge funds--that is, hedging {their own} risk of default.
``Although the timing is impossible to pin down,'' the report says, ``some untoward event or sequence of events could trigger a rapid liquidation [the `great unwind'--Barron's] across
many asset classes, with unpleasant consequences for investment banks, hedge-fund investors, and possibly a systemic impact for securities markets.''
The Dresdner Kleinwort report may not have specifically named the credit-derivatives market--particularly that part of it based on subprime mortgages--as the probable location of the ``event or sequence of events,'' but this is becoming obvious. More than 20 of even the larger subprime lenders--those with connections to and investments from major banks--have gone under or ceased lending, and the interest-rate spreads in this sector have become suddenly and extremely large, threatening the hedge funds' dominant strategies.
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