Wednesday, October 10, 2007

Legal Con Men Secrets?--The Spreading Reach of Hedge Funds

--The yo-yo effect, with disappearing billions of dollars on the downside revealed, as Wall Street prepares for a launch of new Hedge Funds

Magalia, California-- With huge losses rung up among the 9,000 existing hedge funds, nearly 50% of which are located offshore in the Caribbean, and with a new deluge of these funds about to be unleashed, warning bells are ringing out. One of the bell ringers, business book author, Jack Payne, warns of the tremendous loss potential of these behemoths of investment.

In 2006, hedge fund, Amaranth Advisors, dropped a staggering $6 billion on wrongly betting the direction of natural gas prices. (An unexpectedly severe nationwide heat wave in August turned the tide against them.) And now, as Wall Street prepares for a record release of new hedge funds, many worried observers believe holding them more to account is relevant.

What is a "hedge" fund anyway? one might ask Many suspect these secretive entities to be of con men-style activity To understand, the best model to compare alongside is a mutual fund which most everybody recognizes.

The lightly regulated hedge funds can invest in literally anything at all.. Commodities, real estate, and currencies adorn their habitat. They are beyond stock tips At one end of the investment spectrum they buy entire companies, at the other they speculatively day trade the stock market. This freedom is indeed inviting to con men. In contrast, mutual funds are tightly regulated, with their investments generally limited to stocks, bonds, and closely-related offshoots.

In 1998 the crack up of the giant Long Term Capital Management Fund nearly collapsed the entire U.S. economy. It rocked Wall Street to its very core. Thus, with 9,000 operating hedge funds, soliciting ever more investment dollars, Wall Street observers feel it only fitting and proper--the time being now--to bring them into the spotlight's bright glare.

"SEC regulations are slight; about the only rules governing hedge funds are that an investor must have at least $1,000,000 in net worth, or $200,000 in annual income," says legal thriller author, Jack Payne, former editor / publisher of Business Opportunities Digest, and author of 55 business books. "And, these rules have been in place since 1982 So, one has to think of the inflation push since then.

"More and more people are being propelled into the 'eligibility' classification. More and more people are being solicited by these funds for their 'investment' contributions. More and more horrendous losses lie on the horizon," he concludes. "Combined, these factors can only mean more and more caution should be exercised before investing. With hedge funds, billions of dollars can disappear faster than ice cream in a microwave. Need I say more?"


bhenner said...

Thanks for pointing out the dangers that exist with the proliferation of investment scams. Investors need to work with experienced market professionals if they want to have a chance of success in today's volatile marketplace.

Bill Henner

Jack Payne said...

Yeah, Bill, there are too many amateurs now playing with fire, by way of investing in hedge funds. I always find it troubling that so many have completely forgotten about the Long Term Capital Management mess, just nine years ago. If it weren't for the Fed's last-minute cobbling together of the weird bail-out agreement with Scotch Tape and barbed wire, we would have had a cataclysmic, world-wide financial panic. This was probably Greenspan's finest hour.

Anonymous said...

Very interesting and true article Jack. Thanks for the info. Janice

footiam said...

Shouldn't have anything to do with hedge fund I suppose.

Jack Payne said...

Yes, Footiam, for safety sake, that is the alarm bell I was trying to ring.