Mark to Market

If you ever wondered why hedge funds don't want to be regulated there is any easy answer. These leveraged funds (i.e. borrowed money) sometimes 10 or 15 to 1 are using derivatives that have no mark to market. In other words when they enter into a derivative contract there is no transparent market to say if the "trade" is up or down...so when the hedge funds take their performance fees and refuse to show all investors the "portfolio" they are just suggesting what the value may be and move along...that is ok in a flat or trending market and also true if no one takes money out or wants any money back..but...when the markets do move aggressively in opposite directions...there is a growing unrealized leveraged loss not being market to market, reported or acknowledged. This is the problem facing all those people piling into these hedge funds...when the music stops so will the doors close on them in the room. Why would you pay someone 25% of anything to be buying an asset at a 25% premium from the public market place and then fully tax effect the investment with no reporting or liquidity??? These private equity/ and leveraged trading hedge funds is a bubble we will talk about for the rest of our lives. Interest rate sensitive utilities have peaked, Reits will follow and then the hedge funds as "investors" try to get their cash out....this will take years...the press, consultants, congress and investors have been duped.

Time will tell if the Chinese investing their new found wealth in the Blackstone Group Hedge Fund will compare to the Japanese buying into golf courses and buildings in NYC at their market top 17 years ago.

Often the best players in a sport aren't the fittest or the strongest, but those with "field vision"-knowledge of where teammates are at all times, where the ball is headed and what opponents plan to do. Such talent has long been assumed to be innate, and impossible to teach. To be successful in this stock market you have to be able to read this tape and see whats happening...the markets now feel like they are getting ready to move...away from the highly leveraged money...this in itself creates opportunities!

Danny Boy seen here is on the look out for these opportunities and not leveraged.