The High Water Mark

In the on going saga of the great unwind from the
over leveraged hedge funds...the next course of action will be to fold their businesses and realize the losses for the limited partners. Why? Because the high water marks are so far ahead of their current portfolios and their enormous overhead in running these over staffed operations... means the principles can't make any money now....to get back into the 20% of profits game they have to get the portfolio back to it's previous higher level...in almost all cases this might take years...these people can't even think in terms of days.

The CAT 5 storm to hit the global capital markets in the past three weeks is analogous to hurricane Katrina hitting two years ago. What we saw then was a major wake up call on how fragile our oil and gas supply and industry is...and we got a glimpse of what the world will look like in a peak oil society.....The over leverage of the entire global capital markets and the nonsense in derivatives viewed as protection has been proven false...yet investors are in denial. When you eliminate the specialist from market making process and turn the uptick short sale rule off...the computers just sell at the market held orders and everyone just watches....this was an early warning for those in the wrong stocks, any kind of leverage and no staying power. It appears there are far to many people not paying attention to what they own and how they own it....for those unwilling to learn from this first cut....buyer beware!

Initial estimates on the cost of the S&L crisis from the last great real estate bust in the late 1980's was $10 billion. The final cost exceeded $200 billion. "When you have a crisis, do not be lulled into a false sense of security from the early guesses about how big the issue can be." There are trillions synthetically created out of thin air not being traded thus not marked to market and thought to be assets...they are not.....this squeeze on the over leveraged is not over!!

Danny Boy seen here is way above the water and enjoying his view of an August afternoon.