Placing Blame

Consider the following excerpt raising the ‘odious hedge fund fear’:

“Long Term Capital Management wasn’t the first hedge fund to get itself into serious strife but it’s the one that is always recalled whenever the market turns choppy. A choppy market is one that doesn’t seem to make sense and is hungry for direction. The uncertainty it produces invariably causes traders, investors, analysts and everyone else in the money game to start worrying about a downturn. When that happens, people want a bad guy to blame for the doom that might be ahead. Nowadays, when there’s no obvious candidate, suspicion tends to fall on hedge funds. Run by outrageously paid managers, these vast pools of exclusive private capital are used for highly leveraged investments and are a major component of today’s market. But because hedge funds are largely unregulated and not subject to disclosure rules that apply in other sectors of the market, much of what they do remains a mystery. In unsettled times this makes people nervous.”
The Australian
Hedge Funds ‘To Blame’
David Nason. May 30, 2005

Keep in mind, great traders (the ones that make the big money) don’t sit around during so-called choppy periods looking for someone to “blame”. Great traders accept responsibility and aim to control what they can control. For example, you can’t control the timing of choppy or trending markets, but you better know how to handle either situation. You can’t eliminate uncertainty, but you better have an idea of how you will deal with it. Very little of what hedge funds “do” is a mystery, but if you accept blindly the constant sound bites and “blame the other guy” language of the Wall Street press core, I can imagine it might be very hard to get “it”.