More thoughts on financial markets…
Today’s ET has a short update on Hedge Funds….
“Hedge funds pulled a record $72.2 billion in new assets last year as more conservative investors like pension funds bet on the loosely regulated funds that promise to make money in all markets….For the year as a whole, inflows more than quadrupled from 2002 when investors added only $16.3 billion. Once the prserve of wealthy individuals, hedge funds are now becoming popular with conservative investors like pension funds and endowments after they lost billions during the bear market but hedge funds posting strong returns….Still investors don’t seem to be too overly bothered either by the memories of hedge fund blowups like the one engineered by LTCM or the illegal trading allegations.”
Imagine your pension sitting with one of these hedge funds. If the very idea weren’t so grave, it would be laughable.
I am almost certain there will be another big blowup in the near future. If there isn’t, one of those big banks (say Citigroup) is going to end up buying another of those big banks (say Bank of America), and the accountants will sit around the table, and decide to move a liability to an asset, and all will be fine for another couple of years. The incessant trading on the capital markets motivated by a desire for a quick buck is going to end up ruining more economies in future. We are hypothicating away the future of the next generation.
I also think that this entire Participatory Notes (PN) issue in the Indian stock markets reeks of unchecked greed. It is almost certainly going to lead to an inflow of hot money that is least concerned about long term investment. Its a pity there are no strong alternative voices against the incessant rampage of financial market manipulators. We will need a few strong voices soon, else ICICI and its cohorts will make sure many necessary regulations go, and once that happens, it won’t be too long before we end up like the US.