Don’t expect any sustainable rally from here. Hedgies will continue to liquidate; they were hoping for a very strong rally to S&P 1100 - that’s just a dream now.
By Daniel at 20 November, 2008, 1:21 pm
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The hedge fund manager’s 20% profit take is gone for good - they will never get their accounts in the “black” again; best thing for most of them to do is just close up and liquidate. The managers can do better by starting over with a new hedge fund when the “preceived” bottom is in.
Expect most of the hedgies to announce late in December that they will be suspending future redemptions next year as they continue to liquidate. For most hedge fund managers, it’s just not in their “personal” interest to keep these funds open.
Additionally, there is a lot of year end tax planning going on right now; many investors are planning to liqidate by year end any positve positions they may still have against their loses for this year; no one really knows how high the Congress will raise the capital gains tax next year.
Additionally, there is also the risk that Congress next year could further modify the tax code to restrict “carry forward” on capital losses and change the rules on netting of capital gains and losses (both short term and long term). Thus the big money investors will continue to liquidate and move into cash through the end of the year.
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