Economist predicts Hedge fund Failures,PANIC, Closed markets, page 1

reply to post by ARNOMANNN

From the point in which the economy reaches it's highest peak (14,165.43) to it's current level.. the DOW Jones Average has dropped 40% in value.

40% of the entire value of the 30 largest companies in America.

Mutual funds are invested heavily in these stocks.. Hedge funds are, as are pensions.

Now many people see the "point" basis of the Dow and wonder .. er.. what exactly does that even mean?

Basically, when we see the DOW's point it is ALL 30 companies stocks added together.. it is then divided to reach this "point" that you see.. I believe the number the stocks are divided by is something like .1228 or something close to it.

To see the DOW drop 40% it would imply that as an AVERAGE, the stock prices of individual companies have also dropped by 40%.

Of course 20 prices can be down, 10 can be up and it shows negative.

But what it means in the long term is quite simply... a massive amount of wealth has disappeared. Equity has been lost.

On top of the general price of shares falling threw the floor, we have also seen a rush of investors pulling money out of Mutual funds, and hedge funds moving more and more money into safer investments.. causing the price of shares to drop. Also putting funds at risk of collapse..

Average fund is -25-40% ..

The S&P 500 is a far better gauge of the economy .. representing 500 companies, some larger then those on the DOW.. for instance Exxon is on the S&P (Exxon actually represents 3.5% of the entire S&P....)

And the S&P Has dropped significantly (high was 1,555.10 points).
777.55 points on the S&P is a 50% decline. S&P LOW for this year is 840 points... so you can see how bad the markets are. Especially when you consider the shear amount of money invested in all 500 of these companies.. the equity and funds lost dwarf the DOW many times over.

So you can just imagine what it is doing to these funds.. not to mention to those invested in them. The only reason we have not seen them failing is quite simply people are trying to ride this out. More and more individuals are pulling money from the markets accepting they took a loss, but they want to save as much as they can before the markets drop even further.

The week of Sept. 29th the US was pulling on average $86 billion from mutual funds alone per day!

I don't think we will see closed markets yet, but I would agree if the major hedge funds begin failing (Which I would not be surprised to see come February....) then it will be concrete proof we are in for very hard and difficult times ahead.