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Who do they think is going to buy the (heavily discounted) assets dumped by banks in the lap of the taxpayers? Hedge funds, that's who.

But hey, when your only policy is distraction, it's par for the course.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Sep 20th, 2008 at 06:07:42 AM EST
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Distraction, all right.

Short selling can be simulated at relatively low cost with options and futures. But the SEC and FSA have not banned options or futures on financial stocks.

Also, as the long/short hedge funds all, simultaneously adjust their portfolios to react to the new regulations you're going to see some deleveraging (which, when done by all, simultaneously is a Bad Thing™) and some large sector movements (blowing away the stability of correlation estimates).

It's all for show.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Carrie (migeru at eurotrib dot com) on Sat Sep 20th, 2008 at 09:08:34 AM EST
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