Charlie Rose

Kapanda  07/25/2010 08:21 PM Report

macrobert, you said it yourself, they add liquidity. Added liquidity adds efficiency. Added efficiency eases productivity.

marcrobert  07/19/2010 02:35 AM Report

How do hedge funds help in capital formation? OK they add liquidity, so what? THey also add High frequency trading, added volatility and sloppy selling.

OK, a Hedge fund is probably a better way to invest than unhedged mutual funds or etfs in volatile markets, but to suggest they don't care what direction the market is going in, I think he has them confused with day traders.

I don't think hedge funds are much different than any other investor.

He calls this beneficial because of the added liquidity, but I don't think many investors would find fast downside moves very attractive... Maybe from a market maker's point of view or the exchange's, sudden increases in selling add liquidity.

They obviously add to short interest.

How they help the economy and the system is hard to see. They don't bring IPOs to the market or help companies like VCs do, so no help in financing new capital. They probably have a pretty good track record at selling IPOs and a helping hand with huge short term price fluctuations when they come to market.

What value do they add? I don't see any. Besides to their clients and themselves.

He said they are the perfect investment. You don't need to bail them out.

Well, guess what, you won't have to bail out most other equity investors either, that make up 99% of investors: Mutual funds, private pension funds, etfs, individuals...

big institutions like vanguard, fidelity, pimco or ishares.

They are much bigger than hedge funds, definitely add liquidity to the market, and probably add less volatility over any time frame.

Hedge funds are also somewhat feared by listed companies. They can target companies and play them, have an activist agenda and claim to be helping all investors.

Its only lending institutions and related intermediaries that need bail outs, because they only have to have 10% of their depositors' capital on hand at any given time.

All equity investors are the same, they also have one goal: make profit. And they cannot get bailed out. Hedge funds are a small part of the pie, but their actions can be very concentrated in time and focus.

Individual investors also hedge, they do so with asset allocation and diversification. its not an all in, all out strategy, but it helps.

Why do hedge funds attract so much attention. I think mainly because they are seen as nothing but speculators, and the managers make unreal amounts of money.

But people forget the true nature of stock markets. It was to speculate and play with stock of companies that had raised capital in the market.

So primary function of the equity market: raise capital for companies. What happens to a company's stock on the market is not a concern immediately for the company and is completely out of their control, although it wants to keep its shareholders happy ultimately.

robdverity  07/16/2010 08:59 PM Report

Plea$ed for you. Hope you can hedge some arbitrage arrangement with the ultimate CEO for your winnings to be cashed and recashed ad infinitum.

DavLev  07/15/2010 08:44 PM Report

There is nothing wrong with making money, from which

the US govt and state and local governments get their revenue to provide the many services. I like earning money, and risk the market. Sometimes I win, sometimes I lose. My job was risky, but I stayed for years. If institutions and others want to hedge their bets with a hedge fund, more to them, but investors should be appraised of the possible consequences. Far too many Americans look to Uncle Samuel to insure them against job losses and a recession/depression. What ever happend to private iniative? If hedge funds make (or lose) money, on other money, so what? As Hoover said, the business of America is business. Hedge funds did not borrow above their means, and insure against losses therein by securitizing the loans.

Moral hazard..government guaranteed bailouts, and manipulating the bond markets (Fed) and creating budget deficits (IRS enforced) are the real bad guys in all this.

Charlie Roses questions and comments were right on the ball. His writers are much more adept at local than at foreign policy, when he sometimes believes he is the Sec. of State. If he wants to make decisions, run for office guy. My state (California) needs a good Senator. Then we voters can tell him whether we approve or disapprove of this

policies. Hedge funds..you better believe it. 20b in compensation to 20 officers tell it all. And BTW,they are taxed.

robdverity  07/15/2010 02:09 PM Report

He may be right (tho I hope not). Making money on paper and paper shuffling is too clever. Sure the hedge fund wise-guys have it all figured out - or at least rationalized - that they make markets and market efficiencies. They doubtless accentuate the peaks and troughs, whether good or ill. Mentioned many go out of business. Seems to refute something of their alleged virtue. Hedging firms should be hedged, right? Thus indestructable?

Overall, I recoiled at this guy. Too knowing. Too slick. In short, I wouldn't buy a used car from him. (I hedge my portfolio by contraception.)

REMant  07/15/2010 12:42 PM Report

This discussion came off quite different from the understanding I had of his position from a column Pearlstein devoted to the book c June 18, similar to my own, that the problem is more bank credit and not derivative gambling. But it is wrong I think to say hedge funds merely manage risk and are not engaged in mkt making. It is true that they do not purchase anything like a retailer to promote and distribute it, the technical definition of a mkt maker, but they do make their money on a keen understanding of crowd behavior. And as Soros said this has a self-reinforcing effect. It is this aspect that serves to push up mkt prices, with devastating effects on the distribution of wealth, and the likelihood of burst bubbles. Capital is not formed in this process, certainly, which must depend on savings from productivity, nor, if what is involved is a pyramid of leverage, can it be said to be aggregated. This business has been around as long as there have been financial mkts - Ricardo made his money off it, and the pools in the 1920's did essentially the same thing - but at bottom it requires banks creating money to be sustained. This again illustrates the difficulty many, esp on Wall St, have in understanding the difference between real value which depends on productivity, and mkt value, something Smith, himself, labored to explain. The Church, BTW, was opposed to usury for the very reason that it involved ppl not having enough interest in their fellow men to stick with and support them.