A good layman's summary below (from today's Eureka Report) as to the impact of the collapse of the many hedge funds on not just commodity prices, but the A$ and the broader market.
One big massive margin call. The question is when it will stop...
"Then over the weekend, of course, we saw the biggest problem of them all: the escalation of the forced sales by hedge funds and other leveraged investors. I had hoped the forced selling was over, but clearly there is more to go. The comparison with the Dutch Tulip Mania, which peaked in 1637, is very apt. What we are seeing is the collapse of two tulip booms at once: the debt securities boom and the hedge fund collapses. But it is important to underline that this is more than a hedge fund collapse. In fact, investment banks and brokers are all selling their long positions and not take new ones on except in exceptional circumstances. What we are seeing is a massive deleveraging of the stockmarkets. Of course, the "debt securities tulips" and the "deleveraging tulips" are linked because a large number of banks were stupid enough to lend four and five times equity to hedge fund gamblers on oil, copper, Australian dollars, US shares, our mining stocks and other shares. The banks may be big losers in both debacles.
Perhaps the executives who gambled loan money and lost should be required to repay their salaries. Meanwhile, the question that more informed analysts are asking is not whether there will be a US and European recession, but rather how long the recession and the continued economic downturn will last.
My guess is that it will be at least two years, but it's more likely to be three or four years, despite the fact that the new US President will spend and spend to turn the US around."
BUSH
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