Seeking Alpha – It’s a tough world out there – I saw in the Wall Street Journal the average hedge fund lost 18% in October. Considering what their mandate is i.e. hedge – that is amazing. September was awful as well. We see stories of hedge funds that are performing well (in this market losing 10% in a year is "great") and still facing redemptions because their investors need the cash…. as Ross Perot famously said… there is a "giant sucking sound" in our capital markets.

In a world hard up for cash, even hedge-fund winners can wind up losers. Such is the fate of major credit fund Blue Mountain Capital Management, whose investors have begun yanking investments despite the fund’s performance this year, a modest 2.4% loss, compared with an average 20% loss across all funds. Blue Mountain is a major player in the credit markets, with assets of $5.5 billion invested in bank loans, bonds and credit-default swaps. Its primary fund, the $3.1 billion Credit Alternatives Fund, had lost 2.4% this year through Friday.

Performance was largely beside the point for many Blue Mountain investors, who need access to cash. The perverse effect is that some investors have begun raiding their better-performing investments, giving the laggards a chance to recover.

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Washington Post – It’s easy to explain the continuing financial chaos — and the failure of governments to control it — as the triumph of psychology. Fear reigns, and panic follows. Everyone dumps stocks because everyone believes that everyone else will sell. Only rapidly falling prices attract sufficient buyers. All this is true. But it ignores the real engine of mayhem: "deleveraging." That’s economic shorthand for purging the financial system of too much debt.

Just how this deleveraging proceeds will largely determine the fate, for good or ill, of the crisis. The turmoil has already moved beyond "subprime mortgages," which (it now seems) merely exposed widespread financial failings. These were global, not just American, and their pervasiveness explains why leaders of the major economies have struggled, so far unsuccessfully, to fashion a common response.

Alone, American subprime mortgages should not have triggered a global crisis. Losses are smaller than they seem. Mark Zandi of Moody’s Economy.com estimates that all U.S. mortgage losses will ultimately reach $650 billion. But that hefty amount pales against the value of all financial assets — stocks, bonds, bank loans. For the United States, these totaled almost $60 trillion at the end of 2007; for the world, the comparable figure exceeded $250 trillion.

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