Buyout, Hedge Funds Will Be Next Dominos to Drop: Matthew Lynn

Bloomberg – If Sherlock Holmes were analyzing the credit crunch, he would be drawing our attention to the dog that didn’t bark, just as he did in “The Hound of the Baskervilles.”

The dog, of course, would be hedge and private-equity funds.

Anyone tracking markets in recent years will remember the prediction that the unregulated, feverish trading of hedge funds, and the massive debts and complex financial engineering of buyout firms, would cause the next crash.

The crash happened, but it was started by what appeared to be safer institutions. It was the relatively dull mortgage lenders, and the investment banks that supplied their funding through the wholesale money markets, that sparked the collapse.

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