Houston Chronicle- It’s hedge funds, not houses.<\/p>\n
That’s the take of some economy watchers trying to best explain the recent unraveling in the stock market.<\/p>\n
“This is 90 percent Wall Street and 10 percent Main Street,” Jack Ablin, chief investment officer for Harris Private Bank, said Friday.<\/p>\n
“It’s virtually all a hedge fund phenomenon,” he explained, as some of the secretive investments, which often borrow $3 for every $1 in equity, are scrambling to sell holdings to meet debt obligations.<\/p>\n
It’s among the drawbacks of a borrowing culture that has been encouraged for years as the Federal Reserve campaigned to keep interest rates low. That helped stoke liquidity and a demand for anything that could be borrowed against, including stocks and real estate.<\/p>\n
Another market watcher agrees that hedge funds, which have been conducting business with borrowed money from banks, should take more of the rap.<\/p>\n
“The recent market meltdown had much less to do with bad subprime loans than advertised,” Peter Morici, University of Maryland business professor, said in a report Friday. “It was caused more fundamentally by excesses at hedge and private equity funds.”<\/p>\n