Thursday, September 04, 2008

Hedge Fund Implosions
The Ospraie commodity-based hedge fund closed earlier this week and markets today were roiled, in part, by rumors surrounding another hedge fund. It is strange that despite the artificial increase in commodity prices, "smart" money was still fooled. The commodity bull market was a combination of speculation, a commodity bubble and a weak dollar. How could commodities continue to rise when the whole global economy is slowing. Even a causal observer of the economy could see that a continued increase in commodity prices made no sense. Prices are ultimatey demand driven, and when demand drops so do prices. Something had to give, and it did. But still, some of the "smart" money got caught on the wrong side of commodity bets.

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