Looking for someone to finger for the negative movements in the equity, bond, and commodity markets? Hennessee Group LLC says, “he went that a way!”
“Most Wall Street pundits have persuaded the financial media to believe that the ‘elephant in the swimming pool’ is the hedge fund, which is continuously reported to have been the major contributing cause for the recent equity bear market and currently is being cited as the ‘speculator’ who is pushing the dollar to lower levels and oil to $55 per barrel,” says Charles Gradante, managing principal of Hennessee Group LLC. “It is true that hedge funds have the capability of executing bullish and bearish strategies through the cash, forward, and futures markets. Perhaps it is because of this capability that many have rushed to the conclusion that ‘if it looks like a duck and acts like a duck, then it must be a duck,'” he stated.
But, the Hennessee Group says the statistics do not point to hedge funds as the culprit, and that neither the financial media nor Wall Street pundits have provided facts to substantiate any of their claims. To put their own spin on things, Hennessee says to the naysayers, ask yourself a few questions, the answers to which should cause hesitation by those who are quick to point the finger at hedge funds: Where were hedge funds in the 1970s when oil went from $12 per barrel (1972) to $58 per barrel (1981)? Where were hedge funds when gold went from $32 per ounce (1970) to $850 per ounce (1980)? Where were hedge funds when the US dollar collapsed in the 1980s (50% decline in dollar vs. yen from 1985 to 1988)? Where were hedge funds when the market crashed in 1987?
Of course these are rhetorically questions, meant to make the reader stop and think about the perceived impact hedge funds have on the current markets. All of which, Hennessee says, is that while hedge funds may be a factor in current capital markets, they are not acting alone as market forces and participants that existed prior to the prominence of hedge funds in the 1990s are still present and still the predominant factor, not hedge funds.