09.06.07 Hedge Fund Outflows

..Hedge fund outflows hit 7 year high in July. And it is likely to be higher in August. This blog isn't focused on the markets, but millions of middle class folks are in the markets because of their 401k and IRA accounts. That makes news like this something to keep an eye on once in a while. Hedge funds have nearly $2 trillion invested in them. Unlike mutual funds, they are not regulated, and they can invest in different markets around the world, long or short. They probably contributed to the relentless selling pressure in the last round of market woes because of having to sell off holdings to meet redemptions. On days and weeks when you see quality stocks being dumped and the only things going up are garbage stocks, that often is a sign of hedge funds having to liquidate positions. In those periods, they are selling what they can sell, which is their quality stock holdings, and covering short positions on their garbage.