I think I said this before- Watch the Hedge Funds closely. They are a domain where really serious amounts of money go with very little in the way of oversight by any governmental body or even internal or industry policing. Lots of money and lots of insulation from inspection leads to funny dealings, as we have seen. Most of them are black boxes where billions of dollars are stashed- sometimes with unrealistically high yields. In any case, I was surprised when the subprime mess hit that there wasn't a huge shakeup in Hedge Funds, especially since trading in high risk debt is the historical backbone of the hedge fund model. There was some pain, but not much. Now that Banks are taking multi-billion dollar write-downs, it will be interesting to see what happens.

If it turns out that there was a lot of 'Enron' style management of money and returns in the Hedge Fund market, then there could be some serious problems ahead. You want to see a market crash, watch the very rich flock away from hedge funds (over 1 trillion in estimated holdings in 2007) and into bonds, currency or etc.

Anyway, that Hedge funds didn't start dropping like flies when the subprime mess hit gives me hope.

Yeti