Deleveraging

Hedge Funds are being targeted by the prime brokers. The prime brokers are forcing the hedge funds to reduce their leverage ratios as the need for capital continues to intensify. FED Chair Bernanke stated that he is prepared to raise the TAF auctions. I thought things were getting better, but that announcement indicates things are getting worse. The traditional ratios are all breaking down. Gold/USD, Gold/oil, yield curve, carry trades. The mkts are being dislocated as the hedge funds all switch from one side of the boat to another. The old boys club is all trying tosqueeze through the same fire exit. Despite record short interest, the equity mkts trade well. Either there is a pile of pairs trade, or the mkt is setting up for a fall. With the Fed and other central banks forcing credit down the banks throat and then not giving them any benefit to sit in cash, it is flowing to the most liquid asset-stocks.