Hedge funds suck the alpha out of the mutual funds

The crazy volatility we have been seeing over the last year has, I think, been amplified by hedge funds that react very quickly, by automated trading strategies that don't mind taking any trend (up or down) and running with it hard. The quants and the agile and the traders have been making money, and the effect of this is that volatility is increased and encouraged.

Long only mutual funds, buy and hold strategies and index funds are going to suffer badly. Hedge funds will take all of the alpha out of the system. Owners of antiquated mutual funds (the mom and pop retail investors out there) are going to suffer.

But then the market is going down, so they will expect to suffer. They (average people) may not realize until its too late that this really going down.

Traders (like me) will make money. I hold very few things right now. On friday (Jan 4th, 2008) I bought 350 shares of (QID) (double short the NASDAQ) on the open and sold it at the very end of the day at its peak. +$589 for the day. That paid the rent.

I have two asian mutual funds, and I will be selling some of that off. Personally I expect further pullback in China, though the longer term is obviously still up. I'll be there in an ETF when that restarts.

Relatively safe ETF picks for the start of 2008 :
(SKF) short the financial sector
(SRS) short the real estate sector