BREAKIN OUT THE LUBE

Right about now....some hedge fund manager is getting ready to get pounded in the ass. The funny thing is, the downgrades were small. The forced selling of 1-2% of 2006 subprime securities won't do much in and of itself. The hammer to fall first will be disbursements. See, contrary to what some of you may think, there are many investors in hedge funds that are intelligent, financially savvy, news-cognizant people. These people are looking at the last holdings report from their hedge fund manager and thinking "oh shit, he's about to get pounded in the ass, I better get my money out now". So before we see the massive downgrades that we know must come, we'll see more "hedge fund halts disbursements" headlines. Because when you're leveraged 30:1, and someone asks for their money, and you suddenly realize you cannot liquidate all these arcane structured finance products quickly, you'll do what they all do: stop paying.