July 26, 2004
I fully support your proposal to register the hedge funds. They have a very large negative impact on our economy and prey on IRA holders, individual investors and mutual funds. They should follow the same rules as mutual funds since they hold large enough sums of money to manipulate the market, especially if they all think alike or work together.
I would propose at least that they be forced to invest long in the market by holding shares if they are to be allowed to short the market. The ratio of long to short should be at least 20:1. Holding leaps or long term options should not suffice for long positions. This ratio could be adjusted by the SEC as a way of keeping the market from becoming excessive on the upside or downside. In addition, I believe they should be limited from playing the oil futures market. It seems to me that when they want stocks to fall, they simply raise the price of oil. A further restriction should be placed on the amount of margin they can use. I suspect they are taking advantage of low interest rates. They are low to help the economy, yet by using margin to short the market they are hurting the economy.
It seems to me the stock market is almost dead. Stocks havent risen for 4 or 5 years. Why would anyone continue to be in the market if there is no upside for the huge risk? Please do your job and protect the investor.