Hedge fund margin calls appear to be playing a role, perhaps a substantial one, in the precipitous fall in stock prices. One hedge fund manager told us yesterday that a West Coast hedge fund was supposed to have dumped a lot of risky fixed income positions late in the day yesterday. That affected the stock market over the fear that the distressed prices its paper was fetching would force banks and other financial firms to mark similar assets down, leading to further losses.
I thought as much yesterday, but today people are saying it everywhere. Admittedly there is no hard proof yet, but where there is smoke there is fire. At least that is how it has been so far.