“I can’t believe we don’t have absolutely huge hedge funds blowing up right now.”
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Keep in mind that many hedgies were on the leading edge of shorting subprime paper over a year ago via credit default swaps. That sub-market has exploded (and the cost of CDS’s has risen accordingly) in conjunction with increasing demand to place bets against subprime borrowers.
Bottom line being that many hedgies stand to realize massive windfall CDS profits when the defaults occur and the insurance has to pay up.
