Thursday, July 5, 2007

NBC News Misleads Public On Power of Hedge Funds

Did anyone notice the big lead story NBC's Today show had late last week about the booming "success" of hedge funds, and how the wealthiest of the wealthy are getting wealthier using them?

Now, what NBC News missed is that hedge funds have been around for decades. What they got right was that some creative investment gurus are using them for even more spectacular gains (though there is incredibly high risk) using vehicles that are not regulated to ensure people don't lose their shirts.

What NBC DID NOT MENTION is that hedge funds have been imploding for more than a month. Why? Because a lot of these funds were invested heavily in companies making home buying loans to high risk borrowers. And anyone who hasn't been in Europe -- or ill -- knows that the residential real estate market has been on the skids largely due to millions of dollars in bad loans. And yet, they still aired a story that was riddled with misinformation.

So people walked away from the story thinking that 1) hedge funds are the place to make oodles of money (not right now or for the foreseeable future), and 2) that real estate funds of one sort or another are the only place to make money.

Once again, the media ignores the power of purchasing investment real estate to "hold."

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