August 24, 2002 - Charles Gradante, co - founder of Hennessee Group, interviewed with Rhonda Schaffler of CNN Moneyline discussing hedge funds impact on markets with panelists Bob Doll and Vince Farrell.
Noteworthy highlights from this particular interview include Gradante joining panelists Vince Farrell and Bob Doll. Gradante points out that while the Dow Jones average is down for 2002 (-16%), hedge funds were down only (-2.89%). However, CTA's (commodity trading advisors) were up +18%. Gradante also remarks that CTA's are the "tail wagging the dog," not hedge funds. CTAs are shorting S&P 500 futures contracts and market makers who provide the short position to CTAs are shorting the S&P 500 cash market as few CTAs or hedge funds want to be long the S&P futures contract, consequently broker dealers are long futures, and to offset that risk, they short baskets of S&P 500 stocks as a hedge. He also points out that CTAs can short futures without the "uptick" rule. Pension plans also cause volatility when they rebalance out of equities into bonds.