Hedge Fund Crisis Could Be 'Tip of Iceberg'

Suprime selloff, Bear Sterns collapse will test markets' elasticity
By Peter Fearon,  Newser Staff
Posted Jun 21, 2007 5:54 AM CDT
Hedge Fund Crisis Could Be 'Tip of Iceberg'
Traders crowd a post on the floor of the New York Stock Exchange, Wednesday afternoon, May 30, 2007. The Dow, the first of the major market indexes to recover from Wall Street's prolonged slump in the early part of the decade, closed at 13,632.76, up 111.42, or 0.82 percent, and also reached a new trading...   (Associated Press)

The near-collapse of a $20 billion pair of hedge funds has left Wall Street jittery, though not yet in panic mode, the Journal reports. Speculation about the fate of the Bear Stearns funds rippled through yesterday's markets, where stocks and bonds dipped widely; news that banks were struggling to unload subprime-backed securities had traders biting their nails.

"The fear is that this Bear situation is the tip of the iceberg and could lead to other funds being liquidated," one said. But 10-year Treasury notes and gold, traditional shelters in turbulent markets, both fell, indicating investors are not running for cover just yet. And recent scares (like housing) may provide a roadmap for recovery from the subprime debacle. (More Bear Stearns stories.)

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