Ok, I ‘m sure your first thought might be that it has something to do with the fact that daylight savings time is taking a turn. I know that each morning I get up and start my routine which is riding my exercise bike and listening to various news reports. With a quick check of the weather, I have been noticing the indicator telling me when sunset will be for the day that it will be getting darker earlier. I hate to see that as I really enjoy the longer period of daylight and dread the thought of changing the clocks at some point along the way.
But the fact is my comment about getting dark out has nothing to do with the above. It appears that there is a new term that has surfaced in the financial community that refers to the action of going dark! It looks like the credit for the terminology belongs to Todd Harrison who is the founder of a website known as www.minyanville.com The gist of the phrase implies that there are people in the financial industry that are just deciding to wrap up their businesses or for the time being stay as far away from the markets as possible. The evidence seems to manifest itself in the closing of several hedge funds with the most prominent one being that of Duquesne Capital Management, a 30 year business run by a well regarded hedge fund manager named Stanley Druckenmiller.
The reason offered…he’s just tired of managing other people’s money. For the thirty years of his business he had never lost money, but with the current market environment he is down 5% for the year. Apparently it is just getting too difficult! Typically people in the hedge fund industry seem to find a way of making money whether a market is going up or going down. Logic would suggest that if there was some opportunity presenting itself, such as shorting positions, even if we were to be falling back into a double dip recession, it would not be the time to close shop. Why go out on a negative note.
The scary part for all of the ordinary investors is that the implied suggestion of such a move could be that there is no good indication of the economy or the investment markets doing much of anything for some time to come. That could be a real possibility as there are no good economic indicators out there upon which to hang a hat. Today’s data (8/19/10) coming over the wires shows first time unemployment benefits rising to 500,000, the highest level since week ended November 14, 2009. Additionally, the Philadelphia Fed Board reported their August economic index at a negative -7.7 from a positive 5.1 in July. The combination of those facts took a further bit of steam out of the markets. The outlook certainly appears to be one of low interest rates for quite a while yet and that could just be the recipe for a market going no where for some time to come.
Along with what has been pretty anemic trading volume, maybe there are quite a few other investors out there who have chosen to go dark!
