Monday, April 19, 2010

Hedging Their Bets

Over the past year or so, we’ve been hearing about “hedge funds” and, I confess, I have had no real idea what they were all about. So I asked a financial advisor and got a lengthy and involved answer. Nevertheless, it distilled down to this.

A hedge fund is like a mutual fund, comprised of a number of investments … with one main difference: they are very high risk, but offer very high rewards. Basically, hedge funds are designed for the very, very, very wealthy … people who can affords to risk millions in the hope of making even more millions.

Hedge fund managers are the people who buy and sell within their respective funds. The good ones make many millions of dollars for their investors.

And they get paid very well indeed. How well?

In 2009, which was a crappy year for the vast majority of working Americans, the top 25 hedge fund managers were paid an average of about one billion dollars each. That’s billion with a “B” and that’s for one year’s work. How’s this for a contrast: A rough calculation indicates that much money would pay for 50,000 new teachers for ten years.

And all 41 Senate Republicans say they are going to vote against the financial reform package.

What a disgrace.


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