Profunds index and sector trading

[was Steve]

there are a couple things out there that i am aware of that can affect the market adversely other than the obvious rough shape the economy is in.
the first is the hedge funds. many have up to 45 days wait to give them time to sell and give proceeds to the client. those end of sept statements will be hard for folks to swallow. unless the clients live under a rock they know they got annihilated in october so it is realistic that many sell orders were up put in during october. that could lead to selling basically thru the end of the year.
the second is capital gains that the mutual funds pass along to clients when they sell positions they have owned. imagine if you held a fund and were down 40-50% as most are now. then come january you get a statement saying you had X anmount of capital gains due to the actions the funds had to take to meet redemtions. You have been whacked on the fund and now have to come up with extra cash to pay the taxes on something you havent even sold. folks will have to get money from somewhere. Perhaps they sell more funds or take any savings or credit card line they have available. i would think any fallout from this would hit in the march april 2009 timeframe which is roughly when i feel the markets will be back around the current lows.

i havent really thought of the tax loss factor. I would imagine that if folks havent sold out of fear by now they wont. SO if they want to lock in a tax loss they will sell one fund only to put it immediately into another.