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Sometimes I think headlines like this are the cause of a recession rather than the facts behind it. Economy is more about psychology than it is about numbers.

(Of course there were governments and financial institutes which have behaved badly in the past, no denying there.)

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The very same agencies that are generating the headlines are leaking the headlines to hedge funds hours before. There is a current SEC probe of S&P over concerns that employees disclosed info about the downgrade to hedge funds hours before the announcement.

I have regularly wondered how all these Hedge Funds (let alone the Banks) are doing so well without some kind-of inside information and/or some means to "generate interest or concerns" in the direction they would find the most beneficial.

The banks and large hedge funds manage so much money that their opinions and positions actually impact the market prices.

For example, akin to the "Colbert Bump", there is a "Buffett Bump" where position prices rise as Buffett releases his positions. Over the past few weeks a bunch of firms were required to disclose some positions as part of a 13F filing.

But it's not all puffery. Check out the story of David Einhorn and Green Mountain Coffee (GMCR).

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