From John Robb's Radio Weblog
A hidden engine behind the stock declines (as opposed the obvious engine: the malfeasance of America's corporate executives) are hedgefunds that control $560 b in assets for the extremely wealthy (this is double 2 years ago). These unregulated and secretive funds are heavily shorting the market, driving it lower. The upshot is that as wealthy individuals get wealthier in the short term due to these actions, the process is helping to harm the market's long-term prospects and perhaps the economy in general. The presence of so much money in opportunistic, leveraged funds is troubling. These funds ride trends (up or down) and often accelerate and or exaggerate their impact. Given that the current trend is down, we can expect it to get much worse than it would have been given the aggressive actions of these funds. Further, it adds to the image that the US markets are only a playground for the wealthy or "the connected" and not a place for individuals and their hard earned dollars.
Oddly, this is closely parallel to an observation made recently by arch-conservative NYTimes Op-Edster William Safire in a whimsical piece in which he imagines conducting an interview with the spirit of his former speechwriting client, Richard Nixon, undergoing Purgatorial time (for dropping the gold standard, of course):
Nixon: [Bush has] got to get ahead of the curve, find a new villain, ride a fresh news cycle. Are you getting this all down? You can use a recorder.
Safire: And the new villain should be —?
Nixon: The hedge funds. There are a half-trillion dollars in assets, John Mitchell tells me, sloshing around in 6,000 or 7,000 hedge funds. Nobody regulates them the way we do mutual funds. The hedge funds' short-selling and rumor-churning and fast covering — all in secret — are what has turned stock exchanges into casinos. Flush 'em out and zap 'em.
Does John Robb know he's in agreement with a purgatorial Nixon?
9:45:33 AM 
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