Hedge fund liquidations have pulled down stocks and commodities alike. They are now sitting on some cash, and that may help the stock market find its legs, said MF Global Research Senior Interest Rate and Equity Analyst Nick Kalivas (See a sample of his 11/17 morning comments below).

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Financial Market Comments From MF Global Analyst Nick Kalivas

Hedge funds are flush with cash. How much more are they going to sell? The market may be sold out.

There’s an interesting story on Bloomberg which suggests there has already been a large liquidation.  I think there has been fear of more liquidation by hedge funds, but it already looks like there has been heavy liquidation.  Story highlights below:

Hedge-fund manager David Tepper entered the third quarter with $3.1 billion of U.S. stocks and exited with $648 million, selling most holdings to reduce risk and raise cash as carnage spread across the financial markets. “We moved a lot out early because we didn’t want to lose money,” said Tepper, 51, president of Appaloosa Management LP in Chatham, New Jersey. The firm, which switched some money to bonds, has between 30 percent and 40 percent of assets in cash.

At Tudor Investment Corp., the Greenwich, Connecticut, hedge-fund group founded by Paul Tudor Jones, 13F holdings fell to $453 million from $5.7 billion. Jones said markets face more selling from managers. “Our concern now is less over year-end fund redemptions, as record cash balances have already been raised in anticipation, but with prospective fund closures,” Jones, 54, said in an Oct. 31 report to his clients. “This latter event represents a tipping point at which a fund’s call on the market for liquidity goes non-linear.”

SAC Capital Advisors LLC of Stamford, Connecticut, said its holdings were $7.7 billion as of Sept. 30, down from $14.4 billion at June 30. Founder Steven Cohen, 52, had about half the firm’s assets in cash in mid-October, after his main fund fell 5 percent through September. Louis Bacon’s Moore Capital Management LLC said the value of its 13F securities fell 69 percent to $1.4 billion, while at Jana Partners LLC, a firm overseen by Barry Rosenstein that makes activist investments, they fell to $2.1 billion from $5.9 billion. Both firms are based in New York.

Jeffrey Vinik, who once ran the Fidelity Magellan Fund, disclosed that his Boston-based Vinik Asset Management LP held $1.8 billion at

Sept. 30, down from $11.8 billion at June 30. “Movements in financial markets were so volatile, so unpredictable and so seemingly detached from fundamentals” that many hedge-fund managers “didn’t feel they had an edge,” said Doug Peta, an  independent market strategist in New York. “The best thing they could do for their investors was to pull back entirely until markets returned to more of a sense of normalcy.”

8:25: NY Post story

Hedge funds have been rushing in recent weeks to sell risky bond and stock assets ahead of yesterday’s deadline for investors to withdraw money from their beaten-up funds. The withdrawals ahead of the Nov. 15 deadline, the first since the October markets meltdown, could lead to the shuttering of up to 25 percent of the 7,000 hedge funds, industry insiders say.