Here are two articles from a few months ago that talk about growing market volatility due to hedge funds and housing. Given the global crash of equity markets this past week, it is something to think about.

How risky have things gotten? How much are people leveraged? Is the global system at risk of sudden, dramatic shifts?

Debt Party: Investors Scoff at Risk, But Their Borrowing May Haunt Them

By JESSE EISINGER

March 22, 2006

Debt investors expect prices in the market to be stable and returns to be meager for as far as the eye can see.

So they are coming to a natural conclusion: It is time to borrow more money and make riskier bets. That type of thinking is often dangerous.

The problem is that nobody knows just how much the few investors who buy the riskiest portions stand to lose if things go badly. These are the folks who bet, say, $1 million and stand to gain $10 million -- or lose $5 million or so. Such highly leveraged bets are being taken in products that lack transparency. Nobody knows how much is at risk in the entire market if there is a big blowup.

Why investors are so confident the markets will be placid is a troubling puzzle. The optimism seems misplaced. It is unclear when the Fed will stop raising rates. And the bond market -- where long-term rates have been incongruously lower than short-term rates -- is forecasting an economic slowdown that few believe is really coming.

What if Housing Hare Becomes a Tortoise?

By JESSE EISINGER

May 17, 2006

The rapid recent swoons are only the latest evidence of how dominated the markets are by aggressive speculators, especially the trend-following hedge funds that play the futures markets. These funds have been whipsawing the global markets, researcher Bridgewater Associates pointed out in a note this week.

"With so many hedge funds, gradualism is a luxury we rarely get," says Carlos Asilis, a portfolio manager for hedge fund Vega Asset Management. "Corrections that used to take a couple of months take a couple of days or hours."