The latest news tells us that hedge fund Amaranth is now down $6 billion.

The most amazing part of this story is the blasé way in which the financial markets took the news. When Long Term Capital Management went bust the whole world shuddered...and the New York Fed rushed to save the day. And, then, there was not even half as much money at stake.

It's time to hedge against the hedge funds, we conclude. More below...

As you will see, Hedgefundland is a kind of alternative universe where none of the usual laws of nature seem to apply. In the rest of the universe, people trust age, experience and humility...but in Hedgefundland (much like Dotcomworld, which was discovered 10 years earlier), it is the callow twits and the over-confident twenty-something blowhards who get the money. And in the rest of the universe, people want to make money...in Hedgefundland, they seem happy to lose it.

But we do not live in Hedgefundland; we live in the real world. And it is strange enough for us.

One of the strangest things about it is how the opinion leaders have duped the average citizen. And when they didn't mislead him, he misled himself. In the bright, daylight years following Ronald Reagan's 'Morning in America,' he may not have thought he was getting richer...but he definitely believed he should. So, he spent more...he worked more...he lived bigger and bigger, until he was so big, he was ready to explode.

From the Arizona Republic comes this report:
 
"Lost in the debate over whether we're better off today is the inexorable widespread decline of job quality. Yes, the American economy is creating jobs, although at an ominously slower pace the past few years, but what kind of jobs?

"Call-center jobs, which can be some of the better positions in the vaunted service economy, pay an average of $10.71 an hour.

"Yet that's far below the $13.75 needed to keep a family of four above the poverty line. The average Ford factory worker makes $31.64 an hour.

"No wonder most Americans have seen their earnings stagnate the past six years and watched as health care, pensions and other benefits are taken away.

"In the 1980s, many people could watch the pain in the Rust Belt, when hundreds of thousands of steelworkers lost their jobs, and say, 'Serves 'em right.'

"But the same destabilizing forces have since swept a host of industries that support middle-class jobs, including such white-collar bastions as banking."

Losing ground is the sort of thing that people might get cheesed off about...if they came to believe it was happening. But for the moment, the voters still seem to believe in the American Dream. If they work hard enough...and if they put their money into a balanced portfolio of equities and real estate...they will be able to live the good life.

Well, the hard work hasn't paid off for the last 30 years...nor have equities given much in the way of return since 1998...but housing has come through. An aggressive speculator could have flipped and house-hopped his way into big money over the last five years.

Alas, now it's getting harder and harder to make a buck in housing too.

Contra Costa Times:

"Solano County sales also dropped 34.3 percent, and sales appreciated 1.9 percent, the lowest rate since August 1999. The median price in the Bay Area rose a scant 0.2 percent," said DataQuick spokesman Andrew LePage.

"To us, this is a leveling off," LePage said. "Some counties will see their median home (price appreciation) dip below zero. We think the market is heading into a lull while buyers and sellers work out what the price level is."

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.