What does it mean when the big boys are afraid to invest in their own Ponzi?

The Houston Chronicle reports today that famous investor Carl Icahn has decided to return money to outside investors, citing an unwillingness to manage their money through another downturn.  As you can read in a similar article in the Financial Times, he is not the only one.  Hedge funds are falling like flies.  People should not be ignoring this.  If there was any money to be made, these guys would be in there making it but instead they are bailing out of the game.  It is the hedge fund equivalent of insider selling. 

So why are they nervous?  Hasn't the stock market been on an incredible roll since March 2009?   Well, maybe these guys know that the rally has been driven by support from the Federal Reserve in more ways that anyone can count (but principally through low interest rates which push pension funds out of fixed investments into the risky stock market, the taxpayer debt supported bank bail outs, and of course quantitative easing money printing / legalized counterfeiting).  Maybe these guys know that the Fed's inflationary policies are pushing up the prices of food and fuel and that this will eventually leave less money for cars and big screens and fancy cell phones. 

Then again, maybe they just understand that the stock market is essentially a Ponzi scheme which must dry up and blow away when baby boomers move from work mode where they are pumping 401k dollars into the Ponzi to retirement mode where they will be pulling money out of the Ponzi to live on.  It could also be that new regulations are limiting their leverage and increasing their own exposure to legal attacks.  While this may sound like good government going after risky traders, any money that doesn't go into the stock market cannot be used to pump the Ponzi.  Lack of new money inflow is the death knell for any Ponzi scheme.  That is true in triplicate when the money we are talking about is invested by leveraged hedge funds.  Those guys can use leverage to make $2 billion spend like $20 billion when it comes to paper investments and trading. 

Whatever the reason is, when the smart money bails only the patsies are left.  Follow the smart money.