Posts Tagged ‘FT.com’
Andrew Lahde: Sayonara!
Wednesday, October 22nd, 2008
Andrew Lahde, the hedge fund manager, who last year, was catapulted into the limelight when he successfully returned 886% to investors, betting against subprime mortgages, closed up shop last month, claiming that counterparty problems were making it far too difficult and stressful for him to want to keep on going.
Below is Lahde’s farewell and f— you letter to those who deserve it.
Dear Investor:
Today I write not to gloat. Given the pain that nearly everyone is experiencing, that would be entirely inappropriate. Nor am I writing to make further predictions, as most of my forecasts in previous letters have unfolded or are in the process of unfolding. Instead, I am writing to say goodbye.
Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, “What I have learned about the hedge fund business is that I hate it.” I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.
There are far too many people for me to sincerely thank for my success. However, I do not want to sound like a Hollywood actor accepting an award. The money was reward enough. Furthermore, the endless list those deserving thanks know who they are.
I will no longer manage money for other people or institutions. I have enough of my own wealth to manage. Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck. Appointments back to back, booked solid for the next three months, they look forward to their two week vacation in January during which they will likely be glued to their Blackberries or other such devices. What is the point? They will all be forgotten in fifty years anyway. Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.
So this is it. With all due respect, I am dropping out. Please do not expect any type of reply to emails or voicemails within normal time frames or at all. Andy Springer and his company will be handling the dissolution of the fund. And don’t worry about my employees, they were always employed by Mr. Springer’s company and only one (who has been well-rewarded) will lose his job.
I have no interest in any deals in which anyone would like me to participate. I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle. I now have time to repair my health, which was destroyed by the stress I layered onto myself over the past two years, as well as my entire life — where I had to compete for spaces in universities and graduate schools, jobs and assets under management — with those who had all the advantages (rich parents) that I did not. May meritocracy be part of a new form of government, which needs to be established.
On the issue of the U.S. Government, I would like to make a modest proposal. First, I point out the obvious flaws, whereby legislation was repeatedly brought forth to Congress over the past eight years, which would have reigned in the predatory lending practices of now mostly defunct institutions. These institutions regularly filled the coffers of both parties in return for voting down all of this legislation designed to protect the common citizen. This is an outrage, yet no one seems to know or care about it. Since Thomas Jefferson and Adam Smith passed, I would argue that there has been a dearth of worthy philosophers in this country, at least ones focused on improving government. Capitalism worked for two hundred years, but times change, and systems become corrupt. George Soros, a man of staggering wealth, has stated that he would like to be remembered as a philosopher. My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man’s interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles. This forum could be similar to the one used to create the operating system, Linux, which competes with Microsoft’s near monopoly. I believe there is an answer, but for now the system is clearly broken.
Lastly, while I still have an audience, I would like to bring attention to an alternative food and energy source. You won’t see it included in BP’s, “Feel good. We are working on sustainable solutions,” television commercials, nor is it mentioned in ADM’s similar commercials. But hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products. Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term. The original American flag was made of hemp fiber and our Constitution was printed on paper made of hemp. It was used as recently as World War II by the U.S. Government, and then promptly made illegal after the war was won. At a time when rhetoric is flying about becoming more self-sufficient in terms of energy, why is it illegal to grow this plant in this country? Ah, the female. The evil female plant — marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country. My only conclusion as to why it is illegal, is that Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other additive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers. This policy is ludicrous. It has surely contributed to our dependency on foreign energy sources. Our policies have other countries literally laughing at our stupidity, most notably Canada, as well as several European nations (both Eastern and Western). You would not know this by paying attention to U.S. media sources though, as they tend not to elaborate on who is laughing at the United States this week. Please people, let’s stop the rhetoric and start thinking about how we can truly become self-sufficient.
With that I say good-bye and good luck.
All the best,
Andrew Lahde
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Tags: Bear Stearns, Canada, capitalism, energy, Euro, Focus, FT.com, Mortgage
Posted in Markets | No Comments »
Falling LIBOR Spells Relief
Tuesday, October 21st, 2008
Plop, Plop, Fizz, Fizz, Oh what a relief it is…
Finally LIBOR rates have fallen meaningfully, and that spells relief. The credit freeze is finally showing real signs of thawing.
Libor-OIS: 2.71% (previous 2.93%)
TED Spread: 2.61 % (previous 3.27%, record was 4.63%)
Rates used:
Libor: 3.83% (previous 4.06%)
OIS: 1.12% (previous 1.13%)
T-bills: 1.22% (previous 0.79%)
Here is a selection of some decent articles on the subject:
Fears about Lehman CDS deadline seen as overstated
Today’s deadline to settle an estimated $400 billion in credit default swaps on debt in failed investment bank Lehman Brothers is unlikely to trigger new havoc in the market, derivatives analysts said.
The world’s most important number?
On the fifth floor of an imposing building in London’s Canary Wharf, six people are putting together one of the world’s most important numbers: L I B O R.
Porsche, Volkswagen - and hedge funds
Porsche used to be the emblem of a go-go City trader. Recently it has become one.
FDIC forgot
$4.4 billion
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Tags: CDS, Chart, Credit, Derivatives, FT.com, UK
Posted in Commodities, Credit Markets, Economy, Emerging Markets, Markets, Oil & Gas, inflation | No Comments »
Oil and U.S. Banks
Friday, July 25th, 2008
(by John Authers, FT.com) Bastille Day, July 14, is a good day for an old order to come to a sudden and brutal end. And on July 14, the blade came down on the phenomenally successful “buy oil, sell financials” trade.
This trade, popular with hedge funds, offered a rare way to make money this year. It exploited the credit crisis and the response it provoked from the Federal Reserve. Investors deserted banks in the US (and Europe to a lesser extent) and bet that liquidity would instead flow to oil. As higher oil prices made i
t harder to aid banks with lower rates, and intensified pressure on banks’ customers, it was self-reinforcing.
By July 14, a trade of buying crude oil futures on Nymex while selling short the KBW index of US commercial banks would have made a profit of 168 per cent for the year. Even if we substitute the broader MSCI world financials index for the KBW, which covers the banks most exposed to US housing, the trade had made 114 per cent.
Then, banks bounced while oil dropped 15 per cent. The trade, using the KBW index, lost 35 per cent in the six days after Bastille Day (20.7 per cent using the MSCI world financials index).
This plunge was also self-reinforcing, in a different way. Traders covering their short positions by buying back bank stocks may have funded this by selling their positions in oil.
Note, however, that anybody who made the “long oil/short US banks” trade at the beginning of the year is still sitting on a gain of 74 per cent, much the same as they were six weeks ago. This has not hurt that much.
With the trade back to its level of early June, it appears, thankfully, that we can chalk up the extremes for banks and oil in the weeks before Bastille Day to speculative “piling on”.
But traders now have to find a new way to make money. And the world must still contend with the strong fundamental reasons for high oil prices and cheap US bank stocks.
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Tags: Commodities, energy, FT.com, John Authers, kbw, long oil, Nymex, short banks, Trading, US Banks
Posted in Commodities, Financials, Markets, Oil & Gas, US Stocks, inflation | No Comments »
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