Retirement of a Hedge Fund Manager

Quite the departure letter from Andrew Lahde of Lahde Capital Management who has decided that he a) has enough money and b) managing other people's money causes too much stress and c) America is screwed...

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 of 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 lookforward 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 addictive 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 goodbye and good luck.

All the best,

Andrew Lahde

Article from FT.com

Can Analysts Be Trusted?!

Much like the very first analyst / therapist, aka analrapist, Dr. Tobias Funke cannot be trusted maybe financial analysts should be treated with a similar skepticism.

Today Moody's put out a press release on SIVs and failed to remove some of the draft editorial bits. Of course this isn't new, companies often mistakenly put out unfinished press releases in error. What is interesting in this case is that the report's unredacted version is much more to the point. The version that was supposed to go out seems more sugarcoated and potentially a little misleading.

Indeed, all (The entire SIV business model is) SIVs are affected by the recent price decline of fixed income assets and all SIV managers have been actively adapting the structure of their vehicles to this stressed environment, (now widely acknowledged to be unsustainable without restructuring)” says Paul Mazataud, Group Managing Director of Moody’s International Derivatives team and co-author of these reports.

-- Bolded text in parentheses shows what was supposed to be deleted before the final draft was disseminated.

Maybe that glass wall is a little too transparent?! Bricks and mortar anyone?!

More from the Financial Times blog.

Sharades Anyone?

I do not entirely condone this, but who hasn't wanted to test drive a car or two that may be slightly out of their financial league?!

You’re a special snowflake. Your parents always told you so, and you believed them, and it turned out to be true. You’re such a special snowflake that you deserve to drive cars for free, to enjoy them at no cost and without any interference. But how can this be accomplished? Read on to find out, as I share my car sales and joyriding experience with you. Since the fateful day when the State of Ohio made the mistake of handing me a drivers’ license, nearly twenty years ago, I’ve driven everything from Sentras to Spykers, often without having a dollar in my pocket. You can do it too; follow along as I show you how.

Test Drive Anything Guide

Black Monday: Will it Happen Again?!

Today is the 20th Anniversary of Black Monday that saw the second largest single day declines on major world stock markets. The US market declined by more than 22%, the Canadian market by a similar amount, the UK by more than 26%, Spain by more than 31%, Australia by nearly 42%, and the Hong Kong market by more than 45%!!!!

History of Black Monday can be found here.

Some people, such as Warren Buffet, have commented that they believe a crash like that of '87 or for that matter like that of 1929 which was at the start of the Great Depression could happen again. What do you think?!

I alluded to Black Monday in a previous post after Alan Greenspan had alluded to a possible US recesssion.

Saving for Retirement

Or maybe you're still putting the saving part off, but you do think about retirement ever so often despite being in the very early stages of your career. Retirement is one of those words that is bound to spark your imagination. Where's the daydream taking you? Has it kept you inside that 3 bedroom, 2 bath bungalow that you're going to raise your 2.5 kids and a dog in or have you been transported to an untouched white sand beach in the Caribbean? Well it's time to start researching and planning for that.

Many studies have shown that abruptly moving to a new retirement destination can be very hard on the retirees and I imagine on their families as well. So one must plan well in advance and ensure they thoroughly think about any and all retirement decisions.

With that in mind there are many attractive retirement destinations both within the United States and Canada and in more exotic locales. Within North America Atlanta, GA, Portland, OR and Victoria, BC have been noted as prime destinations, especially given their favourable tax climates and moderately priced real estate. EscapeArtist.com recently rated Ecuador as one of the top places to retire in the entire world. The country is quite favourable to ex-patriots, has reasonable real estate prices, no income tax, and a moderately warm climate.