Hedge Fund Request Ping
mark
Interesting. So how’s business these days?
Well, thanks for the update.
ptsal
Good read. Thanks.
The public perception of hedge funds is largely attributable to the headline-grabbing failures of two specific subcategories of the large species known as “hedge funds”: the basically one man shops that turn out to have been have been total frauds, usually from day one, sending out phony statements or deviating wildly from their stated investment strategy without mentioning it to their investors until it was too late; and the large funds using astronomical leverage (think LTCM). Some hedge funds stopped calling themselves hedge funds for a few years after the LTCM debacle, insisting on being called “private investment funds” instead, in an attempt to distance themselves from the stigma associated with “hedge funds”.
Nice job. There might be a case or two, here or there, where a couple of hedge funds have been accused in colluding on stock price manipulation, and you may have glossed over some of the risk and the leveraging and maybe even how the incentive structure could encourage the occasional blowout risk, but a good basic overview.
That said, all the wailing and gnashing of teeth about hedge funds these days is usually followed in the next breath with a rant about the @!#$%&^**!! high cost of oil on the futures markets and the effects of “rampant speculation” on the cost of gasoline at the pump. And, although there has been some easing in prices recently, there is still a lot of ill will toward traders. The actual fact of speculation in the oil futures market is, of course, being simultaneously both proclaimed and denied by various market "experts".
Overall, it is a bit confusing.
Can you offer an insider's opinion/perspective on the role (if any) that speculation may have played in the run up in fuel prices earlier this year?
ping for later reading
NOT one thin dime of my tax dollars should be spent bailing out millionairs. Period. If they can't take the risk, they should stay out of the fund.
Nice post. Thanks.
bump
Investment vehicles were created which were less transparent and less liquid than other instruments. Because of this, these instruments were less susceptible to the discipline of the market and only finally came to be adequately valued after it was too late to prevent a major collapse in the credit market.
I have a problem with the greatest and most creative minds being used to come up with new and better investment vehicles rather then new and better pharmaceuticals, energy sources, materials, material uses, chemicals, industrial processes, etc.
It seems to me that there are currently more than enough ways for those people with good ideas to get the funding they need to turn their ideas into reality. There is no real need for yet another way to repackage risk so that all the benefits go to a few, and the risks are sucked up by the unknowing, e.g. pensioners whose fund managers picked up one to many glossy hedge fund brochures.
I don't know who was helped by slicing and dicing millions of loans into trillions of parts and repacking them to the point of complete obfuscation.
I also have a problem with so much wealth being concentrated in so few places. Some of that wealth can be used (and was) to lobby politicians to look the other way. Now that these entities which are "too large to let fail" are starting to fail, the burden is being put on the shoulders of the taxpayer rather than the fund managers.
If we know ahead of time that the government will not allow businesses worth more than $X to fail, then no business should be allowed to be worth more than $X. What we have now is a weird system where we allow a supposedly free market system to drive toward the edge of a cliff, and when it goes over the edge it falls into a socialist safety net. If there were no net, then let whomever wants to drive over the cliff, but unfortunately there will always be a net comprised mainly of the backs of taxpayers.
Thanks for your informative, well written post. I’ll link to it the next time I come across someone from the “torch and pitchfork” crowd which should be any minute now.
As long as the margin on oil is raised to the margin of everything else and the hedge funds take delivery of the oil they buy, I’m cool with it. Otherwise, not so much.
LOL, I just saw the torch and pitchfork graphic on your blog, after I posted the above reply.
Thank you for posting this.
I sent this to my nephew who is running a hedge fund in Texas ..Thanks