Posted on 10/21/2008 9:50:06 AM PDT by Orange1998
The boss of a successful US hedge fund has quit the industry with an extraordinary farewell letter dismissing his rivals as over-privileged "idiots" and thanking "stupid" traders for making him rich. Andrew Lahde's $80m Los Angeles-based firm Lahde Capital Management in Los Angeles made a huge return last year by betting against subprime mortgages.
Yesterday the 37-year-old told his clients that he had hated the business and had only been in it for the money. And after declaring he would no longer manage money for other people, because he had enough of his own, Lahde said that instead he intended to repair his stress-damaged health; he made it clear he would not miss the financial world. "The low-hanging fruit, ie idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking," he wrote. "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," he said. "All of this behaviour 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."
Lahde became one of the biggest names in the investment industry when one of his funds produced a return of 866% last year, largely by forecasting the US home loans industry would collapse. In his farewell letter, which concluded with an appeal for the legalisation of marijuana, Lahde said he was happy with his rewards and did not envy those who had made even more money. "I will let others try to amass nine, 10 or 11 figure net worths. Meanwhile, their lives suck," he wrote,
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(Excerpt) Read more at guardian.co.uk ...
Maybe we were reading an ambugous quote, one that can be taken both ways. Here is the quote:
“All of this behaviour 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.”
He ‘found’ people, to take the other side of ‘his’ trades.
It does not say whether these people were his account holders, or his students, or his acquaintances, or dinner guests, etc.
He ‘found’ them.
Can you explain this any other way?
Mr. Lahde's deals had to do with "betting against subprime mortgages." In other words, he was operating in the realm of Mortgage Backed Securities, and other similar derivatives.
Normal people typically don't deal in such things -- I don't, you don't, and probably nobody we know does (unless they happen to work for an investment firm or big bank).
And normal people typically don't invest the kinds of money needed for Mr. Lahde to take home a paycheck measured in the tens of millions.
He was dealing with the big boys, not your or me.
Good point. The SEC always have loopholes to drive a Mack Truck thru. The Lehman swaps settlements were orderly today. I say the Dow will selloff tomorrow morning and then rally end of day. 10K Dow before the year is out.
It does not say explicitly that he was trading MBSs or CDOS or CDSs, etc. Hedge funds are normally not involved in those securities. Clearing firms usually trade such securities among mutual funds and investment banks.
For example:
Such firms are not ‘hedge funds’.
Lahde’s LA firm was only capitalized to $80 million, hardly a titan of the hedge fund world, rather a small to mid-level player.
His hedges against subprime could have taken a variety of forms such as shorting MS, GS, LEH, BSC and all the majors of last year. This was the approach that many well known traders took such as Jim Rogers who announced last year he was shorting the majors.
No, I think Lahde is just another greed lizard who has an envy and anger problem, who made some lucky bets and is now running away from having to register and disclose his trades.
He ‘found them’ and was able to lead them to the wrong side of the trade. In other words, he’s a scumbag, one of many on the street.
In his future life if he doesn’t get his insides straightened out, he will repeat in some form his past behavior. That’s usually what happens to those that are not able to buy enough insulation the first time out. And the second time around is usually when they get taken down.
I’ll say this he played them like a grand piano. And he got ricj when everyone else was suckered by the gubberment backed Fannie and Freddie.
After the election is when a lot of cash is expected to pile back into the markets. So you are consistent with the view of a year end rally.
Funds also have to try and minimize losses so they will likely drive markets positive.
Real estate is expected to start thawing out around January. Prime real estate will see sales activity pick up first and the broader RE market will start to see a thawing out late in Q2. People will start to sense less uncertainty in Q3 and Q4. And in 2010 the ‘great uncertainty’ should be well behind all.
That is, unless Biden’s prognostications come true, which would usher in years of darkness that I do not want to think about.
You can actually be on the short side of markets these days by going long. ETFs that are ultrashort on sectors are now sold as baskets. So I can go long and clean up as the world collapses. Unless Obama-Biden declare Martial Law or suspend our liberties. I have no idea what to do in such catastrophes and don’t want to think about it. Maybe I will move the family to our home in farm country, own a cow, plant crops, make wine and keep out income less than Obama’s definition of rich.
I feel your pain, but you’re misinerpreting the quotes.
“He ‘found’ people, to take the other side of ‘his’ trades.
It does not say whether these people were his account holders, or his students, or his acquaintances, or dinner guests, etc.”
He is running a hedge fund, which means he can go long or short. He made millions for himself which means he made many many more millions for his investors.
When he is talking about “finding the other side of the trade”, he is just mocking people who were going long on financials that were heavily invested in subprime loans like BearStearns, fnma, aig etc.
Whenever you buy a stock, there is a seller, and vice versa...when you trade, trading lingo talks about the “sucker or bagholder” who was crazy enough to but a stock at a high level, while one shorts it...or vice versa”
Everyone and there senile mother knew that the subprime rage was the final stage of the enormous housing bubble. The only thing different was this guy was not a lemming and didn’t run off the cliff.
I know all that. I know that hedge funds can go long or short. I run a hedge fund for my family trust. And my lock-up window is technically infinite so I do not have to register.
There have been many many many bets of all sorts in past years. Shorting the dollar for example was a good bet in past years.
But such bets are never without risk unless one has information that is not public, in which case it would be illegal to be involved.
So without 20-20 hindsight the subprime bet could have gone the other way, and people would be saying what an ‘idiot’ Lahde was, but instead he is a ‘genius’.
In the markets, today’s ‘genius’ is tomorrow’s ‘idiot’ and tomorrow’s ‘idiot’ is today’s ‘sucker’.
I know all the street lingoisms. They don’t impress me. What impresses me are causal relationships or budding associations that develop into causal relations. For example, a volume drop off in USD currency trades is associated with less USD supply caused by unwillingness of banks to release dollars. Dollar begins climbing against other currencies and oil futures slide. Get to the source data on dollar supply for currency trading and you can play futures with less risk.
He came out on the winning side of the Greater Fool theory.
He can sleep easily on his pile of money.
That's how I looked at it at well. Good on him!
I don't think I'd want to retire so young though. All that leisure time would drive me crazy. If I was 37 and had $80 million, I think I'd find a low stress job as assistant manager of a comic book store or something.
So you know how the game is played. He simply got out on a good run and made millions.
Alot of hedge fund managers make alot one year, and lose alot another year...Cramer is an example of boom and bust.
This guy ran a great streak hard and said, I’m rich, I’m out. That takes discipline. Yeah, he got lucky and played a big trend, real estate, and rode it. If he would have started shorting earlier he may have lost hundreds of millions instead of making millions.
I got lucky and got out of my longs at about 13,700...I know I got lucky...the hard part is when to get back in, I’m phasing back in incrementally and slowly, don’t trust this market yet.
So, I can’t use contempt and envy in the same sentence?
I could have used “hatred” but preferred “contempt” because that word also conveys disrespect.
Follow the money. Who lost, who gained?
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