pimpjui

In Search of a New Hedge Fund Business Model

Any criticism about how much money someone is making from a uncoerced transaction is sour grapes and in violation of general economic theory. Let the market figure out who deserves 2/20 or whatever. If "smart money" is willing to pay and they get ripped off, over and over again, then the egg is on them. Getting ripped off also includes not being able to get your money out of a HF. Soon they will not be smart money, They will be dumb money. Generally speaking, the hedge fund industry is/will change because many HF were based on certain markets and/or strategies that depend on the existence on investment banks (e.g. exisitence of structured OTC products). In particular, people from the IB's would leave and start a HF, which in turn would make profits from specific knowledge of market inefficiencies that the bank produced (i.e banks "are" the market, and they were ripping off clients with absurdly "priced" OTC products). The HFs, were just trying to get a little bit of the action. Can't blame them. These HF types have/will die off because they don't do any thing special anymore (i.e. outdated business models). Other HFs that do something innovative will survive, and smart money will pay the market rate.

The Street Wants More Job Cuts from Microsoft

Quite laughable that banks, who are bankrupt or had to be bailed out by the government (i.e. they do not know how to run a profitable business), who don't fire enough dead weight themselves, want MSFT to get rid of people. I have never, and will never, listen to these bank analyst morons. I can't imagine anybody with half a brain would pay for their biased and inaccurate information. I suspect this is a last gasp for breath before the analysts themselves die off.

Thain's Undoing: Thinking He's Worth It

The reality is that most of these invetment banking leaders who are being bailed out by the government are:

1. Not that smart
2. Very poor investors
3. Very poor leaders/managers

These people as a group have had a relatively sweet position in society because the government has let them have access to lots of free capital in there positions as "liquidity providers" and at the same time turned a blind eye to the risks that they were taking. Understandable when this group of people are generating so much corporate tax revenue. Of course they are not generating any tax revenue now.

Not that smart. Even a 1st year finance grad student can see that their business models are overly dependent to leverage, and their risk models are bogus. I find it strange that a PhD in Electical Engineering only just a engineer when he's doing electirlcal engineering, but somehow a genius when he's doing quant finance.

Poor investors. The main problem, in the end of the day is that these pathetic "investors" can't take a drawdown on their account. Any moron can leverage up to infinity if the banking system allows it. I wish that someone would bail me out everytime I had a drawdown on my account that could break me.

Poor leaders/managers. I am pretty certain that we coud fire all of the managers of these failed institutions, and promote everyone at the same companies from the bottom up, and still not be a position any worse than now. If these "managers" are now government employees, they should get the same pay and benefits as government employees. Their modus operandi is to milk the system for as long as they can get away with it. Get rid of them, the country has nothing to lose. There are plenty of competent people who can do a better job.

The Fallacy of Floating Exchange Rates

Your hypothesis violates basic economic theory. If speculators cause prices to rise, then they must cause prices to fall. Therefore, it must have been speculators causing the yen to become weaker before, an now they are causing it to become stronger. Who are these speculators, and how do they magically, on aggregate, win all of the time? If this was such a one way bet, all speculators would pile in causing a reverse of the phenomenon.

Speculators Continue to Drive Oil Higher at Risk of Global Recession

Sort of silly hypothesis. If true, then when oil starts tanking back down to $50, then I guess it has to be them darn "speculators" as well. Oil is increasing in dollar terms because the dollar is losing its value to just about everything. The causes of this are far and wide, but most critical is the US trade balance. Simply put, America is not selling enough goods that the rest of the world wants. Hence less demand for the the dollar to pay for these things. Blaming speculators (or any other group of people) is usually a last ditch effort to divert attention away from the real cause of problems....right before the end....

The Second Wave of Bank Troubles

As far as I know, nobody forced the bank in Ohio (or Tennessee or some other relatively obscure place) to take on excess or unknown risk. If these banks genuinely served their local communities, they would not have come anywhere near the complex and absurd products wallstreet concocted. No need to. Example, but not in banking, Warren Buffet. No, what you have is many small players in banking that for some reason decided to gamble with the big boys, when the big boys owned the casino (example, Orange County). And we all know, the only way to make money in a casino is to own one (Donald Trump).

How Deceitful Are the Big Banks?

If you think of banks as just another type of business (i.e. producing products, carrying inventory perhaps of those products, marketing them, etc), then banks are probably just as dishonest as other businesses (e.g. tobacco companies, auto makers, etc.). Granted, they are special in the sense that the government (via the Fed) controls what they can do. And at this point in time, banking is producing a disproportionate amount of federal tax revenue, hence it is classified as an industry of strategic importance to national security (i.e. at the same level as the defense indistry). Hence, you can expect all sorts of bailouts. Where else is the government going to get it's taxes from? All the manufacturing and IT jobs shipped offshore? Finally, if the banks are poorly run dishonest businesses, their market prices (e.g 50% drops) are a good reflection of that sentiment. Looks like the banks are taking their medicine....

Fiat Money and the Silver Coin Quotas

The Mint is just the Mint. They make a product, not fast enough. So they stop. Perhaps politically motivated in telling them to stop US (Treasury).....due to kooks who think they will actually use it as tender (in a normal world). Its just as easy to buy silver bullion, in 1 ounce bars/trinkets. But really it is about the first part of your article. If prices are going up and wages are going up (that's how you afford a mortgage payment for a $800K home). So not too many complaints. It's when wages drop or stay still, but prices keep going up. Hence, inflation scenarios are scary, but stagflation is down right horrifying. And that is where we are. Kooks who are buying up silver with the idea that they will actually be able to use it in a normal way are not focusing on the real issue: How to protect yourself. A gun will be much more useful than silver. The guys with lots of silver will just hire the guys with the guns. The rest of the people will be in a situation like say, poor people in India. Someone with a gun will come along and take your silver. Focus on making yourself physically strong, in case you need to get in volved in hand-to-hand combat. The silver will come......

Bear Stearns’ Bailout by the Fed, JPM: A Century Old Conspiracy

It is clear that the banking system is favored by the government, for most of the reasons in the original post. However, banking now actually represents a disproportionate amount of total corporate profits. I think the number was 40% in 2007 (even worse, banking represents only 4% of the workforce). More than manufacturing and IT combined. If this is the case, the government is proping up banking in order to ensure the continued tax revenues they have been receiving. I guess the double-whammy comes when banking makes no profits (and pays no taxes), and the rest of the economy has been moved off-shore (so really no tax revenue for Uncle Sam at all). If you extrapolate that every $ banking makes filters down into the rest of the economy for goods and services (e.g. dining out, buying a car, etc.) it becomes pretty clear that banking is the core industry of the USA. Without it, the whole boat sinks. Indeed, at this point, I would say that saving it is a matter of national security. Hence, the bailout of the banks is really a cheap way of saving the rest of the country from going under. If a bank goes under, a manufacturing plant will not go up in it's place. Lower cost regions already have that wrapped up. Banking--this is the end game of capitalism. If banking cannot continue to produce inovative products that the global markets want to use (which it has clearly done in the past---including sub-prime, CDO, etc), the USA will not be in a very good position at all.

Hedge Fund Performance: It's the Driver That Matters

Very good points. A general % return from a hedge fund is probably non-sensical because the return can only be valued in terms of the individual clients overall portfolio, and specifically, what the hedge fund in question acutally hedged for him. If he really hedged, then perhaps the fund made him 30% but he lost 30% on the position he was hedging against. Perhaps a more indicative measure could be defined as customer retention. But I guess that is partailly covered by assests under management. Either way, it looks like hedge fund is in many cases just a misnomer for plain old asset management. Gotta admit though, it does sound better.

Understanding The Dollar's Decline

There is no bad publicity. I find it a bit strange that we are defining honest money as non- US Dollar. So let me get this straight, Euro, Pound, Yuan, Yen and Ruble are honest money. US Dollar, worthless fiat currency.

I guess if any currency were to knock USD of its perch, it'd be EUR. But does EUR really have the track record to become the world reserve currency? Considering Europe was at war with itself less that a generation ago, I can't imagine that we can extrapolate that it is now the supreme example of federal stability. I'd still take the CHF over the EUR any day. The Swiss have at least proved that their currency can withstand war all around them. Granted, though, the Swiss simply do not have the size to handle world reserve currency status.

Pound might be the next best bet. But it too does not have the size in order to handle this role. It's run up over the last couple of years has been basically against USD. Go to the UK. Outside of London, there is not much happening. Granted, the UK does have a huge amount of legitimacy in the area of soft power. Unfortunately, a reserve currency needs hard power behind it (e.g. USD has big guns/ships/nukes; CHF has (or had) lots of gold).

Yen? C'mon. The Japanese are xenophobic, the country is stagnating, and the US still occupies it with army and naval forces. The minute the US pulls out of Japan, they will re-militarize, which will cause huge instability as well as a drain on finances.

What's left? Yuan and Ruble. Oh yes, these two governments are beacons of transparency and honesty. Yep, that's where I'll keep my money. Russia has a male mortality rate lower than Africa. Russia exports weapons and commodities--that's it. China's government is desparately holding to power by giving it's poor citizens the hope of upward mobility. All of the problems they face (great domestic wealth disparity, pollution, corruption, poor healthcare, large standing army, etc.) suggest some type of civil or foreign war coming soon.

It's great that we have the freedom and inclination to bash the USD (and the US), because it still means we care. Otherwise we'd be sticking Yuan under the mattress. Indeed, the alternatives to the USD are not as great as would seem.

Seven Reasons Why a Weak Dollar Hurts America

I find your arguments quite interesting. At the same time, I wonder why the exact opposite is happening. I have provided some ideas below.

If the Fed's goal is to stimulate domestic consumption, then a weak dollar helps by making domestically produced goods cheaper than imported ones. I guess the assumtion is that there should be more Americans buying Ford cars versus taking vacations in Europe. I have found that most Americans are oblivious to the real reduction in purchasing power of dollars abroad, and are quite happy if the Fed drops interest rates so low that it appears that their house values are going up (I guess they take out a line of credit against their home to buy the Ford).

It depends on who you consider to be investors. If you mean countries like Saudi Arabia, Japan, even China, then the answer could be pretty Machaivellian. Saudia Arabia and Japan are forced into buying our debt. Saudi is a US puppet regime. That oil belongs to the USA. Japan, well, we heck, the US nuked them, and we still have 50,000+ troops occupying Japan. Of course they will buy our depreciating "assets".

China (or more specifically, the Chinese government) on the other hand, is desparately trying to keep a lid on social unrest and possibly revolution. Ironic that the way to do that is capitalism. It works for both the US and the Chinese government, at least at the moment.


If America is trying to walk down the price curve, the American worker could wind up like his Chinese or Indian counterparts. The reality is that Americans are too expensive compared to Chinese and Indian workers, even if American quality is better. What America needs to do is make American skilled labor (service, manufacturing) better by improving worker skill. This is a tough nut to crack.


The US government will never do anything that will decrease it's power over the American people. Confusing tax codes gives control. When you say federal spending, you really mean miltary spending. With out it's weapons systems, the US would be reduced to the status of, say, Brazil. Don't expect any reduction in military spending anytime soon. Ironically, the USA is better at encouraging productivity than any country in the world. I think the main problem is that the people and the country, are in to deep of a mess to get out with out a lot of pain and more specifically, huge transfers of wealth.