Bong on Andrew...

Lahde, who bet versus subprimes, quits hedge funds
by Jennifer Ablan
Fri Oct 17, 2008 5:15pm EDT

NEW YORK, Oct 17 (Reuters) - Andrew Lahde, the hedge fund founder who shot to fame with his small fund that soared 870 percent last year on bets against U.S. subprime home loans, has called it quits, thanking "stupid" traders for making him rich. (and the beat goes on - Jesse)

In a biting, but humorous letter to investors posted on the website of Portfolio magazine on Friday, Lahde told investors last month he will no longer manage money because his bank counterparties had become too risky.

Lahde ripped his profession in the letter. He noted another hedge-fund manager who recently closed shop and was quoted in The Wall Street Journal as saying: "What I have learned about the hedge fund business is that I hate it." To which Lahde responded, "I could not agree more with that statement.

"The low-hanging fruit, i.e. idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking," said Lahde, who according to the website birthdates.com is 37.

"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."

Lahde, whose Lahde Capital's Short Credit Fund returned 886 percent in 2007, said he didn't have a strong opinion about any market other than to comment, "Things will continue to get worse for some time, probably years."

But while he will no longer manage money for high-net worth individuals or institutions, he will continue to manage the wealth he has amassed.

"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," he said. "I am content with my rewards. Moreover, I will let others try to amass nine-, 10- or 11-figure net worths. Meanwhile, their lives suck." (Newsflash - lots of people living from paycheck to paycheck have lives that suck too - Jesse)

Last autumn, the Financial Times reported that Lahde had launched a fund to bet against commercial real estate -- which made 42 percent in its first two months.

"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," Lahde said.

(In his letter on the web, Andrew drifts into a heavy fugue state, and recommends a think tank to be funded by George Soros to design a new government, and that our economy could be based on hemp. Don't bogart that dream, Andrew. - Jesse)

Andrew Lahde's Farewell Letter:

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. (We'd like to give the Constitution another try - Jesse)

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

And the sourpuss reply from an FT dude.

Yours truly, angry mob

By John Gapper

Published: October 24 2008 19:07 | Last updated: October 24 2008 19:07

Dear Andrew Lahde,

I have read your letter to investors in your hedge fund in which you say you are dropping out, praise marijuana as a drug that, unlike alcohol, “does not result in bar fights or wife-beating” and tell them not to “expect any type of reply to e-mails or voicemail within normal time frames, or at all”.

I did not put any money into your hedge fund although, in some ways, I wish I had, since you are said to have made an extremely large profit by shorting subprime mortgages in the housing downturn. As Kurt Vonnegut once said of the bombing of Dresden, the subject of his book Slaughterhouse-Five, it was a terrible event but he profited from it.

You admit that you were “in this game for the money” and have contempt for bankers “whose parents paid for prep school, Yale, and then the Harvard MBA” and who rose to the top of companies such as Bear Stearns and Lehman Brothers. They were the “people stupid enough to take the other side of my trades”.

Finally, you say you are going to “take a long rest to repair my health, which was destroyed by the stress I layered on to myself” and you have “no interest in any deals in which anyone would like me to participate”.

I do have a proposal for you, in fact, but it is just as well you are not reading your e-mail because it does not bear repeating in a newspaper. So I will confine myself to one point in response to your smug, self-satisfied stream of consciousness.

It may be that you are indeed cleverer than the average fund manager or Wall Street financier. You certainly made a smart bet to short subprime mortgages, rather like George Soros shorted sterling in 1992. You can give yourself a pat on the back for that.

In personality terms, however, you display all the unpleasant characteristics of a class of people who got lucky over the past decade on cheap credit. These financiers came to believe that they had astonishing insight because others paid them a lot of money to take one-way bets on housing, shares and other financial assets.

Lots of them became hedge fund managers because they could charge investors a 2 per cent management fee, take 20 per cent of profits and make a lot of money for two or three years, which was enough to set them up for life. Oddly enough, this did not endear them to many other people.

Plenty of hedge fund managers are now going out of business and causing mayhem in markets. Like you, they can fall back on the wealth they accrued in the good times. The rest of us do not have the luxury of being able to drop out, smoke grass and turn ourselves into philosophers.

So we get a little irritated when you rub your good fortune in our faces and advise us to “throw the BlackBerry away and enjoy life”. Santa Monica, the Californian city where you live and used to work, has a pier jutting out into the Pacific Ocean. Why don’t you go out and jump off it?