Skip to comments.So long, suckers. Millionaire hedge fund boss thanks 'idiot' traders and retires at 37
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,
(Excerpt) Read more at guardian.co.uk ...
With this guy’s attitude, it wouldn’t surprise me if someone tried to feed him a bullet.
What a figgin’ as**ole!
I hope this loser falls straight on his face someday.
Stupid people can be very vindictive.
It is one thing to decide whether or not to “Never Give A Sucker An Even Break,” but it is rather worse to tell the “suckers,” later, that they WERE suckers.
This guy was a freaking genius. He saw the housing bubble burst a mile away when the Wall Street experts couldn’t, and made a pile for himself and his clients in the bargain.
He came out on the winning side of the Greater Fool theory.
He can sleep easily on his pile of money.
No doubt. But I think he pretty much told the truth as it applies to the mental capacity of the idiots on the other side of his transactions.
So, think about think parents, who are thinking of sending their kidlets into the Ivy League. Try the local State university, make them work to earn their money and stand back.
This post inspired me to change my tagline.
No wonder he advocates the legalization of marijuana.
Hate him if you want, but he is right on point.
The hard truth is you don't get a better education by attending an Ivy League school. Your personal character (which defines how much effort you put into your education) has more to do with the quality of your education than the school you attend.
Who was it recently that said Obama was more qualified to be president than Palin, because Obama attended an elite institution and Palin a state school?
This is the equivalent of “Slam, bam, thank you Ma’am”.
I’m sure he’s not going to be asking these guys for references. ;-)
Leona Helmsley, Charles Keating and Michael Milken had this same attitude and look where they landed. Michael Milken used to sweep the front steps of my office while he was behind bars.
Big deal shorting mortgage industry companies and companies tied to housing was a no-brainer. Hell it was widely discussed on some of the housing bubble sites. Perhaps this guy started doing it a little earlier than some.
I had no cash to play these games, so I have no dog in the fight. Other than I’ve been saying since I moved to San Diego 3 years ago that it was stupid to buy a house (not a popular opinion amongst the Norman Vincent Peale types). Incidentally I notice out here there seems to be tremendous pressure to get your kids into (insert Ivy League/Stanford/ etc) these schools. My sons will feel a little left out that I don’t want to bother sending a $50 app to princeton but screw ‘em I can’t afford that, and don’t want to pay it.
State school and work hard.. Sure you won’t be a part of the aristocracy, but you can close the gap once you start working.
Did you read the article?
Read it again...look for your name...
Exactly...to what degree, do you suppose, do a "shoot the messenger" mentality and ignorance go hand in hand?
His diatribe devolves into a lengthy discussion of the virtues of ........ Hemp (yeah man). What’s the bets the guy is penniless withing 5 years?
Someone took advantage of other people making very well informed yet stupid financial decisions?
If he died nothing illegal how can you fault this guy. He played their game, came out way ahead and bailed out before his fortune crashed. Sounds like he did it just about right.
A truly brilliant man. He’s earned his pile and he’s right about those in the Ivy League. It looks good on paper, but paper doesn’t decide how hard you work after getting it on there.
Milken got off light. He is still well off (google says $2.1B in 2007), has written books, he's doing much better than the folks doing their work by the rules who lost their jobs because of his 'errors'. He was on Martha recently touting his cookbook, making the rounds at parties in the Hamptons. Sigh. Every time we see some arse like Milken or Lahde, we have to remember that not only have they gotten rich at the expense of others (wealth that some of them manage to hang onto at least in part), but they've cost law abiding co-workers their livelihood.
Beach Bum from Hawaii ping?
I find more greed in the Baby Boomer generation, of which I am one, and their offspring than the materialism that we accused our parents of back in the 60's.
There is one and only one reason why this guy is quitting; the new regulations that require hedge funds to register and disclose their short positions.
If this fellow had continued, he would have to register and disclose his positions. Those Ivy Leaguers he so cleverly duped would righteously savage him once they saw where he stood on a trade.
As it stands now he got away with it.
And when you hear of other hedge funds shutting down, then you willl know it is for the same reason. However, most will likely be smart and blame it on the economy or other market changing conditions, etc.
But watch for many hedge funds to start up new funds with greater ‘lock-up’ windows. A lock-up window is a timeframe whereby an investor cannot seek a redemption of their funds. The new SEC rules created a loophole that if a hedge fund’s lock-up window is greater than 2 years, they need not register.
This lock-up period will force small startup hedge funds to register and allow the larger players to remain unregistered. So for example Goldman Sachs and any number of their hedge funds will tell their investors “Stay with us, the Big Players, where your money will be safe and your return will be large. But you need only sign that your money is with us for at least 2 years. Sure you can find a fly-by-night hedge fund that promises to return your capital at any time, but why would you take such a risk? “
They look like idiots now. But he likely conned them.
If you think YOU or I are not susceptible to being fooled and made to look like idiots, then you live in a bunker or have no money or no money interactions except in the most safest and low returning investments or savings.
Give the victims he defrauded a break. He lied to them, they trusted him. But now they will never know unless they can show explicitly that he was using them to buy what he was shorting.
And recognize too that he knew exactly where they were financially. He knew where they would experience a margin call and where he could cause them to be liquidated. He betrayed their trust.
But these statements in the press may be used against him if his investors can band together to file suit. He was stupid to make these statements. Crooks are often stupid, letting their criminal egos carry them along an allusion of invincibility.
“With any luck this scumbag will use his ill-gotten gains to buy the dope he wants legislation for and kill himself by smoking it. His contempt for people, especially those who have earned their money honestly, (just to have him steal it) shows his low class and envy. I sure hope that he does get thrown in jail.”
Sorry but I believe you’re confused. He ‘stole’ no money from honest, hardworking people. He traded in the financial pits against other traders. The “financial advisors” who told their clients to invest their money in subprime-backed investments were the idiots (or crooks, depending on your viewpoint).
There is nothing illegal or immoral about shorting stock. It improves the market’s efficiency.
(Also I think you’re a little confused about the concept of “contempt” - it generally has nothing to do with envy. How do you feel about NObama for instance? heh)
If so, then they really were idiots. It seems to me that one of the biggest issues with the whole mess we're in now, is that the folks whose transactions caused it, probably didn't actually understood the financial instruments they were using; nor did they understand the consequences of what would happen when something didn't go according to plan.
I'd say that "idiot" is a rather kind way to characterize folks whose lack of understanding has resulted in the market problems we've seen over the past year.
This is the root problem of the stock markets. They have ceased to be business and have become legalized gambling. As for this guy, you reap what you sow.
You think that was planned by Paulson and gang?
My bank account is with WAMU (Washington Mutual). Am I an idiot for not understanding their precarious condition before their takeover?
There are certain things in our society that we all have faith in. For example, food. If I buy food that is toxic, am I an idiot? If I allow a surgeon to operate on me and he/she has a license forgery framed on the clinic wall, am I an idiot?
Where is the line that separates idiots from victims? And how do you know these people were not truly victims of a con man?
There is no information on those that lost their investments other than he convinced them to take the other side of his trade, meaning he lied to them. To me that is not sufficient to conclude they were idiots. If anything it tells me they were victims.
I don't know ... were you in charge of WAMU's investment strategies?
If so, then yes, you are to blame.
If not, then you're not to blame; but whatever idiot was in charge of WAMU's investment strategies is just as big an idiot as Mr. Lahde makes him out to be.
I think Paulson does not get to that level of details. His level is to pick and choose winners and losers.
The level that separates ‘small’ from ‘big’ and insulates ‘big’ inside players is at the SEC. The SEC organization as I understand it is in many respects a labyrinth of small manons overseen by persons with a revolving door to Wall St. firms. So there is an influence that tilts to those with more gold so to speak.
And we know the ‘Golden Rule’ among the greedy. ‘Those with the Gold make the rules’.
So to answer your question, if the ‘gang’ means the underlings that do their master’s (Wall St. influence) bidding, then yes the gang likely did it to put the small guys under the microscope. Because now those small guys and their positions will be known.
It’s like sitting at a card table and having all those that ***can’t meet the call*** having to fold or show their hand.
I can’t see why the SEC did not require everyone to show their positions, including the big players. But it follows their organizational culture. The markets want to make the big dogs feel special. History of SEC regulation development shows they are complicit. You need only read about SEC investigator Gary Aguirre to understand this is not conspiracy drivel.
Thanks for the info.
I am not following your logic, maybe because there is a lack of logic. I am not trying to berate you but you changed the subject. Let's get you back on track. If you think I am out of line then show clearly where in the following:
There are two categories of persons that were possibly hurt by this hedge fund trader. The first are those persons that this hedge fund trader managed accounts for. The second is all others that he communicated with and gave bad info to.
The investors that this hedge fund trader managed accounts for, those investors WERE NOT IN CHARGE OF THEIR OWN INVESTMENT STRATEGIES.
The persons that this hedge fund trader gave bad information to may indeed have been duped and naive in following his advice.
But there are laws against spreading bad information, against pumping and dumping in concert with disseminating or having someone disseminate bad and distorted information.
In either case, this hedge trader has admitted to duping investors. He is therefore exposed to lawsuits and possibly criminal liability.
All criminals think their victims are idiots.
A legitimate hedge fund firm does not have to resort to deceit. One that comes to mind has done extensive research on points at which programmed trading kicks in, and they benefit from those programmed positions.
Wall St. is about obtaining superior legal information to minimize risk and maximize reward. If a culture of deceit (which always exists) is allowed to grow out of control, then the market is no longer about risk management, but about unfair practices.
An example that everyone can understand is shoplifting. Shoplifting will always exist but it must be held to a small percentage. Otherwise if it is not controlled, many more will do it, and those that don't will pay a higher price for their purchases.
This hedge fund manager served poison to some investors. I say they are victims and he is a con man. He needs to be punished and the victims need to have justice.
The difference is that Milken broke the law. This guy merely beat the system set up by the crooks and elitists on Wall St.
I trade so I have an idea of what he did and I do it every day, except on the much smaller scale.
There are financial vehicles that get driven too high or low based on fear or greed. He merely took advantage and cashed in. It is not easy to cash in, many never do it and are only wealthy on paper...as in many are 40% poorer now after not allocating their 401Ks properly.
Well, true, and we don't know that Lahje broke any laws. I wonder if he broke any 'rules', but that is purely speculative.
There are financial vehicles that get driven too high or low based on fear or greed. He merely took advantage and cashed in.
Well said. He really worked it, and on a large scale. In a way he was paid for his risk. He has taken the Gekko approach to a new level.
I agree. What did he do wrong to deserve the contempt shown in this thread?
Uh, no, actually, I did not change the subject at all. You may have misread Mr. Lahde's statement in the first place.
Mr. Lahde was speaking of "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."
Those are the idiots in question, because they're the "people stupid enough to take the other side of [Ladhe's] trades."
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.
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.