Lashing out while cashing in

articles.latimes.com/2008/oct/18/business/fi-hedge18

Andrew Lahde, the Santa Monica hedge fund manager who shot to fame with an 870% gain last year by betting on the subprime mortgage collapse, has left the building – with a bang.

Lahde, 37, who closed his operations last month citing the risk of trading with teetering banks, said goodbye Friday to his clients and good riddance to the investment world with a stinging, widely circulated letter skewering “idiot” traders, the U.S. government and marijuana laws.

“I was in this game for the money,” Lahde wrote in the two-page missive, saying he would now focus on his personal portfolio of unspecified millions. “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 Bros. 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, who worked as an analyst at firms including Southern California’s Roth Capital Partners and Dalton Investments before launching his own company, expressed contempt for the workaholic ways of the business world.

“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 50 years anyway. Steve Ballmer, 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.”

Lahde closed by arguing for the legalization of hemp and marijuana. He called hemp “an alternative food and energy source” and labeled marijuana laws “ludicrous.”

“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 … drugs than allow you to grow a plant in your home without some of the profits going into their coffers.”

In other words: Put all that in your pipe and smoke it.

Lahde is one of my many heros, of course. His accomplishments are similar to another person I posted about. Here is the full letter.
portfolio.com/html/assets/AndrewLahdeFarewell.pdf

And here are his accomplishments:

http://alphaville.ftdata.co.uk/lib/inc/getfile/893.jpg

ftalphaville.ft.com/blog/2008/03/06/11407/lahde-capital-letter-to-investors-short-california-and-cmbs

I prefer this one:

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?

John Gapper

This guy is awesome!

“I was in this game for the money,” Lahde wrote in the two-page missive, saying he would now focus on his personal portfolio of unspecified millions. “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 Bros. 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.”

Praise him all you want. But the truth may be stated in seven words: Two wrongs do not make a right.

There is no joy in heaven over the greed in the once-ballooning real estate market, or in the savvy fleecing of the greedy by Mr. Lahde.

  • Tim
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