HedgeAnswers - The Blog!

Go To The New Site - See The Latest Post -www.hedgeanswers.com/blog

noreply@blogger.com (Daniel Strachman) — Fri, 09 Oct 2009 11:22:00 +0000

THE NEW SITE! - HEDGEANSWERS.COM/BLOG

noreply@blogger.com (Daniel Strachman) — Fri, 02 Oct 2009 00:22:00 +0000

Friends:

I am pleased to tell you that as of October 1, 2009 - the blog site has been moved to its new permanent home at www.hedgeanswers.com/blog.

The new site is part of the overall www.hedgeanswers.com site and now incorporates more tools and functionality not to mention a bookstore and links to the HedgeAnswers Conference Call Series.

Thank you for your continued support. I hope you like the new site and find that it continues to offer you the news and commentary that you expect and have come to enjoy reading.

Best
~Daniel Strachman

Spend, Spend, Spend, Spend, Spend...

noreply@blogger.com (Daniel Strachman) — Mon, 21 Sep 2009 16:08:00 +0000

Replace the word “Spam” with “Spend” in the great Monty Python anthem and, by George -- or should I say by Barack-- I think you’ve got it.

As the country embraces yet another hundreds-of-billion-dollar spending plan coming out of Washington, I’m sitting here scratching my head, asking why? There seems to be no rhyme or reason to what Washington – both sides of the aisle, mind you - is doing to move things along and fix our sagging – need I say near-depression -- economy.

The economic news continues to be bleak and yet Congress and the other powers-that-be seem to be hell-bent on spending our way out of this mess. I understand the value of coming up with a solution to the healthcare problem, but I can’t understand the value of spending $850 billion on it with what seems to be little or no real research. It is important to fix this mess but spending recklessly is not going to solve the problem. It seems that all Congress wants to do is throw good, hard-earned taxpayer dollars after good, hard-earned tax payer dollars. It is really a nightmare of massive proportions.

And while they swipe the national credit card, Congress and the President talk of the evils of Wall Street and the need for increased regulation and oversight of the markets and everyone involved in finance.

Regulation that does something is, I believe, good, yet regulation for regulation’s sake is simply foolish. Clearly the system is broken and still there seems to be no good ideas that I have heard that will right the wrongs of the past. It seems that all we hear out of Washington is that we need more regulation and oversight, but nothing seems to be coming out of the Beltway except empty speeches and words with little or no meaning.

I have a number of ideas that will not necessarily right some of the wrongs of the past, but may help avoid a repeat performance.

1. Make hedge funds mark to market on a daily basis -- as mutual funds do -- and publish performance data.

2. Remove any and all conflicts of interest between auditors and the companies they audit.

3. Make investors take and pass investment knowledge tests before they are allowed to invest.

4. Make brokers and other investment professionals personally liable for transactions that cause their clients losses due to fraud or just plain bad advice.

5. Do not allow investors to only have long-only investments in their portfolios.

You may agree with some, none, or all of my ideas. I welcome your comments. The main theme of my suggestions is personal responsibility. If we force people to be responsible for their actions, the country will be a better place and we will avoid recklessness.

THINGS THAT DRIVE ME CRAZY
There are two things this week:
1. I hate going to a hotel that is dirty, disgusting and gross. This happened to me this week at the Sheraton in Needham, Mass. It was really bad; the sheets where ripped and stained, the bathroom floor was filthy and furniture was pretty beat up. Not to mention that there were tears in the wallpaper and the shower had enough patina on it to be considered for a photo example in Merriam-Webster. This is a hotel that I will never stay at again nor should you or anyone you know. It is simply terrible and not worth it at any price.

2. I don’t understand why supermarkets can’t just give us the best price for the products instead of always demanding that we use our “customer rewards” card in order to get the discount. Since we are “rewarding” the stores by spending our money there, can’t they reward us by giving us the best price/lowest price without having to register or carry something in a wallet or on a key chain? Aren’t we showing our loyalty by shopping there in the first place? Why is this not clear?

COMMENTS
The comments function is now working properly and I have only one thing to say about it: I will post any comment, good or bad, as long as the commenter provides his or her name. I will not post anonymous comments or those that use vulgarity or profanity – my mother reads the blog. Someone sent in a comment last week saying that my September 11th post was disrespectful to those who where killed. I did not post it because the writer did not provide a name. Had he or she done so, the comment would be up right now.

My Thoughts on September 11, 2009

noreply@blogger.com (Daniel Strachman) — Fri, 11 Sep 2009 10:19:00 +0000

This is a solemn weekend for many, as people around the globe take part in ceremonies that commemorate the events of September 11, 2001.

The wicked, heinous, cowardly terrorist attacks seem to have left virtually no thinking person in the United States untouched. And while the wounds of those lost may never mend and the holes in many lives remain empty, out of the sadness and grief, we have all found a way to survive. Eight years later, I am not sure if we are better or worse off then we were on the morning of September 12 in our understanding or ability to deal with terrorists but we have moved on, the markets have continued to function and commerce has returned, albeit, slowly to downtown Manhattan. It appears that one day in the not-too-distant future a new World Trade Center will grace the skyline of the Big Apple.

So what, where, is the outrage at the terrorist groups, where is the outrage at the people who still want to push us into the sea and where is the outrage at the fact we seem to care more about the rights of terrorists then the rights of the American People?

I just don’t get it.

How can our leaders be so blind, how can they be so misguided and how can they not see the writing on the wall that the only way to win is to bring the fight to the terrorists and not let the terrorists set one foot on American soil? Does this not make sense? Is it foolhardy or just plain out there? I don’t think so. I think that it makes sense. I am not for erecting borders that keep people out of this country; we are after all a nation of immigrants. I am, however, for keeping criminals and those who show no value whatsoever for life out at all costs. I know it is not as simple and easy as I think it is, but I think it should be a priority of this President and this Congress. It is their job to protect us and letting terrorists onto our shores is not a good idea.

There is a reason people fight through the desert, the oceans and the borders to get into the United States: Rightly or wrongly they believe it is the Promised Land. The land where they can build a better life for the family, get access to jobs, education and medical care. We should demand that our leaders protect this dream and keep it alive for both those in and outside our borders.

Taxing The People Will Not Spur The Economy!

noreply@blogger.com (Daniel Strachman) — Mon, 07 Sep 2009 14:40:00 +0000

Over the last two months while I’ve been on hiatus from this blog, two things have made me wonder:

1.Why are there no economists or other great minds telling the government that it’s impossible to tax an economy to prosperity?

2.Why doesn’t anybody seem to be willing to take responsibility for their own actions?

Both of these questions have kept me up at night. I just don’t get it.

I believe that the economy is getting weaker by the day and that increased income, sales or corporate tax revenue or maybe one or two other things that I haven’t heard about yet are going to cause things to get worse. The key to getting things going again is to decrease spending and rein in the pork, not to tax people to the point of deincentivizing them to work.

I just don’t get it, but then again, who am I to question the powers that be? I’m not one of them.

It also makes no sense to me that people are still blaming Wall Street, the banks and unscrupulous mortgage brokers for all that ails the world. While I’m not going to get involved in the blame game (I’ll leave that for the folks at 60 Minutes and other “news” programs and outlets), all I’m going to say is the following: If you signed on the dotted line without reading the document you have only yourself to blame. Am I the only one thinks this way?

In the end, the lesson of the last year, as Rodney Dangerfield said in the movie Back To School is, “You’ve got to look out for Number One but don’t step on Number Two.”

Greed, you see, has been good for everyone, and while clearly Wall Street, the banks, Congress, the former Administration and others are to blame for some of the ills that have wreaked havoc on our economy, the American people are also to blame. They bought the houses, bought the cars, and used the credit cards. The American people took advantage of the easy credit and did whatever they wanted and now are demanding solutions that "only the government" can supply.

As we look to the fall and at what's going on in the markets, one thing is for sure: The death of the hedge fund industry has been highly overstated and capitalism, while bruised, battered and broken, is not dead. While I don’t believe the economy is getting better, I think it's exciting to see that other people believe things are righting themselves. But remember this: Just because stocks are going up doesn't mean that the economy is getting better; it just means that stock prices are rising.

My suggestion is to talk to your friends, neighbors and even strangers and ask them if they’re spending money, making money, saving money or out of money. I’m almost positive the answers will lead you to my conclusions. If the answers do not, please email me. I could use some good news.

THINGS THAT DRIVE ME CRAZY:

I have come to the conclusion that all retailers believe both that all shoppers are stupid and that their employees aren’t worth caring about. I arrived at this conclusion recently when shopping at the Modell’s Sporting Goods Store in Watchung, N.J. The salespeople and managers there are fantastic. On a recent Sunday, they helped my wife and me find the right shoes, socks and shin guards for our kids’ soccer needs. They really worked hard for us. I was quite impressed.

Then we went to pay, and the whole system broke down. The only people to blame are management. The items we wanted, while advertised in the circular that was published that day, at one price, rang up at a higher price and it took two people and three or four tries to “override the system” to give us the advertised price.

It’s clear that management didn’t think that their shoppers are capable of reading letters and numbers and won’t notice being overcharged or maybe were to lazy to program the computers on time. It also shows how little management thinks of their employees in the front lines who have to deal with customers irate or not when things break down. Why should they care? They’re sitting in their offices – out of harm’s way - while their soldiers are at the front taking fire.

It’s a sad state of affairs consumers and retail employees unfortunately have to deal with.

Before I Go Fishing - One Last Post...

noreply@blogger.com (Daniel Strachman) — Tue, 23 Jun 2009 14:21:00 +0000

You know, it’s so funny when you’re listening to the radio and thinking that you can’t hear anything crazier or anything else that’s going to shock you, but then you hear that the Senior Senator from New York – Democrat Charles Schumer-- is pushing the MTA into figuring out how it can provide wireless internet connectivity on the Long Island Railroad.

With apologies to my friends who ride the LIRR, I have to say that this is just plain silly. Before you know it, Senator Schumer will be demanding internet service on the subways and maybe the buses. Why not? The MTA’s house is completely out of order so why not add this to the mess as well. Heck, who knows, maybe through connectivity the MTA will be able to solve its budget crisis and make its services run smoother.

This latest move by Senator Schumer illustrates just how screwed up this society is and how a lack of focus in Washington is causing the country’s economy to sink deeper and deeper.

After my last post, a loyal reader said that I am too angry when I write this blog, that I’ve got too many negative things to say and that I should stick to hedge funds and markets and move away from politics. Just so we are clear, I’m not angry because I think the country is failing or I think the country is floundering; I’m angry because I think our leaders our failing and floundering and wreaking havoc on our economy. Politics, unfortunately in this day and age, is heavily intertwined with the markets. Just so we are clear, my love for this country runs deep – I believe it to be the greatest place on earth and I think it’s the place where everyone wants to be. That doesn’t mean that I’m not disappointed by the inaction of our leaders and angry that people are not willing to be engaged to make this country a better place. (By the way for those of you wondering why it has taken so long for this post to be posted, it is because I recently finished a new book with Richard Bookbinder on Fund of Funds which will be out late this fall. You can secure a first edition by clicking here!)

Recently I had the pleasure of giving a commencement speech in which I spoke specifically about the concept of engagement, getting involved in your community, getting people excited again to be part of the process. I told the graduates that if they see a problem, they should try to fix it. If they know something is wrong, try to correct it and if they hear leaders lying, tell the world that they know that they’re lying and do something about it. The point was that it’s our responsibility as humans to make this world a better place.

The same can be said for your investments. As we settle into the summer, many of you are enjoying time outside and relaxing a bit, but don’t forget that you still need to get involved with your portfolio. Half the year will be over in a few days and now is a better time than most to see where you are and make adjustments. If you don’t, who will? After all, it is your money.

With that I am hanging up the “Gone Fishing” sign for the next few weeks. I’ll post again in mid August, unless something needs posting sooner. Have a good summer and go Red Sox!

THINGS THAT DRIVE ME CRAZY
I am happy to report that nothing has driven me crazy as of late. I will say, however, that I do believe there is a conscious and concerted effort by corporate America, in particular by those who are trying to sell us something, to bring customer service to the lowest point imaginable. I am constantly amazed at just how unengaged the people are who allegedly work in customer service. When I was working at Orbitex Group of Funds at the end of the last century, some of us identified others as the heads of sales prevention. These were the people who were happy to tell those of us who were marketing and selling how much more they knew about what we were doing. Luckily we proved them wrong, the point, however, is that I have drawn on this experience and have identified most people in retail, whether on the phone or in a shop, as the heads of customer disservice.

The Search For Alpha Seems To Deliver Beta

noreply@blogger.com (Daniel Strachman) — Wed, 29 Apr 2009 23:02:00 +0000

The search for Alpha starts with Beta. Is that the most ridiculous thing you have read this month? I think so, because even though I wrote it and I’m sure I heard it someplace before, I didn’t know what it meant then and don’t know what it means now. I just wanted to be cute, as I have decided to bring the blog back to the topic of finance and markets. My biting, wit-filled political commentary will take a back seat for the time being.

Over the last few weeks a friend, who is without a doubt a critical thinker and understands economics, economic policy and the Federal Reserve as well as anyone I know, and I have been discussing the search for Alpha. While I would never admit this to him personally, I do believe that he and I agree that finding Alpha is extremely difficult. Alpha, you see is the juice one gets by outperforming the market or benchmark. It is the excess return. It is what hedge funds are supposed to deliver and what hedge fund managers get paid for doing.

I have a problem with this. The problem is that I don’t believe that there are so many people who can find Alpha. It is impossible to think that there are so many smart people managing money who can find opportunities that others miss and exploit these for a profit. Am I wrong? I don’t think so. I don’t think these people are fraudulent in their assertions; I believe that they think they can find Alpha and try very hard to do so. The problem is that numbers don’t lie and seem to prove my point.

As many of you know, I have little if any regard for the hedge fund databases, not because they are bad (this will remain my opinion, by the way, until we have standardized reporting) but because I question the quality of the data. Still, most of the databases and indices that track hedge funds showed them down between 25 and 35 percent last year. This alone, good data or bad, I believe proves my point: Everyone is executing the same trade.

The herd finds an idea, runs with it, the first person out makes all the money and the rest get slaughtered. It seems that many so-called hedge fund managers have started to act like their mutual fund brethren – they are managing for mediocrity. They end up here because they want to attract sticky assets – pension plan and endowment assets. The closer they are to the mean, the more likely they are to get this money. I believe that this is the wrong way to go. I believe it is a mistake and I believe it is trend that needs to be broken.

The only way investors are going to recover from the last two years is to look for managers who don’t operate with the intention of hitting the mean. They need to find managers who take risks (calculated risks, that is) that are going to pay off, not only in the near future but in the distant one as well. Managing for mediocrity is not something worth paying for – stay away from these manages. Trust me, it will be worth it.

THINGS THAT DRIVE ME CRAZY
Nothing to report this week. Stay tuned however, this is not going to last.

A Good, Honest, Decent American Is Hard To Find

noreply@blogger.com (Daniel Strachman) — Tue, 21 Apr 2009 14:54:00 +0000

Why is it so hard for the Obama administration to find good, honest, decent Americans to work for it? It seems every day we are learning that this person that President wants for his cabinet or that person he wants to work in Treasury has had some problem with something.

I don’t understand. Could Daniel Schorr, in his NPR’s All Things Considered piece of March 4, “Vetting Process Out of Control,” be right when he writes “that the issue should not be past mistakes, but transparency about them,” when commenting on why it’s OK that the Senate confirmed Timothy Geithner despite his tax indiscretions simply because he came clean about them? C’mon, this can’t be right. Simply telling someone you did something wrong doesn’t absolve you from the misdeed. It just means you told someone about it.

Then we learned that the man deemed fit to save the United States automobile industry is “an emerging figure,” according to The New York Times, in the corruption investigation of the New York State pension program. And while Steven Rattner, President Obama’s point man for the auto industry, has not been accused of any crime, according to the same article, he arranged to have his firm pay one of the indicted people being investigated a fee for getting business from the pension plan.

It just doesn’t add up to me. I am confused as to why the President and his advisors just can’t seem to find people to work in Washington who don’t have to come clean or, more pompously, "be transparent” about past indiscretions. I don’t agree with Mr. Schorr’s comments that the vetting process is too difficult. I believe it is too lax. The bar for these people – our leaders – needs to be raised to new heights.

One of the biggest complaints about the Bush administration was Vice President Cheney’s past work at Halliburton and other links to government contractors. While I don’t know all the facts, where there’s smoke there’s probably fire and frankly it seems that we all have been hurt by this relationship. If this type of situation was not acceptable then, it should not be acceptable now. President Obama has to say “Enough is enough” and bring in people that are beyond reproach, as he promised. Only then will he get the respect, admiration and the ability to look us in the eye and say that he’s really brought “Change” to Washington.

THINGS THAT DRIVE ME CRAZY!

Right now nothing is bothering me, except that the Red Sox have gotten off to such a bad start. I expect things to turn around soon. If they don’t rest, assured you will read about it in this blog.

Taxation without representation?

noreply@blogger.com (Daniel Strachman) — Thu, 26 Mar 2009 12:16:00 +0000

It seems like the only solution that any of these so-called leaders -- whether they be in Washington or in State Houses across the country -- seem to have to our financial situation is higher taxes. Across the nation, the answer is the same: Increase taxes after taxes after taxes to get rid of the financial havoc that has taken hold of our economy and gripped our country.

Is it me or is this just plain silly? All of us – I believe that I am speaking for the masses -- are trying to make better lives for ourselves, our families and our communities, and yet the government on every level is hell-bent on not allowing us this basic right.

Taxing our way to prosperity is not a solution; it’s a means to a terrible end. From the governors’ offices and state legislatures to the White House and Congress, our leaders seem to be making one terrible mistake after another with our money. They’re wasting our time with their hearings that describe their great, sophisticated plans to solve the economy on the local, state and federal level. Their plans are ludicrous, their ideas are terrible and essentially they’re just robbing Peter to pay Paul. The Madoff Ponzi scheme has nothing on these guys. Some day, probably in the not-too-distant future, someone will write the story of the largest fraud ever and it will be about what our government did to its own people. Our leaders are clueless, their solutions are baseless and as far as we’re concerned, educated, thoughtful people need to demand more.

It’s time to get fiscally responsible, it’s time to cut programs, it’s time to get up and demand answers. We the people need once and for all to demand that our leaders actually lead and provide us with some services other than merely expanding the bureaucracy for their own benefit. It’s easy to say “I want to raise the sales tax, I want to do away with property tax rebates and “Only the government has solutions to what ails our nation”. Blame someone else is the name of the game.

The reality is that our leaders need to start making hard choices. They need to start acting like fiscally responsible adults with some higher aim than perpetuating their own existence.

The people of this country who work hard should be awarded for their actions. They shouldn’t be taxed into obscurity. Maybe the government should simply spend less.

What a concept!

It works well across the nation at homes of all shapes and sizes. Why don’t they try it in Washington, Boston, Sacramento, Trenton and Albany? These leaders say they feel our pain and are here to help. Well, how much help are they providing by increasing taxes and reducing our take-home pay?

I am not a scholar of our Revolution, but I believe that this is taxation without representation. We can no longer simply stand idly by and wait for the government to act responsibly; we have seen that this impossible. I believe that our misguided government is setting us on a course for bankruptcy.

Until there is true fiscal responsibility and structure to budgets at all levels of government, this country will never get back on its feet. If President Obama wants to set a real agenda for the future of America, it won’t just be focused on clean energy; it will be focused on teaching people to spend not only wisely, but effectively. It’s time to stop this nonsense, it’s time to get real, it’s time to deal with issues head on and it’s time to stop taxing the people for things they simply do not want, need and, frankly, can do without.

THINGS THAT DRIVE ME CRAZY!
I find it absolutely funny that people send me press releases. It seems that a number of people who work in various public relations departments at money managers and service providers believe that I have an interest in their "news" and that it will make it onto this blog. Is it me or are they simply not reading the blog? Just for the record, I don't read, want or use press releases.

Here’s my sales pitch, inspired by Bernie

noreply@blogger.com (Daniel Strachman) — Mon, 16 Mar 2009 15:34:00 +0000

What to do, what to say, what do people want to read, these are the questions I’ve been asking myself over and over again this week. I have spent an enormous amount of time thinking about how to answer these questions. And every time I think about it, the same thing pops into my head: Mr. Madoff and his minions. They all knew what to do, what to say, and what people wanted to read.

Anyway, I’ve come to one conclusion: I am just not that smart. In the end, I guess, I just don’t know how to sell it or maybe I’m just not as sick and twisted as Bernie and his minions.

For weeks now, I’ve been saying this whole thing is a four-act play. The first act was his birth, his marriage and his beginnings on The Street. Act two is the thirty year fraud. Act three is the confession and guilty plea. And act four is his all-expenses paid vacation to Florida or some other minimum security prison where he sits around and laughs at all of us for the rest of his days. He laughs because he has won. Sure, he isn’t free and he no longer lives on Park Avenue or can fly off to here or there at a moment’s notice but I bet he doesn’t care. He doesn’t care because he was able to do it for thirty years. He lived better then 99.999 percent of the world for decades. Now he is reduced to a cell, a bunk, three squares a day and a jumpsuit – Act Four.

Don’t you get it? Don’t you see that he won? We all are collectively the losers. The hedge fund industry has been turned upside down in the last twelve months. People don’t know who to trust, how to trust or even if they want to trust anyone in light of the massive losses experienced in the Madoff fraud and market turmoil. It is not good and it is not going to get any better until people realize that this whole thing is a nightmare and that it is time to wake up.

I, like many people today, am mad as hell and have decided not to take it anymore. My solution is not to get angry, go mad or think of ways to get even. That would be too easy, not necessary and frankly a bit of a bore. Instead, I am paying closer attention to everything, starting first with my wife, my kids, my community and my country. I suggest you do the same. Time is too short to be wasted on being mad about things that we can’t control. That is what I have decided to say, to write and to sell to you.

THINGS THAT DRIVE ME CRAZY

I really don’t care for the check engine light in my car. I have a 2001 BMW that is just awesome except for one thing: the check engine light. It came on this week and the only way to figure it out is to run a series of tests using a machine that I don’t have nor am going to buy. I find it funny that while technology has improved all aspects of transportation, it has also made owning a car more difficult.

A No-Cost Solution To Fix The Economy

noreply@blogger.com (Daniel Strachman) — Sat, 21 Feb 2009 11:21:00 +0000

So anyway, ladies and gentlemen, boys and girls, I know you’ve been reading the blog with real intensity over the last few weeks. I know this because of the comments that you’ve been sending in via email. The inbox is filled with good stuff. Some of you told me that I’m mad. Some of you told me that I’m right. Some of you have told me that I’m wrong. Others have just said, “Get me off the list, G-d damn it!” Well, anyway, here’s my thoughts on how to solve this black hole of an economic crisis that has paralyzed the nation and the world.

The first thing I should tell you is that this solution is not my original thought; I want to tell you I heard it from a colleague who heard it from some radio personality who probably heard from his four-year-old kid in between watching episodes of "Wow Wow Wubbzy" and "Dora The Explorer". But nonetheless it sounds good to me and after thinking about for a few days, running it by some people who are smarter then me and some who are not as smart as me, I’ve come to the conclusion that it’s the right thing to do. Again, like my other comments a couple of weeks back, it will cost the country absolutely nothing. We would not have to spend these 800 billion-odd dollars on something that we know will do absolutely nothing but expand the one thing we don’t need – both the federal and state bureaucracy.

Are you ready? Sit down and pay attention, because here's the solution: a one year moratorium for all mortgage payers.

To be clear - every mortgage payer in America gets a one-year moratorium on payments. If you as of March 1, 2009, have 20 years left on your mortgage, you next payment is not due until March 1, 2010, and on that date you still have 20 years to maturity. Of course if you want to continue paying, you can as usual – good for you, by the way!

If you choose not to pay however, you can use the money for other bills, pay tuition, buy stuff, do what you want with it. Invest in the market or maybe use the money to get your teeth cleaned. It’s up to you. You have one full year to get your house (no pun intended) in order.

If you want to pay you can still pay; it’s fine – good for you! If you choose to pay for the next two months, let’s say to May, you still have the option of taking a year off. know it sounds crazy, but it’s got to be better then what we are currently planning on doing.

The banks will do better under this plan then operating as they are now, because there will be breathing room and everyone can work without pressure.

I believe this will stimulate the economy by doing something that will truly affect people’s lives, and, more important, will solve our problems while limiting the growth of the bureaucracy and wasting money, which is where we are going with this stimulus package that was passed last week.

The current thought process in Washington is quite scary to me, that the whole country, everybody I know, regardless of their economic status, is tightening their belts, and yet the government is expanding its expense side of the ledger. Their solution is to just keep spending, spending, spending with a little more spending. It makes no sense to me whatsoever that friends, family, and others are all operating in a better-safe-than-sorry mode and Congress and the President are acting like drunken sailors in Times Square for the first time.

We need to save ourselves from the government; we don’t need to be saved by the government. The people of America are resilient. We are able to downsize our spending not because the government tells us to but because we realize that we need to do it. These are desperate times, and desperate times call for desperate measures, but they don’t call for spending for spending’s sake. I know that the stimulus package has been passed and there is nothing I can do about it. That does not mean, however, that we should be silenced.

On the hedge fund front, I don’t really have any news to report except that I find the conversations I’m having with many managers to be extremely amusing. Everyone in the industry is saying that they can’t raise money, that there’s nobody willing to put money to work, blah, blah, blah. I’m sort of sick of hearing about it all day. I think the reality is if these managers started delivering on their promises of good, solid performance with steady returns that is uncorrelated to the market then they would have no problem raising money.

Maybe instead of blaming the market for their inability to raise money, they need to look inward and question the long-term viability of their offering. Hedge fund managers need to wake up and realize that the way to raise money is not by giving people a better deal on the fees or reducing lock-up periods. These things are not the problem, ladies and gentlemen; the problem is the managers themselves don’t know that they way to raise money is not by selling pie-in-the-sky performance but rather their ability to deliver on their promise of performance.

THINGS THAT DRIVE ME CRAZY

Once again I have come the conclusion that Comcast really does not want me as a customer. In the wake of last week’s fiasco, I was called by a “Customer Service Representative” to confirm the service was installed. My question was don’t you know that the service was installed. His response was that the company wanted to check. In my mind I thought, hmm, if I say no does that mean, I won’t get a bill next month? I asked again if he knew about the installation as I pondered saying no and his response was – “Look, can you please just tell me if the phone was installed and is working” I said no I can’t but thanks for calling and hung up. Am I wrong here or does it seem that this company is really screwed up in the customer service or lack of customer service department. Maybe they’re thinking “Customers? Ah, who needs ’em!”

American People 1 - Washington Insiders 0

noreply@blogger.com (Daniel Strachman) — Wed, 11 Feb 2009 23:38:00 +0000

The good news to come out of Washington is that one tax cheat is gone and another one or two or their significant others seem to be on the way out. I want to personally thank President Obama for doing the right thing and applaud his apology for the Daschle mistake on national television; I can only hope he continues to do the right thing. I also truly appreciate that he and his staff seem to be taking my words to heart and acting on them. Of course this is pure speculation on my part, but hopeful none the less.

Still, I am confused about one thing that came out of the Nation’s Capital this week about use of tax dollars for unnecessary expenses. Thursday evening, the big story was the President’s speech at the annual Congressional retreat. I believe it was his first official flight on Air Force One and expect it and the retreat cost quite a bit of money. Why is this use of tax dollars tolerated during these times while similar expenses incurred by firms that accepted bailouts are not only questioned but vilified? I don’t get it: The bailed-out companies only recently went on the dole, while Congress and the Government have been on the dole for more then 200 years. Shouldn’t we cut the private sector a little bit of slack?

On the hedge fund front, the big news of the week was of course Senators Carl Levin (D-Michigan) and Charles Grassley (R-Iowa) introducing a bill titled “The Hedge Fund Transparency Act.” If enacted, hedge funds and private equity funds would be forced to become investment companies registered with the Securities and Exchange Commission when they hit $50 million in assets under management. In doing so, they would be required to disclose all sorts of stuff, blah, blah, blah and a little more blah. I am sure it is supposed to do something other then add to the bureaucracy but I haven’t figured it out yet. One thing is for sure: The lawyers win with this – lots more billable hours dealing with registration and all that good stuff.

I find it funny that these two Senators and probably many other members of Congress, the press, probably even President Obama and others believe that registration will correct all that ails the hedge fund and private equity worlds. We all know that this just another example of Washington window dressing. After all, the Treasury Secretary’s recovery and stability plan includes using hedge funds and private equity funds as sources of capital to get us out of this mess!

One thing is for sure, though: A lot of journalists, both print and broadcast, are secretly hoping the bill doesn’t pass, because if it does, they will no longer be able to lead all their hedge fund stories with the phrase : “The highly unregulated and secretive world of hedge funds”!

THINGS THAT DRIVE ME CRAZY!

I am tired of people not taking responsibility. Over the past week, my wife and I scheduled to have our phones switched from one carrier to another. It seemed rather simple, but, as is everything these days, it turned out to be a headache. The real problem turned out to be Comcast Operator No. 441 – Debbie. She’s a really terrible employee and in my opinion should be fired. Not only did she accuse me of lying to her but, to throw fuel on the fire, when I asked to speak with a supervisor, she responded “The supervisor does not want to speak with you now” and then hung up. This drove me crazy, not because she hung up, but because I can only believe that this is corporate policy at Comcast. “Get rid of the callers who expect something” seems to be their motto. After all, what do they need me for, I’m just a customer.

With Cabinet Secretaries Like These...

noreply@blogger.com (Daniel Strachman) — Tue, 03 Feb 2009 00:47:00 +0000

If the recent confirmation of Tim Geithner and the pending confirmation of Tom Daschle are not examples of inside baseball, I don’t know what is. Besides the fact that President Obama was elected on a platform of change and that he has named practically no one who doesn’t have a twenty-page Washington resume to any position of importance, now we are expected to accept that the only people with experience, substance and hope of creating change are not capable of paying their taxes on time.

People have complained about my recent anger. Well, come on, how can thinking people not be angry with this administration? Again I ask as I did last week: Where is the outrage? How come people aren’t as angry as I am that the government has seemed to swap one do-nothing, self-serving leader for another?

One of the greatest aspects of this country is our simple, safe, secure and on-time transition of power at all levels of government, from the highest office to the lowest. (Sorry, Mayor Giuliani!) The structure and order of the Republic is not only the envy of freedom seekers everywhere but the true bond that holds this country together. Yet we still elect and appoint people who laugh at the thing that put them in office in the first place.

I do not believe the current Secretary of the Treasury is the only person to lead us out of the economic weeds we find ourselves in, and now that I know that he’s someone who seems to be less then forthright about paying his taxes, I question his appointment even more. But what is a greater concern is that no one else besides Rush Limbaugh and Sean Hannity seem to be concerned that a Democratic Senate confirmed him by a vote of 60 – 34. Now we hear that the incoming Health and Human Services Secretary, a veteran of the Senate leadership, has also had problems paying his taxes on time.

The President said after the Treasury Secretary was sworn in that “We can’t waste a day” and that there has been “a devastating loss in trust and confidence” in the U.S. economy in the wake of the credit crisis and Wall Street woes. While this all may be true, I think the first way to restore trust and confidence, not only in the economy, but in the United States itself is to make sure that the people in power and the people these people appoint to powerful positions make sure to pay all the taxes they owe and pay them on time, the way the rest of us have to. Seems simple, right?

THINGS THAT DRIVE ME CRAZY!

Shocking as it may be, nothing else drove me crazy this past week. Again I am sure that this won’t last. Something surely will provide the right level of ire deemed necessary for these pages before the week is out.

Where is the Outrage?

noreply@blogger.com (Daniel Strachman) — Sat, 24 Jan 2009 02:36:00 +0000

I am really trying hard not to be angry but I can’t help it. It seems that every time I turn on the news, pick up a newspaper or listen to the radio, all I hear about is the government giving out money. Yet for some reason, I never get any.

I am really sick of hearing about the giveaway and, in fact, I am outraged by it. But what causes me more grief is the fact that nobody seems to care. Everyone seems to believe that government in its infinite wisdom can simply dole out dollar after dollar – or should I say taxpayer dollar after taxpayer dollar -- to one bank or financial institution after another with little if any regard about actually making things better. It’s as if the top bosses of all of the financial services companies – read banks and brokerages -- got together a couple of years ago and said, “Hey, we know how to line our pockets and those of our most-favored employees! We can create, sell and dump worthless financial paper on unsophisticated investors and let the government bail us out when the chickens come home to roost.” Does that sound familiar?

I’m not one for conspiracy theories but I may be by the time all this stuff comes to an end. These bailouts are simply wrong, in my opinion, and frankly I don’t understand why nobody is saying so. Am I the only one who thinks that if companies fail, management should be out of a job and not be rewarded with tax dollars?

Furthermore, the recent news at some of the nation’s largest banks seems to indicate that the bailouts are not working. The old adage about throwing good money after bad is being proven on a daily basis. Please don’t read this and think that I want all the banks and brokerage firms to fail. That isn’t what I am saying at all. I realize the impact that the collapse of some of these businesses could have throughout the world, and I am not that evil.

I am, however, against the idea of continuing to throw money at badly managed businesses. Government bailouts are not going to solve the problems of weak, corrupt and self-serving management teams.

Strong management that is given incentives to run good, tight, successful, money-making operations is what is going to turn this economy around. The White House, Capitol Hill, the Treasury and the Federal Reserve all know that this is the answer. It is time for them to start implementing it. If President Obama really wants to make an impact on this economy, he needs to start by getting rid of the TARP program and working to find better solutions than simply throwing money around. He promised change – hopefully he can deliver.

However, to avoid being called a blowhard like most of the print media poets and talking heads on the cable news channels, I am going to provide President Obama, the soon-to-be Treasury Secretary and anyone else in Washington who might have power to get something done some advice on how to restore confidence to the banking system and to restore order to the equity markets. My suggestions will cost next to nothing and will achieve two very important goals: restore confidence to the banking system and bring order to the equity markets:

1. Increase FDIC insurance from $250,000.00 to $500,000.00
2. Put back the Up-Tick Rule

My suggestions will cost next to nothing to implement and will achieve two very important goals quickly and set us on a course to reverse our current financial situation. Stability will come to the banks as consumers will have a sense of security over their hard earned post tax dollars and the banks deposit base will increase. The Up-Tick Rule will cause the equity markets to be less volatile which in turn will remove the wild gyrations that have occurred over the last six months.

It is our job as citizens to not only demand that our President and our leaders take action but, remember, they’re spending our money, so they should take the right action.

Get outraged. We all work to hard to see our dollars being flushed away in order to bail out corporate mistakes. Get outraged – it is our responsibility.

THINGS THAT DRIVE ME CRAZY!

Last week nothing seemed to drive me crazy and, as I wrote at the end of last week’s post, I didn’t expect that to last very long. Sure enough, I was right. I was having a conversation with someone who fancies himself a financial Wunderkind. This is a guy who used to tell his friends, family and anyone who would listen that he was a hedge fund manager – back when it was en vogue to do so. Now, though, he’s jumped on the anti-hedge fund bandwagon with both feet. Last week he told me that the reason hedge fund managers make money when nobody else does is because of inside information. Need I say more?

Bernie is still pulling our chain

noreply@blogger.com (Daniel Strachman) — Thu, 15 Jan 2009 03:16:00 +0000

Do I sound angry? Do I seem mad? Are my words sometimes too tough to handle?

Everyone who comments on the blog says that I’m an angry young man.

Well, I don’t mean to be. I’m just a guy trying to tell you like it is. I apologize for the tone. I apologize for being stern, but tough times call for tough love so deal with it and move on.

That being said, I am mad about one thing: Madoff

Let me tell you why. First a question: Is there anyone out there -- besides me and a buddy who runs a $100 million fund of funds -- who thinks this whole scenario is being manipulated by a master?

First it was the sons, then it was the jewelry, last week it was the checks, this week the bail hearings. Come on. He’s playing with us and with the powers-that-be. Everything he is doing, has done and will do is some sort of manipulation, scam or smokescreen. He conned people for more than twenty years, so he can’t be trusted now nor can those around him.

I for one don’t believe for one minute that his sons weren’t involved. I for one do not believe he mailed the jewelry without knowing he was going to get caught. I for one do not believe he left a bunch of checks worth somewhere in the neighborhood of $170 million just lying around in a desk. Come on people, we’re smarter then that.

Again, read my words: Everything he is doing is, in my opinion, part of a master manipulation, a smokescreen, a diversion; something to throw people off, get them confused and divert attention from figuring out what really happened or is happening with him, the money he scammed or with anything else.

This is a master manipulator who continues to manipulate and probably will do so forever. The problem is that the media seem to be falling for it. Maybe it isn’t so hard after all to understand how he was able to operate for so long without getting caught…

Separately, I’m happy to report that nothing else drove me crazy this week, so there’s nothing to report in that area...

This probably won’t happen again.

A Brand New Day?

noreply@blogger.com (Daniel Strachman) — Thu, 08 Jan 2009 00:42:00 +0000

Do you feel refreshed? Are you excited for the New Year? Do you feel like it's a brand new day? Well, guess what – it’s not “Morning again in America.”

Don’t be fooled. Just because the calendar has changed, things are still screwed up. But enough of what you already know; I have three things to say – my thoughts about what lies ahead for this New Year!

So what's the plan? What's the idea? What are you going to do this year that makes last year be gone and this year go forward? Here's what I think:

1. It's time to think about opportunities in all sorts of markets.

2. It’s time to think about getting out of old products and into new products.

3. It's time to start paying attention to what's going on in the world, not just the six feet around you.

You know, everyone's talking about due diligence and transparency. Congress is currently holding hearings on hedge fund regulation, transparency and all that sort of nonsense to “get to the bottom” of what went wrong. I define it as nonsense because it is nonsense. It is nonsense because no matter how many rules, regulations or other barriers are put in place by the regulators, fraud and losses will still occur. The fact is, criminals are able to adapt and are able find ways to rip us off no matter what is front of them.

The fact that everyone demands transparency is silly, because at the end of the day, people don't know what to do with the information once they get it. If you don’t believe me, ask one of the 8,000 or so victims of Mr. Madoff. The joke is that no matter what requirements or regulations Congress puts in place, they will only make the hedge fund industry stronger. This industry is not dead. It is alive and well. Mark my words. As long as there is a market there will be hedge funds.

That being said, if Congress and the powers-that-be really want to do something to bring about real change to the hedge fund industry, what they need to do is to require standardized reporting, whether it be monthly, quarterly, daily, weekly – I don't know the answer. But if Congress wants to really affect the way hedge funds are used, viewed or controlled, what it needs to do is to require that all funds, regardless of size or strategy, report both returns and assets under management on a regular basis. This will be the foundation for bringing normalcy, consistency and transparency to hedge funds once and for all.

On that note, I have one more thing to add this week. I am starting a new section to the blog – “Things That Drive Me Crazy!” Each week (well, some weeks hopefully I won’t have anything to write about), I’m going to document one thing that has driven me crazy – either good or bad. Here’s the first:

Café Centro in the Met Life building at Grand Central Terminal charges $3.75 for each refill of ice tea, but does not charge for refills for hot tea or hot coffee. This is nuts in, my opinion, and while the food was pretty good earlier this week at lunch – I cannot in good conscience recommend going there. They clearly don’t care about consumers and so are not worthy of your or my money. There are better choices in the area.

The least wonderful time of the year...

noreply@blogger.com (Daniel Strachman) — Tue, 30 Dec 2008 01:48:00 +0000

I really don’t like this time of year. The end of the year is annoying to me. I don’t like seeing, reading or listening to all the year-end stories in the media. I find it silly when people over the age of 10 say “See you next year” – when they’re going to see me tomorrow and I don’t enjoy the thought of gathering all the data I need to put together to file my tax return.

All in all, however, what I really don’t like is that people seem to use year-end as an excuse not to get anything done. These excuses seem silly to me. Yet everyone, including me, seems to use them. Maybe it’s just because we’re all being lazy or maybe it’s just because we all sort of give up after the 20th or so of December.

I will say that I am glad that 2008 is over, although I don’t seem much change coming in 2009 – it’s just a short 48 or so hours away. It is not like a wind is going come and whisk us all away. Nothing is going to change. The economy is still going to be the toilet, the recession is still going to be in full swing and market will be full of volatility.

I have three rules for you to follow throughout 2009 and beyond:

• Remember that no matter what happens, the sun's going set this afternoon and rise tomorrow and the same can be said for many days to come.

• If you made a mistake yesterday – forget about it. Learn from it and move on. Dwelling on an error will not make it go away or make it better.

• Don’t be afraid to ask questions and demand answers. This is not just in regards to investment advice, guidance and support – it is a rule to be used in all aspects of life. It is your life – demand answers and make sure you understand what you are being told.

One more thing: Are you all as sick and tired as I am of hearing that all these so-called “sophisticated” investors didn’t know what Madoff was doing with their money? It is really making me sick. Every day, another group, institution or fund of funds seems to be coming out with a statement of ignorance. Don’t believe it for one second.

Do they really believe that we are going to believe them? Come on, we aren’t that gullible, are we? I am not saying that they all knew this man was operating a Ponzi scheme but I am saying some of them must have known something was not right with the returns.

My final comment of the year is the one that I continue to make day in and day out: Make sure you know who is managing your money, where it is being held in custody and how you can access it. Don’t get caught in a Ponzi scheme. Demand answers to these simple questions – it may just save you from heartache, pain and unnecessary suffering. Don't ever forget that it is your money and you have a right to understand what's happening to it at all times.

Have a Happy, Safe, Prosperous and Peaceful New Year – so stay alert, stay focused and stay on top of it.

Time should be spent well...

noreply@blogger.com (Daniel Strachman) — Tue, 23 Dec 2008 03:11:00 +0000

The end of the year is near and while this isn’t my final blog post, I will tell you right now that I am happy 2008 is coming to a close. It has been tough. No matter how you look at it, 2008 is one for the ages and I am glad it’s going to be over soon.

It’s shocking how much stuff one can fit into a year. In college, I worked at the student newspaper – the office was too small – so a few of us got together with the school’s head of physical plant to see what could be done to improve the space. Unfortunately, there wasn’t much because -- to quote the head of physical plant directly – “You can only fit five pounds of shit into a five-pound bag.”

I think it’s clear that Wall Street alone, not to mention other events, proved this theory wrong when it came to 2008.

The headlines are many and the list quite long – I won’t bore you with any of them. Still, I do suggest checking out some of the recaps to make sure you don’t lose sight of what happened in the eighth year of the new millennium.

Since the Madoff crisis, I have had received many calls and emails questioning the impact of his actions on the industry. Unfortunately, I don’t have the answer, but I do believe that more regulation is coming. The industry will clearly change in other ways, too, but just how is still up in the air. I do, however, hope that somebody in Washington finally realizes that that the industry needs standardized reporting and that this regulation is at last put into place.

As the Madoff scandal continues to unfold, stories come out day after day of people and families who have lost much, if not all, of their wealth. One of them is the father of a friend. Last Monday, my friend called to discuss his family’s situation, which thankfully is not a total loss. The family and its advisors had only allocated a portion of their assets to Madoff, but it is a loss nonetheless. My friend said that his father’s reaction to the loss was that of shock, disbelief and sorrow. He was devastated not only because he was conned but because he had planned on the leaving the money Madoff was managing to his heirs. It was to be his legacy.

I was troubled by this comment. I told my friend so and then added: “Your father’s legacy is not defined by money distributed at his death. It is defined by the time he spent with you while he is alive. This is what he will be remembered for by you and your family.”

It is important that those of you who know people who were touched by the Madoff situation talk to them to let them know that while they probably aren’t going to get the Madoff money back, the greatest commodity of all is still available to them – time. And they should use their time wisely, because time well spent creates the memories that define one’s legacy.

No Monday Morning Quarterbacking...

noreply@blogger.com (Daniel Strachman) — Mon, 15 Dec 2008 02:01:00 +0000

They say if you live long enough you’ll see almost everything. Well, I’ve only lived 37 years and a few months and can say not only that I don’t like what I’ve seen this year, but that the events of the past week have made me scared even to open my eyes.

Why am I scared?

Because I’m not sure that I could have avoided investing with Bernard Madoff or not have been willing to buy what Marc Dreier was selling. No Monday morning quarterbacking here. I’m not going to tell you that I’m that smart. And frankly, my advice to you is don’t believe anyone who tells you they could have avoided these two charlatans.

What will save you going forward (and me too, I hope) are two simple words: due diligence. Many of you are gagging already and thinking, “Here he goes again.” Well, you’re right. I am going to spout off on due diligence because you, me and everybody else needs to hear it.

It’s your money, stupid. That’s why you must take an active role in how it’s being managed. I don’t understand how people can just go on blind faith. I don’t understand how people can simply assume that because Mr. XYZ is using Manager A (as they say in Illinois), A must be good. It’s easy to say that when something seems too good to be true it probably is, but the issue is acting on it. People need to ask questions and get answers.

I never had the pleasure of meeting Mr. Madoff. All I ever heard was that he knows how to make money. I made a few inquiries a number of years ago for an interview and never heard back. I never really pursued it. I figured that like a number of other managers, he did not have time for a fledgling author. I was duped by his bravado.

Now he’s under arrest and charges of fraud have left me shocked, saddened, disgusted, displeased and frankly disheartened. This news puts vinegar icing on 2008’s cake of ashes. Many of my heroes have fallen over the last 11 months and 15 days. It turns my stomach to see that that so much wealth has evaporated, so many people are out of work and that prospects of change are slim to none. Wall Street is in total disarray and there seems to be no chance of a reversal of fortune in the near future.

I’m tired of learning about hedge funds that aren’t performing in these volatile markets. It makes me sick and I’m not going to take it anymore. I want you all to remember the following rule when it comes to making investments: Ask questions and demand answers.

It’s time to take stock in the future and have a clear view of how your money is being managed. It’s your job. Pay attention. Do your homework. Take responsibility. Stand up and make sure you’re counted, make sure you’re heard. Most important, make sure you understand what is going on with your money and know who is pulling the trigger when you make an allocation to a manager or fund. If no one will tell you, get demanding.

One of my closest friends in the hedge fund business called me late Friday to talk about the news of the day. His conclusion: “It is the end of the hedge fund industry as we know it.” Unfortunately, I believe he’s right.

The reason is simple – lack of knowledge. Investors are too lazy to ask questions, don’t want to take or make the time to demand comprehensible answers and so expect the government to step in to save them from themselves.

Whether it’s a mutual fund, individual stock, separate account, hedge fund or anything else, you need to get on the phone today and start asking questions and demanding answers. You need to understand where your money is, how it’s being managed, what the expectations are, whether the expectations have been met, and if they not, demand to know why not. And until people start asking questions and getting answers that make sense, there will be one fraud after another and one loss after another.

It’s okay to lose money - you can't always win - however you need to understand how your money’s been lost. It’s not okay to lose money because you’re naïve and unwilling to ask questions and demand answers.

In recent days I’ve read a lot of newspaper articles about Madoff’s actions that have left me shocked, saddened and disgusted. But I was also fascinated that someone so successful seems to be nothing more then a con artist who preyed on those blinded by his power and fame as well as by their own greed.

Gordon Gekko was wrong. In this situation, greed turned out to be no good at all.

The real mea culpa that Wall Street -- and Washington -- needs

noreply@blogger.com (Daniel Strachman) — Tue, 09 Dec 2008 03:41:00 +0000

Recently someone who fancies herself one of the founding mothers of the hedge fund industry offered her thoughts on what has recently befallen her industry. The upshot? It was someone else's fault.

Specifically, she said, that managers are taking advantage of investors by using gates and side pockets, and by suspending redemptions. All of that victimizes hedge fund investors. Blame the managers, it’s their fault

Come on people. We’re better than this.

To be fair, I don’t really know this person. I think I've only spoken with her once or twice in the last ten years. Her reputation, however, was impeccable in my book until she put out this missive about what's wrong with the industry.
She's wrong. It's not the managers' fault. It's the investors’. Investors need to take responsibility for the investments they make. Period. End of sentence.

Here's the real problem, though, dear reader: No one wants to take responsibility. Everyone wants to pass the buck. The markets fall and a fund posts losses? Oh, the managers screwed up. The markets rise and a fund posts gains? Oh, the investor was a genius for investing in the fund.

It gets worse. The problem with this country is that we don’t make anything of value, we don’t buy anything that we need, and we all have gotten fat, drunk and happy on the fact that we can buy it now, pay for it later.

"Gee, thanks, Dan," I can hear most of you saying. "I think we already knew that, genius." But before you click away from this page, read on, because I have a solution.

It's actually quite simple: Stop blaming other people for your problems and take responsibility for your actions. I, for one, am sick and tired of the blame game, and you should be as well. It is total lunacy. It needs to stop and it needs to stop now.

I am not just talking about making investment decisions; I am talking about all aspects of society. People need to take responsibility for their actions and stop relying on other people to bail them out.

Looking to the government for solutions is not the answer. We’ve got to stop letting the government take responsibility for the inability of people to build businesses or do things correctly.

I believe it’s going to get worse before it gets better. It's not that President-elect Obama is a bad guy, or that he's a Democrat. The real issue is that the precedent has been set. Bailouts are now a way of life in Washington.

It’s really too bad that only a few seem to be questioning the actions of our leaders as they spend trillions of dollars of our money bailing out one company after another. We're somehow expected to trust these people.

But we really have no reason to. The American people need to get up and scream that they are “mad as hell and that they are not going to take it anymore,” because that’s the only way our leaders are going to hear us.

Leadership isn’t running to the government for money every time there’s a problem. It's not writing blank checks. Leadership is developing sound financial and fiscal programs to save money, to rebuild infrastructure, to create jobs and to put the American economy -- and in turn its people -- back to work.

As for the hedge fund industry -- and for that matter all investments -- remember it is your money. You are doing managers favors by making the investment. Make sure they realize that and if they don’t find someone else to manage your money. Everyone is replaceable – hedge fund managers included. Don’t ever forget it.

So what now?

noreply@blogger.com (Daniel Strachman) — Tue, 28 Oct 2008 01:11:00 +0000

What are we going to do now?

Before we answer that question, we have to answer another one: What the hell is going on?

I’m sorry I haven't written in a while, but the volatility, the gyrations, and the United States' rapid descent into socialism has had me distracted. The massive headache doesn't help. My anguish is truly unbearable.

So what’s the story? What are we going to do? How is this going to end?
Well the first thing, ladies and gentlemen, is an announcement. It's not going to make my many friends in the hedge fund industry happy, but here goes anyway: The hedge fund industry as we know it is over.

That’s right. It’s over. The cause of this once great bastion of capitalism's demise is simple. There are too many people masquerading as hedge fund managers who know nothing about managing risk, know nothing about hedging, and perhaps know nothing at all.

Certainly they don't know anything about managing money. Just look at their recent performance. You know things are bad when funds with less than 500 million in assets under management are going out of business as fast as funds with billions of dollars in assets under management. If this is not a sign - how about all the funds that are down more than 30 percent? Can you see it yet? It’s absolute insanity. There’s no rhyme or reason to what’s going on.

Over the last couple of weeks, I’ve spoken to hundreds of people asking what’s going on in the market, what’s going on in the economy, what’s going on with the government, what’s going on in Europe and Asia -- and they all get the same answer: I don't know.

"Isn't it a global crisis, because of frozen credit markets?" they ask. Sure, I tell them: That must be true because I read it in the same newspapers they do.

That, my friends, is the problem. When market mavens who are supposed to be a source of guidance and insight tell you that nothing is working, that they don't understand what’s going on, that up is down and down is up – it means that things are really bad.

And while I believe we haven't seen the worst of it, I know one thing for sure there is some good news. For the time being, we're stuck in the mud, but the good news is that it can’t stay bad forever. Eventually things will turn around, and the economy and the markets will start working again. Life will be back to normal. And when normalcy returns, the hedge fund industry will be completely different.

There will be fewer funds, less money allocated to them, and more regulation. The changes are coming. By this time next year, a new hedge fund industry will be emerging, one that looks more and more like the mutual fund industry. I don't know if this is going to be good or bad. I just know it is going to happen.

In the meantime, before it gets to cold, go outside and enjoy the leaves that are left on the trees. Have a glass of warm apple cider with your family. Time with family is much more important than time spent looking at a screen full of red ink and is no matter how screwed up your family is, more fun.

What's ailing Wall Street?

noreply@blogger.com (Daniel Strachman) — Mon, 22 Sep 2008 01:06:00 +0000

Over the past week, lots of people have called and emailed me to ask what's causing the crisis in the markets. It's simple: Arrogance.

Arrogance is what has brought extremely powerful Wall Street firms to their knees, wiped out billions of dollars in assets, and lost thousands of people their jobs. It is arrogance that is the root of the crisis in the credit markets, what has caused all of this havoc over the last few weeks, and what will probably cause it to happen again sometime in the future.

As I wrote last week, there was so much news and information being thrown at me that my head was spinning. Well, I'm pleased to say that spinning has stopped. Just like the cause of today's troubles, the solution was simple: Turn it off.

The TV is off, I've cancelled my newspapers, and I've stopped surfing the web trying to figure out what is going on, what happened and what is going to happen. I have made my life much simpler and I love it.

Things are starting to get back on track and as we slowly make our way through the weeds, as we end of one of the most treacherous, tortuous and tumultuous weeks ever to hit Wall Street, there is one thing that we’ve learned. What we have learned is that the sun will always rise, and there's still going to be a line at the Lincoln Tunnel during rush hour.

So, here’s what I think you should be doing and thinking about if you’re thinking about during the next few weeks: Nothing. Don’t do a thing. Relax. Take a breath. Go outside for a run. Play with your kids if you have some. Try to make some if you don’t. Just try to enjoy yourself. Because tomorrow is going to come and things will get better. The tide is going to turn and you need to be ready.

Hang in there, stay focused, pay attention and remain calm. The times they are a changin'. It may take some time, but change will occur and all will once again be right on Wall Street and Main Street.

In other news, we finished HedgeAnswers this week. It was quite interesting and a lot of fun. The roundtable discussions were engaging, and panelists provided thought-provoking strategies for creating and launching hedge funds both here and abroad. If you didn't attend this year’s events, look for information about HedgeAnswers 2009 some time after the first of the year and get the dates on your calendar so you don’t miss these great programs.

HedgeAnswers chooses McCain for President!

noreply@blogger.com (Daniel Strachman) — Fri, 19 Sep 2008 03:11:00 +0000

At recent events in Chicago and Philadelphia, participants in HedgeAnswers 2008 chose John McCain over Barak Obama for President. All participants voted in a mock election with the results overwhemingly going to the McCain-Palin ticket. Voters cast their ballots in secret and while not completely scientific, it was clearly done in a way to avoid any issues of impropriatey.

For more information on the results or the events please get in touch.

Look for a blog posting tomorrow regarding recent market turmoil and economic events. Thanks as always for your continued support and interest in my work.

Stay Alert...

noreply@blogger.com (Daniel Strachman) — Mon, 15 Sep 2008 00:11:00 +0000

It is a very interesting time to be working on Wall Street. History is being made almost daily and all of us are witnessing it first hand. Buckle up, the ride is about to get wild and it is not going to stop anytime soon.

We are entering uncharted territory. Be afraid, be cautious, stay alert and pay attention. Focus during difficult periods is what will allow you to weather this and other storms.

Since things are moving so rapidly, I have decided to spend the next 48 to 72 hours collecting my thoughts and will publish a full post on Thursday. In the meantime, be careful what you read. The news is bleak but all is not lost. There are great days ahead. We will get out of the weeds. It will take some time, there will be some more blood in the streets but before we know it, the world will be right again.

Remember this - markets are efficient and always correct for price and value.

Stay alert - it is the key to success...

On another note, HedgeAnswers 2008 ends Tuesday in Philadelphia. Try to make it, the conversation will be extraordinary, thought provoking and worthwhile. Register at www.hedgeanswers.com

Blame the cocktail parties and managers!

noreply@blogger.com (Daniel Strachman) — Thu, 04 Sep 2008 00:34:00 +0000

I know it’s a cliché, but I’m going to write it anyway: I’m mad as hell and I’m not going to take it anymore.

I really just don’t know what else to say about what’s going on with hedge fund performance this year. The third quarter of 2008 is quickly coming to an end, and for the most part, hedge fund performance is abysmal. It looks like both the equity and fixed income managers are taking it on the chin. I have seen some funds down over seven percent, some down more then 20 percent and a number somewhere in between. The numbers are all over the map and really very poor.

It’s like a grisly car accident: I now for the first time in my life understand why people rubberneck on the highway. I can't throw my hands up in disgust, I can't turn off the television, I can't turn off the radio, and I can’t stop reading newspapers, because I just can’t get enough of it.

Unfortunately, it doesn’t seem likely that the tide will change anytime soon. There are a lot of people out there masquerading as hedge fund managers who, in reality, are doing nothing more than running expensive mutual funds. Simply put – they are not hedging!

I don’t blame these managers, though. They wouldn’t have assets if they did not investors making investments.

That’s right: I blame the investors, specifically unsophisticated investors. It is their fault and theirs alone. These people all want to have a bit of the apple – the forbidden fruit. Well guess what, there is a reason it was forbidden. It’s a bit of the reverse of the Garden of Eden story: In the case of hedge funds, the fruit is forbidden until you have the knowledge necessary to eat it.

But that’s not what unsophisticated investors want to hear. Every time, I go out to a cocktail party or every time I go out to an event, all I hear about is hedge funds. First the conversation is about how speculators are driving the cost of oil through the roof and wreaking havoc in the stock market. Then the name game starts: Who do know? How can I get access to that fund?

Having a the cash and the name of the hot new fund isn’t good enough. In fact, it’s probably going to hurt you. Hedge funds operate in the ether. Therefore it's much more difficult to determine if there is any real value in investing in a particular hedge fund. Forget the hot name. Read the documents and perform due diligence. Ask questions and get answers – understand what is going to happen to your money once it is wired into the fund’s bank account.

So, as the third quarter draws to an end, and you're thinking about your plans for 2009, all I can say is remember to perform thorough due diligence. Find out if it is worth it. Gather as much data about any given fund manager from multiple sources.. Review the audit; get a background check on the manager. Talk to other investors. Ask questions and make sure you get answers. It is your money make sure you know what is happening to it!

HedgeAnswers Chicago is Monday. It’s going to be great. I hope to see you there. Learn more at www.hedgeanswers.com.