Hedgies Anonymous (February 14, 2007)
In my unending quest to monetize this humble site, I designed this ad for a new self-help group, Hedgies Anonymous.
With somewhere between 9,000 and 10,000 hedge funds--one for every tradable equity in the U.S. markets--countless hedgies are suffering from addiction to borrowing and leveraging leverage.
Swelling the mighty hordes of wretched victims of addiction are the employees of private equity firms, which specialize in borrowing vast sums, buying public companies, and then stripping them of assets. For these rapacious souls, an addiction to looting and pillaging is almost as powerful as their addiction to borrowing billions.
We all know the explosion of hedge funds and the desperate search for alpha (any gain above the standard benchmark, usually the S&P 500 or the Wilshire 5000) will end badly, and Hedgies Anonymous is gearing up to offer solace to the thousands who will lose their livelihood and fortunes when the derivatives house of cards the hedgies have so carelessly constructed blows away in the storm of an unexpected "financial crisis."
When those winds sweep away the leveraged leverage of derivatives, then Alpha will be reduced to "losing less than everyone else."
For more on this subject and a wide array of other topics, please visit my weblog.
copyright © 2007 Charles Hugh Smith. All rights reserved in all media.
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