7 Habits of Highly Suspicious Hedge Funds
By Barry Ritholtz - June 28th, 2009, 7:30AM
I met Richard Bookstaber at an event recently — very nice guy — and we briefly discussed A Demon of Our Own Design (excerpted here).
This week, he discussed The 7 Habits of Highly Suspicious Hedge Funds (The Journal of Investment Management), which he posted on his own blog as a preview.
Here’s the overview:
1. No independent risk reporting.
2. A change for the worse in the critical risk numbers.
3. Increased use of derivatives.
4. High level of secrecy.
5. Growth in headcount and lifestyle.
6. Decline in assets under management.
7. Lackluster performance in recent years.
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Source:
The 7 Habits of Highly Suspicious Hedge Funds
Richard Bookstaber
June 22, 2009
http://rick.bookstaber.com/2009/06/7-habits-of-highly-suspicious-funds.html
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June 28th, 2009 at 8:14 am
Barry, the guy has a Ph.D. from MIT….only bad things can happen to you while you are hanging out with someone like that…you may be overheating your brain and burn out a fuse or something…
Since I will be away from the computer all day today like yesterday, and since I’ve never owned a hedge fund, I will put my only cogent thought from the weekend down.
With the 7% savings rate, car bankruptcies, hotel implosions, very low workweek hours, Alt-A approaching,energy costs going up, and so forth…I will vote strongly for many months of tame inflation, or probably deflation, even with Obama spending like a drunken sailor..
(Sorry, didn’t mean to offend drunken sailors…)
June 28th, 2009 at 8:29 am
Does anyone know know to search for recent DoJ RICO actions?
search terms like: DOJ RICO only bring up suits against Tobacco Co.s selling to ‘Minors’, and actions against Labor Unions..
http://www.google.com/search?q=DOJ+RICO&hl=en&tbo=1&start=0&sa=N
FBI RICO brings up a lot of ‘Puerto Rico’, and cases against dudes named ‘Rico’.
~~~
BR: Add the word “Racketeering” if that doesn’t help, add “Corruption”
And lose all the damned clusty searches, fer cryin out loud . . .
June 28th, 2009 at 8:30 am
One other thing, before we finish the pastures today…California is where the action will be this week. It appears the Governator is not going to back down this time.
http://www.latimes.com/news/local/la-me-arnold28-2009jun28,0,2038455.story
Governor’s last stand: his way or IOUs
“In doing so, Schwarzenegger has sent the message that he would rather allow the state to begin shutting down than let lawmakers push its troubles off for months by closing only part of the shortfall. The latter prospect could swallow up the rest of his governorship.
“Whatever needs to be done,” Schwarzenegger told reporters outside his Capitol office Friday when asked why he would be willing to delay payments to needy Californians. “I know that there is a history in this building of always being late with the budget, to drag it out and to kick that can down the alley. . . . I don’t think we have this luxury this time.”
June 28th, 2009 at 9:28 am
@MEH: try ncjrs.gov for starters. “Database” in scholar might also get you there.
June 28th, 2009 at 9:29 am
@MEH
I tried, “DOJ RICO 2009″ on Google and got a few hits on Uzbeki nationals and several other un-tobacco topics. Apparently, you can search RICO at the DOJ website.
June 28th, 2009 at 9:36 am
@MEH
Forgot to mention that, if using Google, you might try excluding puerto, tobacco or unions from your search. You can do this by placing a minus sign in front of those words. Now try this string:
“rico doj 2009 -puerto -tobacco -unions”
June 28th, 2009 at 9:41 am
Cursive, alfred e,
Gracias!~
June 28th, 2009 at 9:59 am
@MEH
Trolling other sites and found this that might be of interest:
http://zerohedge.blogspot.com/2009/06/sec-needs-your-feedback.html
Awesome. This could be a great developing story.
June 28th, 2009 at 10:36 am
Cursive,
thanks for the link~
that ZH cat, as I’ve mentioned before, “knows where the Mice are.” Now, obviously, so, too, do many of his Readers.
that he intends to forward that info to the ‘appropriate Authorities’, and is, also, willing to Publish at his own site, should, further, recommend him.
While there are Many that Love to bask in the glow of Liberty’s Lamp, few are willing to stoke it’s Embers.
It should be, more than, obvious, he’s one of the few.
June 28th, 2009 at 10:51 am
The bloger known as “Zero Hedge” reels off un-substantiated blather at every turn: The Renaissance Technologies ponzi scheme? His spin on Ackman and Target… dumb? He’s got no idea about 363 bankruptcies, etc… etc… Far from knowing what’s going on, he’s the sort of story-planting loose-blogger that the good journalism people warn about.
Go back and look at his frantic posts of the past. Trade behind him at your peril.
June 28th, 2009 at 11:36 am
@VennData
Who’s suggested trading behind him? He’s not a trading blog and, BTW, neither is ritholtz.com. ZeroHedge is a good read. Yes, he is frantic and it suit his medium well. It’s nice to have different blogger styles. How was Ackman losing over 90% and charging 2/20 for a hedge fund that invested in ONE equity holding not dumb? ZeroHedge was a driving force behind the HR1207 movement and I applaud his latest attempt to provide a platform for those in the know to “out” the banksters that have lied, cheated and stolen us into this mess. Get off of your Sunday morning high horse.
June 28th, 2009 at 12:06 pm
I’ll 2nd Cursive-
ZH brings up excellent issues that are lightly covered or ignored by the msm- sees many of the miscalculations, graft, greed and financial and economic mistakes and failures of our current system-
it’s a long term view that sees a country in desperate need of reform and accountability
June 28th, 2009 at 12:10 pm
I second ZH too. He’s done a good job of outing some trades.
June 28th, 2009 at 12:28 pm
Could someone explain EOQ window dressing. Looks more like undressing.
http://chart.ly/w555s4
June 28th, 2009 at 5:10 pm
Here’s the overview:
1. No independent risk reporting.
a. Our statements are on the internet for all to see. This proves our accuracy and pride.
b. Our owner’s personally vouch for our numbers. They’re a lot smarter than you.
c. We don’t need risk reporting because we are so good at this, it’s not risky.
d. We have an auditor’s report.
2. A change for the worse in the critical risk numbers.
a. Not applicable. See point 1.c above.
b. What happens to those other funds will never happen here.
3. Increased use of derivatives.
a. See point 1.c
b. We are fully hedged on the downside
c. Our industry experts provide exceptional guidance on the direction of the markets.
d. We see outstanding opportunity due to pent up recovery influences.
4. High level of secrecy.
a. Of course. People would kill for our secret and proprietary trading systems. That’s how we got it, but don’t tell anyone.
5. Growth in headcount and lifestyle.
a: Our account statements to you tell the story of your fabulous success. We are celebrating your victories.
6. Decline in assets under management.
a. Not here. Just look at your statement and our reports to you.
7. Lackluster performance in recent years.
a. Not here. Our withdrawal limitations and prohibitions are only because the exceptionally priced environments of today require us to maintain maximum liquidity for ass kicking returns. All for you.