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August 11, 2009 – Comments (18)

Andrew Lahde Farewell (pdf)

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October 17, 2008

Today I write not to gloat. Given the pain that nearly everyone is experiencing, that would be entirely inappropriate. Nor am I writing to make further predictions, as most of my forecasts in previous letters have unfolded or are in the process of unfolding. Instead, I am writing to say good-bye.

Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was
also closing up shop (a $300 million fund), was quoted as saying, “What I have learned about the hedge fund business is that I hate it.” I could not agree more with that statement. I was in this game for the money. 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 Brothers 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.

There are far too many people for me to sincerely thank for my success. However, I do not want to
sound like a Hollywood actor accepting an award. The money was reward enough. Furthermore, the endless list those deserving thanks know who they are.

I will no longer manage money for other people or institutions. I have enough of my own wealth to manage. Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck. 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 fifty years anyway. Steve Balmer, 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.

So this is it. With all due respect, I am dropping out. Please do not expect any type of reply to emails or voicemails within normal time frames or at all. Andy Springer and his company will be handling the dissolution of the fund. And don’t worry about my employees, they were always employed by Mr. Springer’s company and only one (who has been well-rewarded) will lose his job.

I have no interest in any deals in which anyone would like me to participate. I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle. I now have time to repair my health, which was destroyed by the stress I layered onto myself over the past two years, as well as my entire life – where I had to compete for spaces in universities and graduate schools, jobs and assets under management – with those who had all the advantages (rich parents) that I did not. May meritocracy be part of a new form of government, which needs to be established.

On the issue of the U.S. Government, I would like to make a modest proposal. First, I point out the
obvious flaws, whereby legislation was repeatedly brought forth to Congress over the past eight years, which would have reigned in the predatory lending practices of now mostly defunct institutions. These institutions regularly filled the coffers of both parties in return for voting down all of this legislation designed to protect the common citizen. This is an outrage, yet no one seems to know or care about it. Since Thomas Jefferson and Adam Smith passed, I would argue that there has been a dearth of worthy philosophers in this country, at least ones focused on improving government. Capitalism worked for two hundred years, but times change, and systems become corrupt. George Soros, a man of staggering wealth, has stated that he would like to be remembered as a philosopher. My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man’s interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles. This forum could be similar to the one used to create the operating system, Linux, which competes with Microsoft’s near monopoly. I believe there is an answer, but for now the system is clearly broken.

Lastly, while I still have an audience, I would like to bring attention to an alternative food and energy
source. You won’t see it included in BP’s, “Feel good. We are working on sustainable solutions,” television commercials, nor is it mentioned in ADM’s similar commercials. But hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products. Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term. The original American flag was made of hemp fiber and our Constitution was printed on paper made of hemp. It was used as recently as World War II by the U.S. Government, and then promptly made illegal after the war was won. At a time when rhetoric is flying about becoming more self-sufficient in terms of energy, why is it illegal to grow this plant in this country? Ah, the female. The evil female plant – marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country. 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 additive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers. This policy is ludicrous. It has surely contributed to our dependency on foreign energy sources. Our policies have other countries literally laughing at our stupidity, most notably Canada, as well as several European nations (both Eastern and Western). You would not know this by paying attention to U.S. media sources though, as they tend not to elaborate on who is laughing at the United States this week. Please people, let’s stop the rhetoric and start thinking about how we can truly become self-sufficient.

With that I say good-bye and good luck.

All the best,

Andrew Lahde

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18 Comments – Post Your Own

#1) On August 11, 2009 at 8:59 PM, dragonLZ (99.45) wrote:

I don't get it.

Is portefeuille Andrew Lahde, or...?

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#2) On August 11, 2009 at 9:28 PM, alexpaz (28.94) wrote:

Wow!

 

thank you porte...I am inspired

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#3) On August 11, 2009 at 9:38 PM, Mark910 (< 20) wrote:

old news

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#4) On August 11, 2009 at 9:59 PM, ChrisGraley (29.80) wrote:

This is my first rec towards the Porty bonus points, but on second thought it doesn't count. I like the article too much and would have recced it anyway.

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#5) On August 12, 2009 at 3:12 AM, cclogic77 (25.32) wrote:

entertaining and poignant article!

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#6) On August 12, 2009 at 4:01 AM, kaskoosek (67.01) wrote:

I agree with Mark, old news.

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#7) On August 12, 2009 at 10:32 AM, portefeuille (99.51) wrote:

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Barakett’s Letter to Atticus Investors: ‘This Will Come as a Surprise to Most of You’

 

August 11, 2009

Dear Investor in Atticus Global, Ltd. and Atticus Global, LP:

I am writing to inform you of my decision to close the funds I manage, including Atticus Global, Ltd. and Atticus Global, LP (together, the “Atticus Global Fund”). This decision will come as a surprise to most of you, especially given that we have received redemptions of less than 5% of capital and your loyal support over the past 15 years.

I have used the market’s recent strength to begin liquidating a significant amount of our holdings. We currently expect that the portfolio will be fully liquidated by September 30th and that we will be in a position to return approximately 95% of your capital in early October. The balance of investor capital will be returned after the final audit is completed, which should be later this year.

My decision is solely a personal one. After fifteen years of being singularly focused on building and managing Atticus, I believe it is time to reassess my future. I intend to spend more time with my family, pursue my philanthropic interests and establish a family office to manage my own capital and charitable foundation.

Atticus (the management company) will continue to operate, and the Atticus partnership will remain intact. In addition, it is my partner David Slager’s intention to continue to manage the Atticus European Fund.

I founded Atticus in 1995 and launched our first fund in January 1996 with less than $6 million under management. The Atticus Global strategy was launched in December 1996 and has compounded investor’s capital at over 19% net annually since inception.1 I am very proud of the Atticus Global track record and our net returns through July 2009 are shown below:

Atticus Global S&P 500
1 year -13.3% -20.0%
3 year 0.8% -6.2%
5 year 9.3% -0.1%
10 year 13.6% -1.2%
Inception 19.3% 3.9%
Cumulative 835.3% 62.3%
1 The Atticus Global Fund was formed in April 1999. The statistics set forth in this letter include the period from the inception of the Atticus Global strategy in December 1996 as a managed account.

...

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#8) On August 12, 2009 at 10:45 AM, SolarisKing (21.65) wrote:

It is old, but i'm not sure it's news. Is there anyone who knows this story? 'Cause every time i tread it there is no supporting evidence.

-solaris

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#9) On August 12, 2009 at 10:51 AM, portefeuille (99.51) wrote:

Andrew Lahde From Wikipedia, the free encyclopedia

Andrew Lahde (b. 1971) was a California-based hedge fund manager who in 2007 earned some fame for achieving return rates in the vicinity of 1000%[1] with his Lahde Capital, based in Santa Monica, California. The fund speculated on increases of U.S. subprime mortgage defaults[2]. He earned a Bachelor's degree in Finance from Michigan State University and an MBA from the Anderson School of Business at the University of California Los Angeles.[3]. Lahde's hedge fund strategy was based on his knowledge of real estate, real estate finance, the complex world of securitized real estate finance and various financial vehicles associated with the transactions. What differentiated Lahde from many other hedge fund operations was an understanding of the underlying asset, residential real estate.

In September 2008, Lahde closed his fund, telling investors that credit problems - the basis of his profits - were likely to continue, but that possibility of defaults by counterparties was too high.[4] On October 17, he released an open good-bye letter to his investors, in which he said that the "low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking." Lahde criticized the harried life of the rich, and said that "Capitalism worked for two hundred years, but times change, and systems become corrupt." He suggested that George Soros "start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man’s interest". He concluded his letter by proposing to legalize hemp and marijuana, saying that hemp had been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products, and thus should be part of making the U.S. "truly become self-sufficient". He also said that marijuana is only kept illegal because "Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other addictive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers."[5][6]

Lahde's increased media visibility has attracted attention from hemp-legalization organizations,[7] and even fan-merchandise surrounding his much-reported farewell letter.

References
    1.    ^ "Andrew Lahde: The Hedge Fund Manager With a 1000% Return". Portfolio.com. November 26, 2007. http://www.portfolio.com/views/blogs/market-movers/2007/11/26/andrew-lahde-the-hedge-fund-manager-with-a-1000-return. Retrieved on October 18, 2008.
    2.    ^ "Having a Lahde". FT Alphaville. 2007-09-27. http://ftalphaville.ft.com/blog/2007/09/27/7666/having-a-lahde-the-410-per-cent-man/. Retrieved on October 18, 2008.
    3.    ^ "Lahde quits hedgefunds, thanks idiots for success". Bloomberg.com. October 17,2008. http://www.bloomberg.com/apps/news?pid=20601087&sid=aVUE96d.HKyw&refer=home. Retrieved on October 18,2008.
    4.    ^ "Hedge fund returns money". Financial Times. 2008-09-22. http://www.ft.com/cms/s/0/4fe893ec-883f-11dd-b114-0000779fd18c.html. Retrieved on October 18, 2008.
    5.    ^ "Andrew Lahde bows out in style". FT Alphaville. 2008-10-17. http://ftalphaville.ft.com/blog/2008/10/17/17194/andrew-lahde-bows-out-in-style/. Retrieved on October 18, 2008.
    6.    ^ "Hedge Fund Manager: Goodbye and F---- You". Portfolio.com. 2008-10-17. http://www.portfolio.com/views/blogs/daily-brief/2008/10/17/hedge-fund-manager-goodbye-and-f-you. Retrieved on 2008-10-18.
    7.    ^ "Hemp Advocates to Andrew Lahde: 'Can You Spare a Million to Make Your Vision Reality?'". FT Alphaville. 2008-10-18. http://www.marketwatch.com/news/story/hemp-advocates-andrew-lahde-can/story.aspx?guid={1A513346-3D8C-41E3-96B9-A3E009F22965}&dist=hppr. Retrieved on October 21, 2008.

 

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#10) On August 12, 2009 at 10:53 AM, portefeuille (99.51) wrote:

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Andrew Lahde bows out in style

Posted by Stacy-Marie Ishmael on Oct 17 19:03.

Say what you will about Andrew Lahde, but the man knows how to write a letter.

Last month, the famed-for-betting-against-subprime hedge fund manager shuttered his operations, citing unacceptable levels of counterparty risk.

His goodbye missive is impressive not just for its length, but for its clearly-articulated (and somewhat apocalyptic) closing arguments.

Verbatim:

“Today I write not to gloat. Given the pain that nearly everyone is experiencing, that would be entirely inappropriate. Nor am I writing to make further predictions, as most of my forecasts in previous letters have unfolded or are in the process of unfolding. Instead, I am writing to say goodbye.

...

With that I say good-bye and good luck.

All the best,

Andrew Lahde”

So long, Andrew. It’s been emotional.

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#11) On August 12, 2009 at 11:02 AM, portefeuille (99.51) wrote:

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Nov 26 2007 12:11am EDT

Andrew Lahde: The Hedge Fund Manager With a 1000% Return

To the pantheon including subprime shorter John Paulson and Amaranth vanquisher John Arnold we should probably now add Santa Monica hedge fund manager Andrew Lahde. Lahde almost certainly hasn't reached the billion-dollar-a-year club, but he does now officially oversee a fund – the poetically named US Residential Real Estate Hedge V Class A – which is up 1000% year-to-date.

Lahde's still very bearish on both housing (he has a new fund to short commercial real estate) and on the economy more generally (he's predicting a deep recession). But it seems he thinks the bloodletting in residential real-estate might be over: he's returning money to his investors, telling them “the risk/return characteristics are far less attractive than in the past”.

In a way, given the sheer number of hedge funds out there, and the increasing amounts of leverage they employ, it's a little surprising there aren't more funds which return 1000% in a year – and it's actually quite reassuring that such things are still rare. To have one enormously successful year, like Lahde or Paulson or Lahde, can make a man dynastically wealthy. But it doesn't make him an investing great like Buffett or Swensen or Lynch. Remember that during the housing bubble people were regularly making 1000% returns on their own money by buying and flipping condos with little or no money down. In a way it's only just that now a few hedge fund managers are making equally large returns by making bets in the opposite direction.

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#12) On August 12, 2009 at 11:06 AM, portefeuille (99.51) wrote:

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Having a Lahde — the 410 per cent man

Posted by James Mackintosh on Sep 27 15:02.

Hedge fund managers and big egos generally go together, but Andrew Lahde manages a new high with his latest investor letter, in which he says his Lahde Capital “has the top-rated performance for all hedge funds in the universe” for the year to August.

Santa Monica, California-based Mr Lahde, to be fair, has good reason to boast: Series A of his fund was up 7.9 per cent in August, 410 per cent for the year so far, outpacing even the stellar performance of John Paulson’s (of Paulson & Co) Credit Opportunities fund.

Like the far larger fund from Mr Paulson, Mr Lahde’s diminutive $60m Lahde Capital makes most of its money by shorting US subprime mortgage-related structured credits, particularly the ABX indices.

Lahde, though, goes further. He predicts “100% likelihood” of a US recession, and this month launched a new fund shorting the CMBX indices, betting that commercial property will also tumble and his “commercial fund [will] act as a hedge for all of the carnage still to come”.

Also, Lahde is becoming even more bearish, if that were possible. He has upped his estimate of US subprime mortgage defaults from 30-40 per cent a month ago to 50-60 per cent.

If he’s right, his conclusion pretty much sums up the likely outcome for the subprime market: “Game over.”

Here’s a taster:

Rising tides lift all boats. Rock, paper, scissors. Tsunami crushes all (except those who bought tsunami insurance and got the hell away from the water). The tsunami is this credit contraction I have been writing about for the past year. It has affected everything. Period…

…Fellow CFAs probably remember learning about the mosaic theory, which distinguishes between plain old inside information and attaining information from different sources and combining them together to reach a conclusion that is virtually as good as ill-gotten inside information. I have so many sources of information, both the factual/statistical type and the anecdotal type. Everything I see tells me the ABX is going to fall further, as is the CMBX, the equity market, the dollar, etc…

…If God comes down and miraculously fixes everything that is going to drive us into a deep recession, we probably still would not lose money on the CMBX trades…

…There isn’t enough lipstick in the world to sell a pool of subprime loans right now…

…Will Bush help? No. His plan would help some 80,000 borrowers out of the two million subprime borrowers whose mortgage payments jump in the next two years. Try again.

Good night and good luck.

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#13) On August 12, 2009 at 9:40 PM, portefeuille (99.51) wrote:

Paulson stocks up on banks, drugs and gold

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#14) On August 12, 2009 at 9:48 PM, portefeuille (99.51) wrote:

Tucows Commences Third Dutch Auction Tender Offer to Repurchase up to 5 Million Common Shares

Tucows Inc. reports financial results for the second quarter of 2009

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#356) On March 26, 2009 at 3:07 PM, portefeuille (99.99) wrote: TCX - 0.32 - outperform

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(from here)

 

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#15) On August 12, 2009 at 10:23 PM, portefeuille (99.51) wrote:












 












 












 












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#16) On August 13, 2009 at 10:32 AM, TigerPack1 (97.94) wrote:

BullMarketN09 wants to add "FACT" as a pick in the TigerPackFund!

He says his money flow indicator and accumulatoin index are off the charts the last 3-4 weeks and since the bottom around $6 per share six months ago.

I told him I would give you notice and 24 hours to email me first, if you want the pick under your CAPS name to get credit.  Otherwise, I guess I will add it under his member name since he emailed me first.

-TigerPack

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#17) On August 13, 2009 at 12:02 PM, portefeuille (99.51) wrote:

in celebration of the end of the recession in france and germany

 

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#18) On August 13, 2009 at 4:38 PM, portefeuille (99.51) wrote:

************************************************************************************

a guide to my blog posts can be found in the comment section to this post

(should be or should be close to the last comment)                                                                

************************************************************************************

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