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.