Thank you for the links about the history of hedge funds!

A little girl tried selling me lottery tickets that were on sale. Last year, they were $1 each, but now they were 5 for a dollar. I smiled, because your odds are exactly the same. If everyone has five times as many tickets, your $1 purchase buys you exactly the same amount of chances.

That’s where we are today. A dollar represents your share of the economy. which is currently $13.13 trillion. If they doubled the number of dollars outstanding, then shared them out pro rata, your share of the economy would be EXACTLY the same even though each dollar was worth half as much. You’d have twice as many of them.

We could be saved from 1929 by understanding this.

Let’s say, for instance, that they increased the supply of dollars by 20%, which would make every dollar 1/1.2 = 83% as much as it used to be. It wouldn’t matter as long as those new dollars were distributed pro rata. Every one would be exactly as wealthy as they were before this happened.

Unemployment causes people to be less wealthy. If only half the people were working, then the GDP would only be $6.565 trillion and all of our dollars would be worth half as much.

So, here’s what a lot of people have trouble wrapping their head around. If you print money and it keeps the economy from shrinking by keeping everyone employed and in their home and the money is distributed pro rata, then everyone has the same percentage of the national wealth and the national wealth doesn’t shrink and we all got something for free.

I’m a bit left leaning and would consider myself a Democrat, but here’s where tax cuts make sense. Obama could offer massive tax cuts (no capital gains, huge cuts in the brackets, etc.) which would allow people to keep their homes and employ other people and as long as he then monetized that debt, rather than borrow it from the privately owned Federal Reserve and other bankster families, it would cost us nothing and make us all wealthier in 2010.

Let the car companies go bankrupt. Let Wallstreet go bankrupt. Write checks to mainstreet and save the economy.

…things that make you go, huh….

I know for a fact that this went to the commissioners at the SEC in 2006.

“Little Known Stock Fraud Could Weaken U.S. Economy”

http://www.projectcensored.org/top-stories/articles/18-little-known-stock-fraud-could-weaken-us-economy/

“As short-selling is a sale of stocks not owned, but loaned, it is an example of buying on margin-a category of practices whose abuses stand out clearly in many people’s minds as a significant factor in the Stock Market Crash of 1929 which ushered in the Great Depression”

I’m glad they are going after Stevie Cohen, but they should go after Knight Deephaven and UBS, the other two besides Madoff the begged for the grandfather clause

http://tinyurl.com/8udj6k

The second-biggest investor in hedge funds will demand that some of the largest names in the industry, including Cerberus, Citadel, DE Shaw and SAC Capital, appoint independent administrators or face it pulling its money.

Switzerland’s Union Bancaire Privée, in an internal memo, instructed managers of the $56bn it has allocated to hedge funds to put in immediate redemptions for any fund that does not have independent administrators and custodians, following its heavy losses from the alleged fraud by Bernard Madoff.

…
Webmaster’s Commentary:

This may force some new Ponzis into the light!

(from http://www.whatreallyhappened.com)

and this:

http://www.law.harvard.edu/programs/olin_center/corporate_governance/papers/Brudney2008_Horsfield-Bradbury.pdf

http://www.investopedia.com/articles/mutualfund/05/HedgeFundHist.asp

A Brief History Of The Hedge Fund
by Jim McWhinney (Contact Author | Biography)
Story Tools

Famed hedge fund manager Mario Gabelli wrote in 2002: “Today, if asked to define a hedge fund, I suspect most folks would characterize it as a highly speculative vehicle for unwitting fat cats and careless financial institutions to lose their shirts.” This characterization stems from the hedge fund’s recent history, which began with the headline-making collapse of Long Term Capital Management in 1998 and continued with the sensational meltdown of the Tiger Funds in March of 2000, followed by the reorganization of the once high-flying Quantum Fund in April of 2000. These high-profile incidents overshadow more than half a century of hedge fund history that began when Alfred Winslow Jones launched the first hedge fund in 1949.

The Father of the Hedge Fund
Alfred Jones was born in Melbourne, Australia in 1901 to American parents. He moved to the United States as a young child, graduated from Harvard in 1923 and became a U.S. diplomat in the early 1930s, working in Berlin, Germany. He earned a PhD in sociology from Columbia University and joined the editorial staff at Fortune magazine in the early 1940s.

It was while writing an article about current investment trends for Fortune in 1948 that Jones was inspired to try his hand at managing money. He raised $100,000 (including $40,000 out of his own pocket) and set forth to try to minimize the risk in holding long-term stock positions by short selling other stocks. This investing innovation is now referred to as the classic long/short equities model. Jones also employed leverage in an effort to enhance returns.

In 1952, Jones altered the structure of his investment vehicle, converting it from a general partnership to a limited partnership and adding a 20% incentive fee as compensation for the managing partner. As the first money manager to combine short selling, the use of leverage, shared risk through a partnership with other investors and a compensation system based on investment performance, Jones earned his place in investing history as the father of the hedge fund.

The Rise of the Industry
When a 1966 article in Fortune magazine highlighted an obscure investment that outperformed every mutual fund on the market by double-digit figures over the past year and by high double-digits over the last five years, the hedge fund industry was born. By 1968, there were some 140 hedge funds in operation.

In an effort to maximize returns, many funds turned away from Jones’ strategy, which focused on stock picking coupled with hedging, and chose instead to engage in riskier strategies based on long-term leverage. These tactics led to heavy losses in 1969-70, followed by a number of hedge fund closures during the bear market of 1973-74.

The industry was relatively quiet for more than two decades, until a 1986 article in Institutional Investor touted the double-digit performance of Julian Robertson’s Tiger Fund. With a high-flying hedge fund once again capturing the public’s attention with its stellar performance, investors flocked to an industry that now offered thousands of funds and an ever-increasing array of exotic strategies, including currency trading and derivatives such as futures and options.

High-profile money managers deserted the traditional mutual fund industry in droves in the early 1990s, seeking fame and fortune as hedge fund managers. Unfortunately, history repeated itself in the late 1990s and into the early 2000s as a number of high-profile hedge funds, including Robertson’s, failed in spectacular fashion.

The Hedge Fund Today
With media attention still focused on the recent failure of some hedge funds, there has been an increasing move towards their regulation. In 2004, the Securities and Exchange Commission adopted changes that require hedge fund managers and sponsors to register as investment advisors under the Investment Advisor’s Act of 1940. This greatly increases the number of requirements placed on hedge funds, including keeping up-to-date performance records, hiring a compliance officer and creating a code of ethics. All hedge funds that fall under the new SEC rules must be registered by Feb 1, 2006. This is seen as an important move in protecting investors. (For more information, see the SEC website.)

Despite troubles in the last few years, the hedge fund industry continues to thrive. The development of the “fund of funds”, which is simplistically defined as a mutual fund that invests in multiple hedge funds, provided greater diversification for investors’ portfolios and reduced the minimum investment requirement to as low as $25,000. The introduction of the fund of funds not only took some of the risk out of hedge fund investing, but also made the product more accessible to the average investor.

Conclusion
Hedge funds have evolved significantly since 1949. Modern hedge funds offer a variety of strategies, including many that do not involve traditional hedging techniques. The industry has also rapidly grown, with recent estimations pegging its size at $1 trillion – quite the leap from the $100,000 used to start the first fund half a century ago.

With a fascinating past that has twice seen media-fostered publicity push the industry to stratospheric highs and vilify it when it fell from grace, it seems highly probable that the cycle will repeat itself at some point in the future. While it is easy to get sucked in by the hype or repelled by the negative press, it’s always advisable to take a step back and conduct some due diligence, just as you would prior to making any investment. Take the time to learn more about hedge funds – for example, you may want to start by reading our Introduction to Hedge Funds – Part 1 and Part 2.

Before you put your hard-earned money at risk, you have to make sure you are choosing the right investment for the right reason. Don’t blindly chase performance, and remember that past performance is not an indicator of future performance.

I am beginning my generic letter to Congress (which I will post here) and would like understand the history of how hedge funds were made UNREGULATED by Congress.

Like Gary Webb, a few years ago, who shot himself in the head, twice. Suicide, ya, sure.

He was rumored to be investigating the role of Wallstreet and drugs. He’s the one who revealed the CIA’s role in bringing drugs in for Iran Contra.

Maybe they hope he will take a dive out his window or someone will get a bead on him with a hand cannon.

Could that save someone some trouble?

They are extremely vulnerable to the danger their own investors ever realize it’s a ponzi scheme and the reason no counterfeiters live on Park Avenue is you can be right 1,000 times, but that last time bankrupts you when you are wrong.

It’s easy to create a run on the scumbag’s “bank”.

The louder we can scream and the more light we can shine on these cochroaches and the more rocks we can overturn, the more quickly they will be gone.

http://business.theglobeandmail.com/servlet/story/RTGAM.20081212.wubsfund1212/BNStory/SpecialEvents2/home

http://www.propertyweek.com/story.asp?sectioncode=36&storycode=3130161&c=1

It’s snowing tonight and I can’t help looking at the window and watching the snowflakes land. Just like individual efforts, which seem to be frustratingly slow in bringing change, the snowflakes pile up as the letters do.

The avalanche of change is coming in early 2009.

Knight has a fund named Deephaven.

We need to do what we can to make all the Ponzi schemes fail as soon as possible as the snowflakes have been piling and there is an avalanche of CHANGE coming in the new year.

It’s going to be torches and pitchforks for the mouthpieces of the captured media come 2009.

NEW YORK, Oct 30 (Reuters) – Knight Capital Group Inc (NITE.O), the electronic trading services provider, said its Deephaven Capital Management LLC unit has suspended withdrawals from two hedge funds, including its flagship, after investors demanded much of their money back.

http://www.reuters.com/article/regulatoryNewsFinancialServicesAndRealEstate/idUSN3053834020081030

I can’t help but think the ladies doth protest too much. The ones that freaked out the most and wanted grandfathering and other protections are the ones that are likely guilty.

“Top wholesalers Knight Capital Group, UBS Securities and Bernard L. Madoff Investment Securities are voicing their concerns in letters and in public forums over an SEC proposal to scrap an exception to Regulation SHO.”

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=34210816

http://www.nypost.com/seven/12042008/business/ponzi_scheme_at_citi_142511.htm

Got it

By Saijel Kishan, Katherine Burton and Henry Goldman

Dec. 23 (Bloomberg) — Thierry Magon de La Villehuchet, who ran a fund that invested with Bernard Madoff, was found dead today in his New York office in an apparent suicide, Police Commissioner Raymond Kelly said.

“Our investigative premise is that it was a suicide,” Kelly said in an interview. De La Villehuchet, 65, was found “with his feet propped up on his desk, a trash pail nearby to collect blood,” and no sign of a second person, Kelly said.

The money manager had “multiple stab wounds” to his arms and wrists, a box-cutter and pills were found nearby, and no suicide note was found, Kelly said. De La Villehuchet was co- founder and chief executive officer of Access International Advisors, a New York firm that invested $1.4 billion with Madoff, who was arrested on Dec. 11 for allegedly running a $50 billion Ponzi scheme.

The death of de la Villehuchet, who founded Access in 1994 with Patrick Littaye, came as lawsuits mounted in connection with investors victimized by Madoff. Fairfield Greenwich Group, a hedge-fund firm that had $7.5 billion invested with Madoff, has been sued by investors for allegedly failing to protect their assets. A New York woman who says she lost most of her savings is seeking $7 million in damages from the Securities and Exchange Commission for Madoff losses.

The tally of investors hurt by Madoff continues to grow. Pedro Almodovar, the Spanish film director known for movies such as “Women on the Verge of a Nervous Breakdown” has about $280,000 at risk, El Economista reported.

Credit Lyonnais

De La Villehuchet was chairman and CEO of Credit Lyonnais Securities USA, the U.S. investment banking arm of the French bank, according to Access marketing documents. Prior to joining Credit Lyonnais in 1987, he ran Interfinance, an international broker firm specializing in French, Belgian and Italian stock markets that he founded in 1983.

Access managed $3 billion and had 26 employees according to marketing documents dated September, and its LUXALPHA SICAV- American Selection fund invested solely with Madoff. Access said last week that it was working with lawyers to assess the situation. UBS AG was LUXALPHA’s administrator until this year, and is no longer involved with it, said Karina Byrne, a UBS spokeswoman.

Clients of Madoff had at least $36 billion with his firm, according to a Bloomberg tally that may include some double counting. Before his arrest, Madoff, 70, confessed to employees that his “giant Ponzi scheme” may have cost as much as $50 billion, according to an FBI complaint.

His misconduct may have stretched back to at least the 1970s, two people familiar with the government’s inquiry of Madoff said last week. Madoff is now under house arrest at his New York apartment.

To contact the reporters on this story: Saijel Kishan in New York at skishan@bloomberg.netKatherine Burton in New York at kburton@bloomberg.net

STOCKS NEWS US-Madoff victim files claim against SEC: WSJ
Tue Dec 23, 2008 12:20pm GMT Email | Print | Share| Single Page | Recommend (0) [-] Text [+]
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U.S. stock market report [.N] 0715 ET 23Dec2008-Madoff victim files claim against SEC: WSJ ——————————————————————————

Phyllis Molchatsky, an investor who lost nearly $2 million by investing with Bernard Madoff, has filed a claim against the Securities and Exchange Commission alleging that the agency was negligent in failing to detect an alleged fraud, according to a report in the Wall Street Journal. Molchatsky is seeking $1.7 million in damages. [ID:nBNG153505]

Reuters Messaging: ryan.vlastelica.reuters.com@reuters.net 0707 ET 23Dec2008-Firm sees first-ever fall in solar panel revenue ——————————————————————————

http://online.wsj.com/documents/Madoff_SECdocs_20081217.pdf

Hedge funds gain access to $200bn Fed aid
By Krishna Guha in Washington
December 20, 2008 6:01:44 AM

Hedge funds will be allowed to borrow from the Federal Reserve for the first time under a landmark $200bn programme intended to support consumer credit.

The Fed said on Friday it would offer low-cost three-year funding to any US company investing in securitised consumer loans under the Term Asset-backed Securities Loan Facility (TALF). This includes hedge funds, which have never been able to borrow from the US central bank before, although the Fed may not permit hedge funds to use offshore vehicles to conduct the transactions.

The asset-backed securities to be funded under the programme are pools of credit card receivables, automobile loans and student loans.

The idea is to increase the supply of these loans and reduce borrowing rates by ensuring that the companies that make the loans can sell them on to investors who have guaranteed access to low-cost funding from the Fed.

The TALF is a key plank of the unorthodox strategy set out by the Fed last week as it cut interest rates virtually to zero. Washington insiders expect the programme will be dramatically expanded next year with further capital support from Treasury once the Obama administration takes office.

A senior official in the outgoing Bush administration told the Financial Times it could also be broadened to include new commercial and residential mortgage-backed securities.

The Fed thinks risk premiums or “spreads” for consumer loans are much higher than would be justified by likely default rates, even assuming a nasty recession.

It attributes this to a lack of buying interest in the secondary market where the loans are sold on to investors. By making loans to these investors on attractive terms it aims to increase market liquidity.

Making the scheme open to all US companies is a radical departure for the Fed, which normally supports financial market liquidity indirectly by ensuring banks have adequate liquidity to make loans to other investors.

However, the liquidity the Fed is providing to banks is not flowing through to financial markets, because banks are balance-sheet constrained and risk-averse. So it is channelling funds directly to investors.

The scheme is not designed specifically for hedge funds and a wide range of financial institutions are likely to participate.

Nonetheless, Fed officials hope that hedge funds will be among those investors that take advantage of the low-cost finance to drive down spreads.

The loans will be secured only against the securities and not the borrower. However, the Fed will lend slightly less than the value of the securities pledged as collateral. The Treasury has committed $20bn to cover potential losses.

Since the credit crisis erupted, hedge funds have complained that they cannot get the leverage they need to arbitrage away excessive spreads and meet high hurdle rates of return.

“Demand is there for leverage but not supply,” said Sylvan Chackman, head of global equity financing at Merrill Lynch.

In effect, the Fed will now take on the role of prime broker – the lead bank that lends to a hedge fund – for specific assets.

Additional reporting by Henny Sender in New York

If I was a bad guy, I’d be making deals today to sell out my partners in crime.

The Cramer’s, McLean’s and Greenberg’s of the world, who put their faces to supporting this crime are going to face the pitchforks and torches of us commoners come 2009.