Saturday, February 21, 2009

Book Club Day

My book club comes to my home today. As usual, EPA cleanup duties abound. We are reading Niall Ferguson's, The Ascent of Money.

I thought I would print for them my Spring 2007 series of Hedge Funds and Systemic Risk. I ran across this paragraph, that I thought would bear repeating:

I wanted to provide a bit of a backdrop of hedge funds (HF's). You may not be a qualified investor and may never will be, so HF's funds may never be in your investment horizon. Nevertheless, they are in the same financial arena as you competing for returns. And the whole point of my writing about this is that if they screw up, it can cost you money.

Let's reflect a moment on the basic tenets of the paper.
· HF's have proliferated;
· They have a high attrition rates;
· Risk profiles (due to leverage and investment styles) are unavailable;
· Operations are not transparent; and
· Non-correlated dynamic strategies can correlate into phase locking during periods of market stress.

Welcome back Nice Guy.....the markets are writhing like a worm on a hot sidewalk. I stay mostly on the sidelines with just enough in the market to feel some pain/gain!