'Low-Hanging Fruit'?

23 October 2008

2 minute read

Miles of choice words, some unprintable, have been published about those wonderful financial wizards who dreamed up and distributed all the toxic securities that set the stage for the ongoing financial meltdown.

But what about the legions of well-meaning investors and traders who bet wrong - who bought MBS or CDOs too soon, or took equity stakes or sold credit protection in institutions such as Fannie Mae or AIG or Lehman Brothers at what only looked like bargain-basement valuations?

Do their disastrous blunders make these stolid individuals fair targets for verbal abuse, and perhaps worse?

Andrew Lahde thinks so. In a farewell letter to investors in his hugely profitable hedge fund, the 37-year old trader referred to those who took the opposite side of his trades as, "the low-hanging fruit, i.e. idiots whose parents paid for prep school, Yale and then the Harvard MBA."

"All of this behavior supporting the Aristocracy," Lahde wrote, "only ended up making it easier for me to find people stupid enough to take the other sides of my trades. God Bless America.''

Although a relatively small player in the hedge fund universe with $80 million under management, Lahde Capital Management LLC posted an eye-popping 870 percent return last year by leveraging short positions against sub-prime mortgage securities, the debt of states like California, Florida and Michigan, and other credit instruments. Last month Lahde closed down his funds and began returning his investors' money after concluding that the same credit meltdown that made his strategy a winner created too much risk that the global banks he'd been trading against might become unable to pay off their contracts with his funds in the future. Now he says he plans to spend his time "repairing" his health and his life - and apparently, agitating to legalize marijuana.

What do you think? Is Lahde justified in labeling the wide swath of the finance industry that ended up on the wrong side of his trades, as "idiots," who were often "truly not worthy of the education they received" thanks to help from their "rich parents"?

AUTHOReFinancialCareers News

Insider Comment

4 comments

Ap
Apple
27 October 2008
Lahde may be a *****. One thing that does ring true is that he was spot on with his investment strategy and good on him. No room for haters in this biz. The guys in this market that a fearing the best are the natural traders, the guys looking for a quick 3~5% and not the homeruns. Lahde may be smart and was able to see the writing on the wall, but lets be honest, seeing that trade before it happened was like seeing a unicorn and tera patrick at a dog n'pony show in tijiuana on spring break. So GOOD ON YOU mate and everyone else who saw it, though few and far between. This guy is the envy of every average trader, incldg myself with a prep school education, on the street for pulling off the perfect trade. No one is here for the love of the game, you are here to make money and then get out quick ala the american dream. Believe me the game hath changed now and will undoubtedly be more regulated but the same educated derilicts will continue to pull up a seat at the table to see what kind of all-in hand they can get, albeit with a bit less chips upfront.
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Ma
Maui Mak
24 October 2008
History is written by the victors
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BR
BRLKNG
24 October 2008
The guy is a doosh
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ja
jay
24 October 2008
the people who dreamed them up weren't stupid, per se...they were merely engineers building a product according the specification of the manufacturers--it wasn't their job to include a danger warning on the label (and more than one of the rocket scientists pointed to the inherent risk elements i.e. counter party failure domino effects).
That said, the people that sold them weren't stupid--their job was to sell, period. Given the toxic wasteland of products outstanding, one could say they were as smart as your average Mercedes Benz salesman.
The people who bought the products, and those that sold puts on the products were complete morons only to the extent that it was their job to anticipate what Alan Greenspan couldn't (although Arthur Levitt did); save for the few that purchased products that were fraudulently mis-represented or mis-labeled.
The entire industry has always been based on how to make more money. That's the American dream. Pointing fingers at individuals and casting blame is a waste of time, as the entire reward system in this country is driven by the metric "what did you do for me today?"
I do agree with Lahde's current goal: legalizing marijuana.
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