farewell letter from hedge fund manager

[JakeMartinez]

GoldenBoy, for once I absolutely agree with you.

[maladroit]

rich people feel guilt, but like most poor people who feel guilt, they usually don't do anything about it, except maybe bite their nails or get drunk

hedge fund managers play by the rules, but the rules are unfair, and their speculation negatively impacts far more people than the parents and people of ivy league schools...they hurt people who don't have a single penny in the market, as was the case with the speculation on oil futures...the speculation on mortgage backed securities is currently hurting people who never had any equities or even a mortgage

in good times and bad, speculators are parasites who get rich without producing anything of value...it's the system we're stuck with, but we should regulate it to minimize the impact on people who aren't speculators

[GoldenBoy812]

in good times and bad, speculators are parasites who get rich without producing anything of value...it's the system we're stuck with, but we should regulate it to minimize the impact on people who aren't speculators

You do realize you have just called anyone who puts money into the market without a sure fire clue on the future of their investment a parasite.

[maladroit]

i believe there is an ethical difference between investing and risky short term speculation...we don't need regulations for investors...we need regulation for speculators

[killerweed420]

Very true. That stock market doesn't need to be so complicated. The should just do what they are supposed to do,sell stocks. And then all thats needed is a simple law that stocks have to be held for a minimum 6 months.

[GoldenBoy812]

Very true. That stock market doesn't need to be so complicated. The should just do what they are supposed to do,sell stocks. And then all thats needed is a simple law that stocks have to be held for a minimum 6 months.

A measure such as that would inhibit firms abilities to obtain capital in times of need. In doing so, stocks would falter to much lower levels than what we have seen.

[GoldenBoy812]

i believe there is an ethical difference between investing and risky short term speculation...we don't need regulations for investors...we need regulation for speculators

Investing is risky. There is nothing different. Speculators are investors, it is how the business operates. By investing in anything, you are either speculating that it will go up or down. Speculation drives all markets, otherwise it does not work.

[maladroit]

speculation is different than investing...for example:
people who invest in companies are buying equity in the existing products, profitability, productivity, and reputation of a corporation whose boards of directors they have a legal right to question...people who speculate on oil futures contracts are betting on a non-existant future price of a commodity they will never see, nor have a say in how they are managed

the time frame is different too, as noted above...risky speculation is short term - in and out like a bandit...there's a lot of corruption there in part because the regulators/investigators lag time exceeds the short term speculation time

[rebgirl420]

Before I read the actual letter all I could think of was someone getting a letter like this in the mail:

Dear Mr.Mrs. ________,

This is Mr.Skippy from hedgefund mutual regarding your account.



WOOOOOOPS.

We screwed up.

Heres a coupon for Hot Topic.

[GoldenBoy812]

speculation is different than investing...for example:
people who invest in companies are buying equity in the existing products, profitability, productivity, and reputation of a corporation whose boards of directors they have a legal right to question...

Again you miss the point. If i were to invest in ExxonMobil just 3 months ago, i might be doing so under the assumption that the stock price would go up. What has happened to the stock price as of late? Anyone who did so in that time frame above has lost (except for short sales) as of now.

I know of many people who are troubled by this very investment because they could not vision revenues dropping as they are. The thing that has saved XOM (look at the stock price) is the fact that many idiotic futures contracts are still obligated, even as they are called upon at this moment. There were many firms who purchased contracts much higher than the current market price of crude, but are still obligated to make that very purchase. THEY LOST!!!! The RTS (Russian market) is a great illustration of this concept...

This is an excellent example of how markets correct themselves. The ones who made overzealous moves got caught.

people who speculate on oil futures contracts are betting on a non-existant future price of a commodity they will never see, nor have a say in how they are managed

Again you missed the mark. For the most part, firms purchase futures contracts to stabilize their input costs at future times, mostly because they would be forced to enact abrupt changes in pricing if they failed to do so. Failure to do so would expose risk to shareholders, which is in itself a risky move. Your lack of understanding is showing once again...

the time frame is different too, as noted above...risky speculation is short term - in and out like a bandit...there's a lot of corruption there in part because the regulators/investigators lag time exceeds the short term speculation time

Hold on a second. You do know that most "speculation" is driven by firms that are reliant on a given commodity?

What does a firm do? Either speculate that the price of a given commodity such as crude will stabilize? Or do they speculate that it will jump in times of uncertainty. Either way it is speculation with concern to shareholders wealth. If i were you, i would study inverse relation to pegged currency. That way, you will gain a better understanding of commodities that are sold in specific denominations. Oil has declined because the dollar has jumped, just as oil jumped when the dollar declined.

Lastly, you fail because you view such trading activities as a zero sum game.