Investment Series Preview: The "Good Bye and F__k You" Letter

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Is this a hedge fund manager? (photo: dannyhammontree)

I’m in the process of preparing a series of posts on the investment lessons I’ve learned in the last 18 months.

To preface the series with some humor (and insight), I thought one particular farewell letter would be appropriate. The author is hedge fund manager Andrew Lahde, who produced a one-year 866 percent return betting on the subprime mortgage collapse.

Today, he announced he was leaving the hedge fund business with a rather hysterical letter…

Today I write not to gloat. Given the pain that nearly everyone is experiencing, that would be entirely inappropriate. Nor am I writing to make further predictions, as most of my forecasts in previous letters have unfolded or are in the process of unfolding. Instead, I am writing to say goodbye.

Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, “What I have learned about the hedge fund business is that I hate it.” I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.

There are far too many people for me to sincerely thank for my success. However, I do not want to sound like a Hollywood actor accepting an award. The money was reward enough. Furthermore, the endless list those deserving thanks know who they are.

I will no longer manage money for other people or institutions. I have enough of my own wealth to manage. Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck. Appointments back to back, booked solid for the next three months, they look forward to their two week vacation in January during which they will likely be glued to their Blackberries or other such devices. What is the point? They will all be forgotten in fifty years anyway. Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.

So this is it. With all due respect, I am dropping out. Please do not expect any type of reply to emails or voicemails within normal time frames or at all. Andy Springer and his company will be handling the dissolution of the fund. And don’t worry about my employees, they were always employed by Mr. Springer’s company and only one (who has been well-rewarded) will lose his job.

I have no interest in any deals in which anyone would like me to participate. I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle. I now have time to repair my health, which was destroyed by the stress I layered onto myself over the past two years, as well as my entire life — where I had to compete for spaces in universities and graduate schools, jobs and assets under management — with those who had all the advantages (rich parents) that I did not. May meritocracy be part of a new form of government, which needs to be established.

On the issue of the U.S. Government, I would like to make a modest proposal. First, I point out the obvious flaws, whereby legislation was repeatedly brought forth to Congress over the past eight years, which would have reigned in the predatory lending practices of now mostly defunct institutions. These institutions regularly filled the coffers of both parties in return for voting down all of this legislation designed to protect the common citizen. This is an outrage, yet no one seems to know or care about it. Since Thomas Jefferson and Adam Smith passed, I would argue that there has been a dearth of worthy philosophers in this country, at least ones focused on improving government. Capitalism worked for two hundred years, but times change, and systems become corrupt. George Soros, a man of staggering wealth, has stated that he would like to be remembered as a philosopher. My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man’s interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles. This forum could be similar to the one used to create the operating system, Linux, which competes with Microsoft’s near monopoly. I believe there is an answer, but for now the system is clearly broken.

Lastly, while I still have an audience, I would like to bring attention to an alternative food and energy source. You won’t see it included in BP’s, “Feel good. We are working on sustainable solutions,” television commercials, nor is it mentioned in ADM’s similar commercials. But hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products. Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term. The original American flag was made of hemp fiber and our Constitution was printed on paper made of hemp. It was used as recently as World War II by the U.S. Government, and then promptly made illegal after the war was won. At a time when rhetoric is flying about becoming more self-sufficient in terms of energy, why is it illegal to grow this plant in this country? Ah, the female. The evil female plant — marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country. My only conclusion as to why it is illegal, is that Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other additive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers. This policy is ludicrous. It has surely contributed to our dependency on foreign energy sources. Our policies have other countries literally laughing at our stupidity, most notably Canada, as well as several European nations (both Eastern and Western). You would not know this by paying attention to U.S. media sources though, as they tend not to elaborate on who is laughing at the United States this week. Please people, let’s stop the rhetoric and start thinking about how we can truly become self-sufficient.

With that I say good-bye and good luck.

All the best,

Andrew Lahde

Hat tip to Ryan Holiday for pointing me to the letter. More on rethinking investment soon.

###

Odds and Ends: You Rock!

Donorschoose got 2nd place ($500K) in the American Express competition by a very thin margin. Your votes made the difference and will impact more than 30,000 schoolchildren who need education the most. Remember this!

I hope each of you realize that your actions will make a life-changing difference for thousands who never would have otherwise had the opportunities good teaching (and enabled teachers) will provide. This is huge.

Have a wonderful weekend! All of you should be very proud of yourselves.

Posted on: October 18, 2008.

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81 comments on “Investment Series Preview: The "Good Bye and F__k You" Letter

  1. I liked the letter a lot. Kind of a hippie, and Canada is definitely not laughing as the U.S. (unless they are kidding themselves) with the horrendous taxes they pay and waits for this awesome “free” (paid for through more taxes) health care. But great letter other than that. Over 800%. Nice work.

    Like

  2. Everything in this letter is true, if only it were so simple to make the powers that be realize that it really is so simple. What a shame that the powers that be were not able to foresee(or chose not to see) the sub-prime debacle, borrowers that can’t afford the cost being afforded the opportunity to go broke.

    As for the hemp argument…it is absolutely true. I have done several research papers and oral reports on the subject. Forget the legalization of marijuana, the benefits of which pale in comparison to those we could derive from the legalization of hemp. Realize that the most versatile plant the world has ever known is illegal because our politicians are more concerned with their own welfare than that of the American populace.

    Thank you Andrew Lahde, it’s too bad your lesson will be in vain.

    Like

  3. Thanks for cross-posting this Tim (nothing wrong with that when it is in the readers interest).

    It is a well written and interesting perspective by Andrew which I’m sure conveys publicly a wider feeling in the US and the world. The difference is that some people bottle up this passionate, intelligent thinking whilst others have the edge to stand up and say what they believe. It is the latter that make the difference in the world and no more so than in the current climate.

    Looking forward to your posts on investment lessons.

    Cheers,

    Chris

    Like

  4. Thats hysterical.
    Thats why I only invest in things i did myself. If its about my money i like to have all the control. Dont like the Idea of other (maybe greedy people) handling my money.

    Like

  5. “Give up on leaving your mark. Throw the Blackberry away and enjoy life.”

    There are many many people across the banking sector who are finally thinking, like this but havent the b*lls (or cash) to leave.

    Great post, thanks you

    Like

  6. Hey Tim,

    Saving it all up for the big pile at the end leaves you stressed, fat and frankly uninteresting. We get a short time on this planet and I don’t think our lives were meant to be lived the way he was living it. If this isn’t a shining example of avoiding the deferred life plan- I don’t’ know what is. Thanks Tim for helping us never have to write that letter. Excuses are over. It’s time to live!

    Best
    Rob

    Like

  7. “Our policies have other countries literally laughing at our stupidity, most notably Canada”

    I agree, Canada does benefit greatly from the US buying our oil, lumber, fish, wheat, etc and then really only giving us money and some trinkets in return. The money though, its great.

    Like

  8. Dear Tim I writte from Barcelona, Spain, to put you some questions about your book. You suggest that the best think to sell is Info. I have a law degree plus a Documentalist degree. I speak English, French, Spanish, Catalan and Italian. I worked for 2 years in a Company as a Documentalist, my job was doing research in Internet about subjets that people in the office would need to make their job (Scientific articles from Universities, Studies, reports, etc…).
    I would like to create my own company and sell infoproducts. The problem is the following:
    How to start? What kind of info can I sell? Should I prepare reports about an specific subjet (f.e. Enterprises social responsability, Cause-related marketing…) and then try to sell my reports in a web site?
    I have the tools to work as an infoproduct sales woman but I feel really lost about the way of make it real. Thanks in advance for your advice, Maria

    Like

  9. This is brilliant. Thanks for posting it. As a Canuck I’d say that while we do often snicker at our Southern Neighbours, there is still plenty of fodder for them, in turn, to rightfully snicker back.

    What we need are leaders, not politicians.

    Darlene

    Like

  10. Tim, thanks for posting the letter. For the past few months, I’ve been considering, off and on, to join the fallen ranks of financial analysts and other money people. Reform from the inside, was my thinking. Over the last month, however, I think I’ve realized just how broken and decrepit the system is. This letter has helped confirm some of those feelings. I look forward to reading about your investing experience.

    Oh, and just to make sure credit is given where credit is due: Adam Smith was Scottish, not American. The dearth grows deeper.

    Mark

    Like

  11. Hedge fund management = a job that requires you to con rich people you otherwise hate to deal with as you consider them stupid enough to take the other side of your trades…

    How the hell do we expect the world to be in shape when these are the rules of the game at the core of modern capitalism?

    Great letter!

    Like

  12. Great letter.

    Nate: yeah, sorry but we are quite often laughing at the US… but we wouldn’t do it to your face though, we don’t want anyone to feel bad.

    Taxes do suck up here, and the weather…..and our TV isn’t quite and entertaining.

    Check out the link for a little recent US/Canada social study.

    Cheers

    Like

  13. Andrew Lahde has issues.

    His scorn and hatred for anyone who was lucky enough to come from more advantaged circumstances than his own borders on the pathological. The message would seem to be ” I wouldn’t have had to clutter up my life chasing money at a job I hated, if only I had been a ‘rich kid’.”

    Moreover, the idea that George Soros is a “great man” who should be the architect of a post-capitalist society is a point of view which is not only bewildering, but laughable. George Soros, who was convicted of insider trading in France. George Soros, who by shorting the British pound for personal gain in 1992, damn near collapsed the entire economy of the U.K. George Soros, whose political vision is to remold America into some sort of Western European “nanny state.” Sure, Andrew, let’s trade in our exceptionalism for some feel-good mediocrity.

    Andrew’s screed also tells us by indirection, when he refers blithely to “figures”, that his modest retirement requirements are something less than one hundred million dollars.

    Andrew is not part of the solution. Andrew is part of the problem. Andrew is a financial predator and a jerk.

    Like

  14. We do have worthy philosophers like Jefferson and Adam Smith. Llewellyn H. Rockwell, Jr is one. He and Ron Paul were students of Austrian economist Ludwig von Mises. Also consider Murray Rothbard and Hans-Hermann Hoppe.

    Most of the classical liberal economic/political philosophers of the Jeffersonian tradition are involved with the Mises Institute at http://www.mises.org.

    Like

  15. Howdy!

    Indeed, marijuana is illegal because of politicians. But, Anheiser Bush (I think that’s how you spell it) is the largest contributor to those who oppose it. The idea is that they are substitutes and if people smoke weed they will not drink Bud. Who knows? They may actually be complements, but AB is probably right to be afraid because weed would be cheaper than beer and have more kick.

    John

    Like

  16. We could all write a version of this letter in one form or another, in fact everyone reading this can pull an example or two out of it that has applied in their lives in one way or the other. What you take from this letter is that he did something about it. We all need to do something because our current economic situation is not going to get better anytime soon. The crap hitting Wall Street has already been living on Main Street for the last year or so. What we all need to notice here is who the government bailed out.

    So please read this article and then take a look at your life what are you going to do to avoid becoming a victim?

    PS
    The section on the US Government is mind blowing, if the last philosophers, we could trust to watch out for the common man were Thomas Jefferson and Adam Smith, then we are truly screwed.

    Like