Beirut in the WSJ

Read the article. My hat is off to anyone who can turn chugging beers into a $1mm/year revenue stream in 3 years. Incidentally, the custom beer tables over at http://www.bjsbeerpong.com/ look amazing and I will be picking one up. The suitcase portability is great both for gestapo campuses and smaller urban apartments. Cheers!

clipped from online.wsj.com

The Value of Money

Had a discussion with some intellectual friends today about the joys and burdens of money, and how as it relates to a fulfilling life of happiness, and whether the latter can be achieved with the former if one makes its acquisition his central pursuit. Here is a summary of my thoughts on the matter for all those curious:

1. Your family and genuine relationships (that is, those which would withstand any material stress test) matter the most in life no matter who you are or what's in your wallet.
2. “Friends” who hang around you because of your socioeconomic status are leeches and should be treated as such - in the medical sense - that is, you should only allow them close to you if they serve a purpose and then immediately discard them.
   
3. Money is an enabler of greater enjoyment of our immaterial possessions. It is perfectly rational to live in the moment instead of only being focused on working to make your "tomorrow" better since that day, as my friend pointed out, will never come if you set no clear goals and become caught up in a neverending race to acquire ever greater wealth. What if living in the moment, however, involves chartering a jet to Paris for a weekend with the woman you love? What if it involves buying a work of art you’ve always admired or populating your library with first editions? Do you need these things to be happy? Of course not. All man needs (loosely based on Maslow's Hierarchy) is physical nourishment, intellectual stimulation and love.
4. Thus I agree that it is worthless to chase money aimlessly (and especially if you must sacrifice your relationships, your youth or your health) but if you truly love what you do and by luck it happens that this profession makes money then you shouldn’t feel like your life lacks meaning just because you’re not engaged in what society deems to be more creative or nobler pursuits. A person who derives his greatest joy from structuring derivatives should not try to be a poet, painter or doctor. Doing what's against your nature is never right.
5. A litmus test I often ask myself is "Would I still do this job for free and if I just won the lottery?"
   
6. I’ve often wondered myself what other careers I could’ve pursued, but the reality is we have many talents and you won’t be able to explore and grow them all fully. Thus you have to compromise and pick your path, and in doing so choose the one that you will enjoy the most, not the one that will lead you to the greatest riches, fame or power. I don’t know many people who achieved greatness in finance or otherwise who did not love what they did. You need passion to excel.

Goldman Sachs Is Perfect...

...everyone else is just cramping their style:

clipped from www.bloomberg.com Goldman Sachs Group Inc. blamed its $3 billion in hedge-fund losses this month on too many quantitative managers making the same trades. "Successful quant managers will have to rely more on unique factors, while we have developed a number of these factors over the last several years, in hindsight we did not put sufficient weight on these relative to more popular quant factors." {Hate to break this to ya, but this statement means your model was not unique as a whole and furthermore that you didn't give these "unique" factors enough weight to actually trade based on them - i.e. the factors are crap used for marketing materials, and you have the same damn model as every other quant fund.} Goldman's quantitative funds use six major investment ``themes'' that it identified as momentum, earnings quality, valuation, profitability, analyst sentiment and management impact. All suffered ``extreme negative returns'' from July 30 through Aug. 10. {Gee whiz these sure would sound unique...if it was 1960s when Vinnys roamed the floor of the NYSE like brightly colored dinosaurs.} Last week, ``quantitative portfolios fell (and rose) by unprecedented amounts -- far more than at any time in the history of our data,'' according to the Goldman report. {The only thing that rose was the P&L at Goldman's prop desk who found out about the liquidations early and front ran the trades, notes an inside source.} The world's most profitable securities firm and second-largest hedge-fund manager lost $1.4 billion, or 28 percent, in its Global Equity Opportunities fund this month while the flagship Global Alpha, fell 27 percent year to date. {Fortunately, unlike Smelly Bear Stearns Goldman's got plenty of money in the Sachs to keep these funds afloat - if they were to liquidate their reputation would take a hit and cause serious long term damage to the firm. Bear, on the other hand, has no reputation to speak of and is thus scrappily taking all of their investor's money so they can keep themselves afloat long enough to get CEO Jimmy Cayne's golf score down to non-laughable levels.}

Three Horsemen of the Crapocalypse

I know it's been a while since I posted. Some of you were wondering if I got killed in the avalanche that started rolling with subprime and got bigger as it piled into credit, then equities and then the global macro markets. The Austrians were onto something, that's for sure. Rest assured, however, that I am alive and well - a tsunami of volatility can be a beautiful thing if you know how to surf it. Of course with so much free money being stuffed into the markets by funds liquidating their assets for pennies on the dollar (think 10 Amaranths and I'm John Arnold with a bigass fishing net) there has been no time left to pen witty banter on a blog. I got post ideas, though and will get to them when I have time. Meanwhile check out these three intraday charts that spell either doom, boom or opportunity depending on your positions:

VIX:
and SPX:
Treasuries (TYU7 Future):JPY
This poor otter was caught on the tracks of the Vega train today:

Don't worry little buddy, the markets will rebound ...just not this week. Once S&P breaks the 1400 floor more stop losses will get triggered (leading to a further Treasury and Yen rally as hedges and carry trades are unwound). More bodies of failed PMs will surface (but we all know Portfolio Managers never die - they just go to hell and regroup [unless the FERC gets all pesty]).

Stealing money from your friends for political advancement

John Edwards clearly learned something (besides poverty) at Fortress - life, like trading, is a zero sum game and someone always has to take a loss. In this case - his former colleagues.
Johnny was overheard saying from behind his modest ivory and platinum desk while lighting a handrolled Cuban with a $1000 bill - "Hey, it was either that or no more $400 clips, and I gotta look good for the campaign. The wifey aint gonna last past the primaries."

clipped from online.wsj.com Democratic presidential candidate John Edwards proposed increasing taxes on private-equity and hedge-fund managers in three ways [through extortion, pogroms and inquisitions] saying it would make the tax code more fair without damaging U.S. capital markets [it's not like those hedgies could just go public on the LSE and move themselves to London or Dubai]. Taken together, the former North Carolina senator asserted, these steps would raise [steal] $4 billion to $6 billion a year [that will fund a program to rid the world of sex slaves by buying the market and putting them into a safe compound adjacent to the White House]. Mr. Edwards, himself a former adviser to the hedge fund Fortress Investment Group, thus became the first major Democratic candidate to wade deeply into the controversy sparked by the explosive growth and profitability of hedge-fund and private-equity firms [because making money by improving failing companies is un-American - if you want to be a capitalist bastard go to China!]. While making amelioration of poverty a centerpiece of his campaign, the one-time trial lawyer earlier this year reported that he had received $1.7 million in salary and investment income from Fortress, where his holdings total $16 million [but not for long! Unexpected drawdowns are a bitch.] Mr. Edwards's stance could help shore up his populist credentials after criticism of his personal wealth and lifestyle have eroded his poll standings [surely you jest!].

Stylish Condoms for BSDs

News like this always worries me. When Cavalli and Versace start designing subdued (!!!) clothes for hedgies I get a desperate need to lock down another $500mm infusion of capital pronto and find it hard not to lend at least some credence to naysayers preaching of the hedge fund "bubble." The good news, however, is that maybe this new trend will tone down the effeminate rainbow that has been painting men's collections in recent seasons brighter than it ever has since the eighties.
Incidentally, highly recommend reading page 2 of the article for those with a cursory, but developed, interest in fashion. Dsquared and Jil Sander looking good for '08

clipped from www.nytimes.com "HEDGE funds, hedge funds, hedge funds,” Richard David Story said before the Ferragamo show on Sunday when asked to account for the current mood in men’s fashion all pitched to a guy with both a high net worth and a 30-inch waist. To judge from all the $700 cotton poplin trousers (Bottega Veneta), $250 flip-flops (Hermès) and $20,000 satchels in matte tobacco crocodile (Tod’s) on offer, the fractional-jet-share crowd has coffers so deep that there’ll be plenty left over for chronographs or John Currin paintings. That Bottega Veneta man — lithe, young, carefree in his moneyed assurance — seemed to be everywhere. He was spotted at Roberto Cavalli’s unexpectedly restrained show held in a cavernous disco near Linate Airport wearing not the leopard spots and junky rocker paraphernalia one expects from this designer, but instead the subdued suits and the slouchy suede driving shoes favored by the Maserati crowd. He appeared again in shiny trench coats, knife-slim suits and a muted palette at the Versace show, designed this season by the Russian-born Alexandre Plokhov, formerly of Cloak. Another avatar of the hedge-fund hottie turned out at Valentino’s brand-consistent presentation, notable as usual for natty Roman tailoring styled in a way that is often more than a little bit campy. Wasn’t that double-breasted white jacket nipped at the waist once a uniform of sorts among the high-end gigolos populating the piazzetta in Capri?

How I Spent My Summer Vacay

Ahh, to have the Treasuries keel over, the Pound rally to the 2 spot again and big LBO bets come to fruition. Certainly makes one's mind wander to things like G5s, Breguets and single malts twice your age. To that effect, I found this Forbes article both inspirational and useful.

clipped from www.forbes.com Assuming they can pry themselves away from their computers for a quick break this summer, hedge fund partners are planning to spend a fair amount of money enjoying the good life. Many in the business are already anticipating that their funds' strong performance so far this year will morph into a big incentive payoff come winter. The average hedge fund partner plans to drop $82,000 on watches and jewelry alone this summer. The biggest-ticket item of the summer seems to be yacht rentals, where the average budget is $446,000. But only 14 of the 301 partners in the survey plan to rent a yacht. The rest of them probably own. Hedge fund clients want unusual and off-the-beaten path destinations, challenges to take their minds off number crunching. Surfing down the ash covering a volcano in Nicaragua, heliskiing in Chile, anaconda hunting in the Amazon and motorbike safaris in Namibia are all popular. They plan to spend an average of $96,000 on "experiential" vacations.