How a hedge fund tells its investors bad news

Ok, so this letter isn't nearly as uncomfortable to read as the one that has to go out to those who lost $2 billion when Texas Pacific Group led an investment in now JP Morgan assimilated Washington Mutual but it is still a good read.  Here's the NYTimes DealBook story on it.

It is a letter to shareholders in the TPG-Axon fund covering recent market "activity."

So for 2% mgmt fee plus 20% of any profit, how'd we do?  It can all be summed up in one word, according to fund manager Dinakar Singh – "abysmal."  Here's an article covering the launch of the fund a short four years ago with much fanfare and hype.

Mr. Market takes no prisoners and no matter how smart you are, how much data you have, or how confident you are in you abilities, he will get the best of you.  Just ask Mr. Singh.

Where are the opportunities according to Mr. Singh going forward?  Distressed mortgages, Chinese stocks and transportation. 

Are hedge funds good investments?  Well, think about the word "hedge" for a minute.  If it were a true "hedge" then wouldn't it have protected these investors against recent market craziness?

No thanks, I'll stick to index funds

10 Things That Will Change

Kiplinger's Personal Finance
is the only print magazine I subscribe to because I like the absence of
"get rich" stories featured in other money pubs and the focus on
personal investments.  It's not expensive and reading it will do
wonders for your financial security. 

This is a great list of items from them on what we can expect the regulatory and financial climate to look like going forward.  As the article points out, most of this will be familiar as everything old is new again.

"In reality, the change isn't to a new environment. It's a return to
traditional norms of the past, before cheap money inflated asset
values, undermined lending standards and encouraged excess risk. It's
bitter medicine, but it's necessary."


Amen.

My worlds collide at 35,000 feet

Today was a bit surreal for me.  Not only did we have a crazy day on the financial markets as well as in the US Congress, but this all came together for me as I was in an airplane. 

Kind of a weird collision of CSPAN and CNBC occurring as I watched the events of the day live via Direct TV on the screen in the seat in front of me while listening to the audio with my iPod earphones.  I believe it is a historic moment when the floor of the NYSE is focused on the outcome of a US House of Representatives' vote and CNBC is bringing both to me via split screen.  I did a bit of digging to see if I could find a screen shot of this around and whether this was the first time the vote feed was featured on the business network, but was unsuccessful in my search however I did come up with this:

House Bailout Vote

I'm not sure where things are headed from here other than that we all need to calm down a bit and understand that this is a serious time but not the end of times. 

The drama of the day was enough to leave your head spinning but as I sat there being shuttled to my destination watching the markets mostly fall…and fall a bit further as the vote tally was totaled, I couldn't help but think how absurd it was that Wall Street had pinned its hopes on Congress and how counter this is to who we are as a country.

Knowing how to win

I found myself using this phrase today and thought it was a good point to share.  Simply put "knowing how to win" is an essential character trait of the people you should surround yourself with regardless of what you are working on – start up, product launch, neighborhood picnic, etc. 

People can make or break a venture and surrounding yourself with those that either don't know how to win or are unable to do what it takes to win is the death knell.  Playing to tie or having people that just want to stand on the sidelines and tell you why things won't work can kill your company or project and they should be shown the door quickly. 

Reality check

Read this today via Valleywag and it struck me as both sad and absurd at the same time.  Google is finding out that providing free food has become a source of abuse, excessive cost, and distraction.  What a surprise.  Here's a dandy quote from the post:

Some Googlers, we've heard, treated their families to free dinner every night; others took large amounts of food home with them on Friday nights, to last the weekend.

Company provided meals/snacks/beverages are a courtesy not an entitlement.  I am a fan of providing food for meetings, launches, peak work periods or other special occasions but it is not the company's responsibility to feed you, your family, your friends, or anyone else that suits your whim.

Can the cell phone change the world?

I wrote some time ago about effective teledensity and why you should care about it.  I continue to be intrigued about the impact connectivity and communication can have on economic development and wanted to share this article from Popular Science entitled "Will Cellphones Save the World?"

"Within a year and a half, half the world will use cellphones, predict analysts, and with the bulk of new users emerging from developing nations, the question of what phones can do for their owners has never before had such potentially world-changing answers."

Mobile devices will gain more and more computing power and more communication capabilities as the technology evolves and its pretty cool to think that this could not only improve people's lives but level the playing field a bit more between developed and developing countries.

A candid VC conversation

This is a good interview with Bob Ackerman of Allegis Capital by Robert Scoble.  I'm biased but I like the operating perspective in VCs.  If life takes me that direction at some point, I look forward to applying some of the lessons learned by living long sales cycles, struggling to come up with the right positioning, suffering through a destructive change of mind by a 'strategic partner' or putting a buggy product in the hands of the first customer. 

You don't get that perspective in an investment bank or through an HBS case study.  Who knows, maybe the pendulum swings back towards operating vets as Bob discusses here.  A bit long (30-ish minutes) but worth the time.

http://twistage.fastcompany.tv/plugins/player.swf?v=3aec989158ffd&p=scobleizer-tv_fctv_social

Getting involved in my local government

I received a call from the Kirkland Mayor on Friday and got the word – I am the newest member of the Parking Advisory Board working with the City Council on parking related issues here in Kirkland.

Here's the link to Thursday night's agenda.  I had a short interview at City Hall where I had the opportunity to meet all the members of the City Council as well as the Mayor.  What qualifies me for this position?  Other than the fact that I live here, have parked a car before, and really care about my community, I'm not sure.  Our communities are only as great as the people who give their time to make them so and I was done standing on the sidelines. 

I have no doubt that parking questions are related to other questions about the development and growth of this city so I look forward to getting started.  I'll keep you posted as I learn more.