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Andrew Lahde bows out in style

Say what you will about Andrew Lahde, but the man knows how to write a letter.

Last month, the famed-for-betting-against-subprime hedge fund manager shuttered his operations, citing unacceptable levels of counterparty risk.

His goodbye missive is impressive not just for its length, but for its clearly-articulated (and somewhat apocalyptic) closing arguments.

Verbatim:

“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”

So long, Andrew. It’s been emotional.

Related links:

Lahde Capital letter to investors: short California, and CMBS - FT Alphaville

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Comments

  1.    0:28 Posted by Veckans citat: Lågt hängande frukter : Motbilder [report]

    […] /Andrew Lahde, chef för en hedgefond med ett värde på 80 miljioner dollar, som nu valt att pensionera sig vid 37 års ålder. Lahde passade också på att förespråka en legalisering av marijuana. […]

  2. Oct 18   20:16 Posted by Brutal Deluxe [report]

    Off topic but in case anyone missed it:
    http://uk.youtube.com/watch?v=eVB-SSkkLnY

  3. Oct 18   18:35 Posted by Tears for Tier 1 [report]

    There’s more at
    http://online.wsj.com/article/SB122427783161845699.html

    I suppose the tabloids may have the juicy bits in the morning.

    It may be fair to say that faction fighting continues at the IMF.

    Which is nice.

  4. Oct 18   18:09 Posted by Tears for Tier 1 [report]

    That’s great is starts with a landslide

    As the world’s banking system worried about slipping into the abyss over the past few months, it seems that senior figures at the IMF, one of the biggest sources of world liquidity (SDRs), were worried only about who had been
    sha**ing who on the directors’ table. And who should leave with what pay off.
    (Traditionally of course, its always the Table that has to go)

    http://news.bbc.co.uk/1/hi/world/7677908.stm

    eye off the ball

  5. Oct 18   17:12 Posted by The Plug › News is to Information as Truffles are to Pigs. [report]

    […] 18, 2008, at 4:11 pm. Filed under Current Affairs. Tagged Crisis, Economy, Finance. Bookmark the permalink. Follow comments here with the RSS feed. Post a comment or leave atrackback. […]

  6. Oct 18   16:07 Posted by Andrew Lahde’s Goodbye Letter: Great Read at Olson’s Observations [report]

    […] Here is the letter in full (via FT Alphaville and Portfolio.com).  Lahde surely knows how to go out with a bang, that’s for sure! (via The Big Picture) Dear Investor: […]

  7. Oct 18   15:53 Posted by Anonymous [report]

    Have I overlooked the bit where he promises never to send his chidren to the Iv League?

  8. Oct 18   15:13 Posted by Hemp: the alternative food and energy source « disinter [report]

    […] October 18, 2008 by disinter Andrew Lahde writes: 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. […]

  9. Oct 18   14:57 Posted by Harry Potter [report]

    What a tool

  10. Oct 18   14:55 Posted by Hemp Fund Manager « The Moist Site [report]

    […] post info By cream1 Categories: Uncategorized Wow…this is sorta blazin’ on the blogosphere right now, but Andrew Lahde, the hedge-fund manager who quit after posting an 870% gain last year, said “hasta la vista suckas” to his clients in a letter that thanks dumb traders for making him rich and ends with a Peter Tosh toast. […]

  11. Oct 18   14:40 Posted by != » No one saw it coming [report]

    […] except a stoner who made 866% off it: October 17, 2008 […]

  12. Oct 18   11:27 Posted by burnt quant [report]

    Shame he’s bowing out - I’ve enjoyed the letters, especially the early ones.

    NOW PASS THE BONG!

  13. Oct 18   10:52 Posted by Hedgehog Says, "Goodbye" | PoliticsMuch.com [report]

    […] This is just too good to not pass on. Critical context: Lahde had an 866% return betting on the sub-prime collapse, doing that which a true hedge fund should do. Two other things to add: this is a guy who knows how to step away and say, “this is enough.” Second, the comments on some of the site that have posted this letter are absolutely nasty. Clearly there is some real envy concerning this guy, who, while he didn’t go to the right schools, etc. . . got it ALL right. Just read the 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. […]

  14. Oct 18   10:11 Posted by coffin dodger [report]

    WOW. I’m so surprised that this letter made it into the headlines - it is positive proof of the shift away from toeing the line amongst a complicit media.

  15. Oct 18   9:45 Posted by Anonymous coward [report]

    Good letter. Which Adam Smith is he referring to - the Scottish one?

  16. Oct 18   8:13 Posted by BigBadBank [report]

    Right on.

  17. Oct 18   5:55 Posted by Anonymous [report]

    HEDGE SLAMMER
    (Sledge Hammer, Peter Gabriel)
    WilliamBanzai7

    You could have a net gain
    If you just laid on your back
    You could have your P&L flying
    When leverage was cheap and
    the market wind was at your back

    All your trades were long
    2/20 was easy and it was sweet

    You could be a swinging big dipper
    Going up and down, all around the bends
    You could have three fast ferraris bumping
    You thought the performance fees would never end

    Now the markets a hedge slammer
    Why don’t you call it a day
    Oh the markets just a hedge slammer
    This will be your testimony
    Now you have to earn a fair wage
    the old fashioned way
    Cos life’s hard for a hedge hog
    You don’t have to be a sage to know
    Money don’t grow on trees

  18. Oct 18   3:11 Posted by Lahde deja los hedge funds... y agradece a los idiotas por su exito. - Burbuja Econ�mica [report]

    […] Lahde deja los hedge funds… y agradece a los idiotas por su exito. �� Esto si que es retirarse a lo grande… y a los 37 a�os!!! Lahde Quits Hedge Funds, Thanks `Idiots’ for Success Oct. 17 (Bloomberg) — Andrew Lahde, the hedge-fund manager who quit after posting an 870 percent gain last year, said farewell to clients in a letter that thanks stupid traders for making him rich and ends with a plea to legalize marijuana. Lahde, head of Santa Monica, California-based Lahde Capital Management LLC, told investors last month he was returning their cash because the risk of using credit derivatives — his means of betting on the falling value of bonds and loans, including subprime mortgages — was too risky given the weakness of the banks he was trading with. “I was in this game for money,'’ Lahde, 37, wrote in a two-page letter today in which he said he had come to hate the hedge-fund business. “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 sides of my trades. God Bless America.'’ Lahde, who managed about $80 million, told clients he’ll be content to invest his own money, rather than taking cash from wealthy individuals and institutions and trying to amass a fortune worth hundreds of millions or even billions of dollars. “I do not understand the legacy thing,'’ he wrote. “Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.'’ Request for Soros He said he’d spend his time repairing his health “as well as my entire life — where I had to compete for spaces at universities, and graduate schools, jobs and assets under management — with those who had all the advantages (rich parents) that I did not.'’ He also suggested that billionaire George Soros sponsor a forum in which “great minds'’ would come together to create a new system of government, as the current system “is clearly broken.'’ Lahde ended his letter with a plea for the increased use of hemp as an alternative source of food and energy that segued into a call for the legalization of marijuana. “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,'’ he wrote. “Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term.'’ `Innocuous Plant’ He added, “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.'’ Lahde said the only reason marijuana remains illegal is because “Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other addictive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers.'’ Lahde graduated from Michigan State University with a degree in finance and holds an MBA from the University of California, Los Angeles. He worked at Los Angeles-based hedge fund Dalton Investments LLC before founding his own firm two years ago with about $10 million. Lahde wasn’t available for comment. A woman at his firm, who asked not to be identified, confirmed the authenticity of the letter. Lahde Quits Hedge Funds, Thanks `Idiots’ for Success Andrew Lahde bows out in style […]

  19. Oct 18   1:12 Posted by WhenIWereYoung [report]

    Big ups to the Andy L

    http://www.youtube.com/watch?v=305vRNoofr8

  20. Oct 18   1:10 Posted by WhenIWereYoung [report]

    ….man.

  21. Oct 18   0:47 Posted by Tears for Tier 1 [report]

    I smell burnt fingers.

  22. Oct 18   0:43 Posted by Tears for Tier 1 [report]

    Andrew Ladhe does a Ringo Starr.

    So long and thanks for all the fibs.

  23. Oct 18   0:21 Posted by pegnu [report]

    this is the kind of thing I would write when drunk. Was he drunk? :)

  24. Oct 17   23:08 Posted by Mike Dell [report]

    Sounds like a lot of sour grapes, clearly he didn’t get into a good university. And not only “rich kids” get into them. Oh, and Adam Smith is not American. Go home and smoke your pot, dude. You got lucky and you should acknowledge it.

  25. Oct 17   22:59 Posted by Iceberg [report]

    brilliant. brutal. some really interesting stuff in there alongside the vitriol. And let’s be honest…who wouldn’t want to drop out right now to be a hippy :) good luck to him.

  26. Oct 17   22:53 Posted by Anonymous [report]

    Like almost all very clever people, he’s totally nuts. Absolutely, completely, irretrievably, bonkers. I envy the swine.

  27. Oct 17   22:48 Posted by Wordout - Dear Investor - Andrew Lahde’s Farewell [report]

    […] Below is his farewell letter to the markets. It’s a fascinating read. […]

  28. Oct 17   21:17 Posted by praxis22 [report]

    Hell of a way to go, I wish him luck :)

  29. Oct 17   21:02 Posted by K [report]

    Andrew will be missed by many, I’m one of them.

  30. Oct 17   19:43 Posted by HinTat [report]

    Tin hats off to the man, whaddaguy…

  31. Oct 17   19:41 Posted by weakis [report]

    Excellent letter

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