Letter: Andrew Lahde, Lahde Capital Management
By Andrew Lahde...10-17-08
http://www.ft.com/cms/s/0/128d399a-9c75-11dd-a42e-000077b07658,s01=1.html [1]
Today I write not to gloat. Given the pain that nearly everyone is experiencing, thar 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 of 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 lookforward 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 aphilosopher. 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 addictive 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 startthinking about how we can truly become self-sufficient.
With that I say goodbye and good luck.
All the best,
Andrew Lahde
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From the bowels of Mondo Hedgefund, comes this remarkable letter of resignation from Andrew Lahde, founder of California-based Lahde Capital, reputed to have made enormous profits from betting right on the subprime-foreclosure mess. He laughs at the "aristocracy," the elite, privately educated "idiots" who run banks (and are now being bailed out by the government) and were "stupid enough" to buy the toxic waste he was peddling to the great benefit of himself and his clients.
The old Class War would appear to be cropping up here, there and everywhere. This is not the blues of Bessie Smith; we're talking about very elaborate harmonic tensions, at least Charlie Parker's beebop version of the blues. Unfortunately, today American music lacks both the lyric and the harmonic complexity to express our times. But, if history matters, these times will produce some good music again soon because we cry out for a harmonics complex enough to intuit our moment. And all we get is rap, the best of these times.
If that were not candid enough, Lahde calls for the legalization of hemp and the resurrection of philosophy.
"Since Thomas Jefferson and Adam Smith passed," he writes to his clients, "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..."
Lahde the hedgefund monster knows that Smith's Wealth of Nations was published in 1776? Jesus, oh Jesus, as ol' Wayne at the Buckhorn usta say, where do we git 'em? A literate yuppie. What next?
I know of only one 20th-century philosopher, Leopold Kohr, whose political contempt for the graduates of elite universities like Harvard, Oxford and Cambridge equals Lahde's, but Kohr also said that the best thing about such schools is the availability of Plato and Aristotle on their library shelves. One can even learn to read them in their original language if he wishes to sacrifice a few of the usual social pursuits that have always passed for education in such places. Of course, such languages were actually taught in the most pretigious prep schools in America, but that was "back in the day, the day that produced the latest generation of imperialist investment bankers.
Kohr took on the problem Lahde identifies at its roots in the 1950s, in The Breakdown of Nations. The very knowledge of Kohr or any other challenging philosoophers since is a guarantee of a diminished social in any fashionable banlieu in the West and double-plus guaranteed to be a non-starter in a cocktail chat with a Harvard or Stanford MBA grad. If Lahde's point is that elite MBA programs are a conspiracy against actual economic thought, one cannot disagree, based on empirical evidence.
Kohr's argument is that the scale of the nation states and capitalism negate a culture capable of great philosophy and art, and perhaps, therefore, a way out of the problem, i.e. we are left in the boiling pot with elite-educated MBAs, not nearly as good company as dull-witted missionaries when being boiled alive.
Lahde suggests that George Soros set up a kind of philosophical academy to sort through the political economic issues. One might add "at their leisure" if he had ever attended even one American Philosophical Association meeting. But, it's still better than a think tank full of ideologues. But Lahde foresees a long recession unlike so many economists now screaming that their ideas will mean a short recession, if the government just does exactly what they prescribe when they prescribe it. Lahde knows the government won't. He understands human nature better than most social scientists and he knows that government is not always full of good people in the right positions to obey the most brilliant economic prescriptions at exactly the right time.
According to Michael Hudson, in a brilliantly argued piece, "Parsing Mr. Paulson’s Bailout Speech: The Unprecedented Giveaway of Financial Wealth," Global Research, Oct. 18, the Roman Empire itself fell from debt deflation, initiating what he calls the "Dark Ages." Hudson remarks that the story is all foretold in Plutarch's Lives, a book written by an erudite Greek Platonist at the time of Christ. By that time, the Platonic Academy was 400 years old. By contrast, Kohr's view was that all of the greatest cultural achievements of the West had occurred by the end of the Renaissance, before the consolidation of the huge, modern nation states. He remarks that Greek philosophy is inconceivable except in the political context of hundreds of tiny, feuding city states, in which everyone knew everyone and Lahde's aristocratic bankers could not have existed in the utterly isolated, self-congratulating social cocoon in which they have spent their entire lives nurturing their egos to the neglect of their minds, affecting in a few generations in an anti-aristocracy nation the time-honored aristocratic tradition: never learned anything; ever forgot anything. Kohr notes the small size of the United States at the time of its revolution and also notes de Tocqueville's observation 50 years later that the USA was destined tobecome a great world power, equalled only by Russia -- which would lead inevitably to the decline and extinction of American democracy.
Perhaps the social idiocies imposed by capitalism and imperial nationalism will provide their own way out of themselves, through the tried and tested means of complete political economic ruin, as happened to the Roman Empire. At the moment, as the sound of the system's spine breaking is roaring in our ears, it is probably easier to conceive of one's own death than the death of the American Empire. Perhaps the most positive outlook would be that after several generations of political economic pain, a new society would emerge, one which, in America at least, will have to have been broken up into smaller states. Probably only one of such societies could produce an historian capable of teaching the lessons learned from this crash.
Consider our own Great Nation, Bastion of the Free World, Etc. Etc. Did we in our greatness produce a culture capable of learning and transmitting the lessons of the Great Depression? Evidently, NOT! as the skateboarders used to say.
However, although great cultural achievement is not given to large states anymore than better quality of goods is given to large economies, sometimes, in their moments of crisis, a little light shines through the pollution and is actually seen by a few strange, gifted individuals. Kohr's own experience included the Spanish Civil War, where nearly alone among the war correspondents, he actually grasped the motivation of many ofthe Republicans -- self-sufficient local economies.
Today, American plutocrats are having it all their own way and will possibly have produced by the time (hopefully) Obama takes office, something approaching a depression that will last many years. However, much as we hope for "Change," given that Obama received private donations while McCain has accepted public campaign financing, there is nothing in an Obama administration that -- until proven otherwise -- assures us of policies more in line with the public good.
And, nothing could be more inimical to what American communities will have to do to survive -- become far more self-sufficient on a local level. In the midst of this turmoil, no doubt will arrive a whole tribe of new, academically minted Marxists, preaching their contradiction, for Marxism withers away without its beloved enemy, capitalism. But, the mass bankruptcies of local governments as well as larger economies will require new, local solutions in an extremely hostile economy as the plutocracy becomes evermore adamantly demanding of the cowering federal government.
Terrible news of the loss of American consumer "confidence" is the lead story in the financial press at the moment. In fact, this display of common sense and household financial responsibility is a sign of general public awakening to the terrible danger of falling farther into debt, even as the phone rings off the hook with canned messages offering more debt. It is possible that those not driven out of the stores by necessity may be expressing some genuine hostility to an economy that has such obvious hostility to the public. If it could once be said that the consumer used his house as an ATM machine, the public may now be realizing that it is the plutocrats' ATM machine. Don't buy today and a preppy has to go to public high school tomorrow -- a great contribution to the nation's education and political recuperation at no expense to yourself. The poor little dear will have to see how we live and come to terms with us.
What to do at the moment. Take Lahde's good advice and wait. But, prepare yourself as you wait by reading books that help you see what's going on overhead and help you see yourself beyond this collapsing cave of shadows. The very best of these books are available to you in your public library. They are called "classics" for a reason. You will notice them by the dust collected on them. Considering all the good the contemporary books have done us, you might consider as a rule of thumb the depth of the dust on the book as a good place to begin your selections.
We are, in fact, being economically ruined -- an excellent time to repair our democracy for lack of more expensive entertainment. Eventually, at the local level there will be a great deal to be done. Meanwhile, go see the natural world, spared for the moment from the developers' blade. Observe the comedy of arrogance falling. Observe, too, that not everyone in government is unjust and corrupt. Heroes, one hopes, will emerge, heroes speaking of modesty, of local control, of simpler, more durable economies, of compassion for the sick and weak and abused. Learn to distinguish between them and what will surely be a gigantic crop of demogogues. Do not throw yourself foolishly upon the bayonets of your own nation's troops turned against you. If the plutocracy is nervous about your Constitutionally protected right of assembly and legitimate political protest, you just cut up another one of their credit cards -- the way we used to burn draft cards. You have great means of resistance and power to effect good change. Remember the superb poetry of the American people in songs like "Nobody Loves You When You're Down and Out," "That Old Ace Down In the Hole," "She's Funny That Way." Notice that good friends do love you when you're down and out, just like they loved and still love Bessie Smith, who sang, "If I get another dollar, I'm gonna hold on to it till the eagle grins." Every job lost is an opportunity opened if you don't incapacitate yourself with despair, which was never the spirit of the blues.
"Can't save a dollar, ain't worth a cent,/She wouldn't holler, she'd live in a tent/She's funny that way."
A federal judge in Fresno, Oliver Wanger, recently awarded a group of homeless people more than $2 million in damages for lost possessions when the city bulldozed their camp. In a more recent forum, he debated the mayor about it. A decent, thoughtful, articulate and courageous judge willing to face off with bully bigshots is a community treasure as much as an honest DA and a good cop.
Above all, laugh! remembering that in the last eight years it has been the Comedy Channel that has nearly single-handedly (with help from Amy Goodman) kept the notion of TV journalism alive. The responsible dissidents were right. They have been the true American conservatives, liberals, of course, given that the entire notion of the United States of America has been the essence of liberalism of its times. What became the conservative movement (and how much we would have preferred Barry Goldwater, Ronald Reagan or George Bush I in office in these years) has been nothing but a pimp for finance, insurance and real estate corporations, oil and pharmaceutical companies and other special interests -- all at the expense of the American public. Their foreign policy decisions raise the question: when does hubris become treason?
As far as religion is concerned, I return to Leopold Kohr. In his view, God, not Marx, created the physical universe. In other words, you can pay the closest attention to material conditions, a material interpretation of history and call yourself a materialist, in short "follow the money" -- most appropriate in our times -- without your eyes turning to stone when you read a passage from the Bible.
Mendocino and Humboldt women, heads up! That dreamy-eyed stranger in the coffee shop with the Aristotle book could be a real rich guy. You could get lucky, my darlings, and, of course, so would he.
Incultus
Links:
[1] http://www.ft.com/cms/s/0/128d399a-9c75-11dd-a42e-000077b07658,s01=1.html