Tuesday, October 28, 2008

The Hedge Fund Bubble Will Pop With A Massive Short Squeeze

The herd mentality approach to shorting needs to stop in order to get our economy back on track. The first professional casualties of short selling like cows has just occurred overnight in Germany with a few hedge funds blowing up on margin calls. This Volkswagen 400% short squeeze in Germany is just what we might get with some large U.S. stocks since no one is expecting it. Don't forget your loses are unlimited when shorting versus going long! I can think lots of other Dow and S&P stocks that might be in a similar position.

Please remind any hedge fund manager you know that they contribute absolutely zero to the prosperity of our economy, innovation and job growth. I cannot wait to hear stories of hedge fund managers jumping out of windows with the squeeze I think we could get. I hope someday that LP’s realize that most hedge funds mainly contribute to destruction. What would happen if 100’s of billions of dollars started getting allocated back into venture capital? Who knows maybe job creation, innovation, IPO’s?

Yes I am angry and hope venture capital thrives forever as the financial vehicle to growth in the economy. Hedge funds deserve some hard times like our “.com crash” and should become the worst performing asset class for the next 10 years!!!

Friday, October 03, 2008

Quotes from Warren Buffet’s Interview on Charlie Rose

I firmly believe that this financial crisis will spur innovation to solve our problems. We will look back 5 years from now and likely have solutions to many of these problems which caused the current crises: transparency, liquidity, asset pricing, audit and credit. Government will stop the current bleeding by buying some "bad assets" but entrepreneurs will ultimately cure the disease by providing technology solutions and creating new markets. Here are some quotes from Warren Buffet's interview that should very inspiring and should provide confidence to any entrepreneur.

• The natural progression of business: Innovators, Imitators and Idiots

• Derivatives were national weapon of mass destruction.

• Cash isn’t king if it just sits there. This is a time when cash buys a lot more and a time to accumulate cash.

• Be fearful when others are greedy and greedy when others are fearful.

• In my adult lifetime I have not seen people as fearful as they are economically as they are right now.

• 8% of money market funds in the U.S. have been moved in the last 2 weeks to new institutions. 10s of billions of dollars which is incredible.

• We have a terrific economy that is like a great athlete that has just had a cardiac arrest and needs to be resuscitated. Don’t argue about inches where to shock should be applied.

• There is one institution in the world that can leverage up when big businesses are leveraging down. That is the U.S. government.

• Politicians pointing the finger at an executive that walked away with a golden parachute of a failed company and assigning blame is wrong. It’s a waste of time and we need to move forward.

• The U.S. government can borrow at 1% and buy assets that are yielding 15%. The government is going to make a lot of money and I’d like to have 1% of the $700B deal. I just don’t have $700B dollars or I’d take the deal.

• AIG would be fine today if they’d never heard of the word derivatives.

• Derivatives are a national weapon of mass destruction

• Leverage is the only way a smart guy can go broke

• The government might be buying $2 Trillion worth of real estate for $700B.

• We have a 7 for 1 improvement in the last century

• The private sector tried to save AIG but the problem was too big. The Feds structured the deal very very well

• I'd be much more interested to hear a debate between the next 2 Treasury Secretaries candidates, than the VP candidates.

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