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Why is this man crying?

Posted: December 12th, 2008 | Author: Wayne Weddington | Filed under: Opinion | Tags: , , | Email This Post Email This Post 2 Comments »

Bernard Made-Off.  With $50 billion.

I have been a little surprised at the lack of coverage on Madoff’s devastating crime of fraud.  The ripples from his crime will reach tsunami proportions for investors around the country and particularly in the towns of Long Island and Palm Beach.

I cannot not imagine how someone like Madoff can sleep at night.  It was a scheme carried out with profound efficiency, hype and arrogance.  Madoff even had a two-year waiting list to get exposure to his supposed performance.  He created a ruse of scarcity value when all the while he probably “let” investors into the fund only to pay off mounting redemptions.  Because of the relative “safety” of Madoff’s returns, there were many families who parked their entire life savings with the firm.

I am deeply suspicious of the rest of the family’s participation.  It seems implausible that they could not have known or were not complicit.  (This is a blog so I can make opinionated statements.)  I have been told that Bernard’s brother, Peter, had the temerity to “show up at temple” this past Saturday, only two days after Bernard was arrested.  As there were no incidents at the temple I can only applaud the restraint of his fellow congregants, many of whom, I understand, were clients.  Perhaps at least one congregant might have thrown his or her shoes at Peter, as was infamously done to W this weekend in Baghdad.

Of my own experience, clients sometimes chafe at the rigor with which my Administrator scrubs a subscription for proper notary signatures, passports, character references and other identifying data.  “I have invested in 20 hedge funds and no one else has asked me for this information,” they complain. But in the world of private funds, rigor, while it is cumbersome and tedious, is your best friend.  I suspect that the SEC will also be found to have been negligent for not pursuing oversight of Madoff more strenuously.

-Wayne Weddington

Why is this man laughing?

Posted: December 11th, 2008 | Author: Wayne Weddington | Filed under: Opinion | Tags: , , , | Email This Post Email This Post Make a Comment »

I share the floor of my office building with two other hedge funds.  It is an open office lay-out, partners in glass offices along the walls and the executors (traders and assistants) in the middle.  We are distinct companies but the layout makes us seem a seamless one organization.

We see each other every day but other than the traders and assistants of my own group I could not even hazard a guess as to most of the names of the other 30-odd people that work within my view.  All very nice people.  No matter…. a smile, a grunt or an empathetic nod to current market conditions is sufficient to signal camaraderie.

Interestingly we all have a different reaction to the markets on any particular day.  Each of the three fund groups here concentrates on a particular aspect of the market.  I run a Long/Short equity strategy and a Global Opportunity strategy (both doing well, detailed in a previous post as a Tale of Two Cities).

The other two groups are each fixed income shops focused on distressed commercial debt and distressed residential mortgage portfolios.  One buys up the distressed debt of the very failed institutions that have made the headlines, and the other buys residential mortgages.  They have raised a lot of money for their strategies in a relatively short period of time.

On market days when most would be crying, those arbiters of distressed securities are audibly giddy.  They sure do laugh a lot.  Lots of smiles. One cannot help but conclude that distressed debt funds are doing OK these days.

-Wayne Weddington

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