MB Civic

Yours truly, angry mob
By John Gapper

Published: October 24 2008 19:07 | Last updated: October 24 2008 19:07

Dear Andrew Lahde,

I have read your letter to investors in your hedge fund in which you say you are dropping out, praise marijuana as a drug that, unlike alcohol, “does not result in bar fights or wife-beating” and tell them not to “expect any type of reply to e-mails or voicemail within normal time frames, or at all”.

I did not put any money into your hedge fund although, in some ways, I wish I had, since you are said to have made an extremely large profit by shorting subprime mortgages in the housing downturn. As Kurt Vonnegut once said of the bombing of Dresden, the subject of his book Slaughterhouse-Five, it was a terrible event but he profited from it.

You admit that you were “in this game for the money” and have contempt for bankers “whose parents paid for prep school, Yale, and then the Harvard MBA” and who rose to the top of companies such as Bear Stearns and Lehman Brothers. They were the “people stupid enough to take the other side of my trades”.

Finally, you say you are going to “take a long rest to repair my health, which was destroyed by the stress I layered on to myself” and you have “no interest in any deals in which anyone would like me to participate”.

I do have a proposal for you, in fact, but it is just as well you are not reading your e-mail because it does not bear repeating in a newspaper. So I will confine myself to one point in response to your smug, self-satisfied stream of consciousness.

It may be that you are indeed cleverer than the average fund manager or Wall Street financier. You certainly made a smart bet to short subprime mortgages, rather like George Soros shorted sterling in 1992. You can give yourself a pat on the back for that.

In personality terms, however, you display all the unpleasant characteristics of a class of people who got lucky over the past decade on cheap credit. These financiers came to believe that they had astonishing insight because others paid them a lot of money to take one-way bets on housing, shares and other financial assets.

Lots of them became hedge fund managers because they could charge investors a 2 per cent management fee, take 20 per cent of profits and make a lot of money for two or three years, which was enough to set them up for life. Oddly enough, this did not endear them to many other people.

Plenty of hedge fund managers are now going out of business and causing mayhem in markets. Like you, they can fall back on the wealth they accrued in the good times. The rest of us do not have the luxury of being able to drop out, smoke grass and turn ourselves into philosophers.

So we get a little irritated when you rub your good fortune in our faces and advise us to “throw the BlackBerry away and enjoy life”. Santa Monica, the Californian city where you live and used to work, has a pier jutting out into the Pacific Ocean. Why don’t you go out and jump off it?

More columns at www.ft.com/johngapper

john.gapper@ft.com