Elaine Meinel Supkis
Harvard University loves to boast about its fabulous endowment funds. So it came as a shock to learn the endowment investment fund, Sowood Capital Management, is the latest and one of the biggest hedge fund hell hounds to die of rabies. This collapse of all hedge funds is growing rapidly into the financial disaster I and some others foresaw long ago. It is strange, far from feeling puzzled or surprised, I am bemused that so many people hoodwinked themselves. On the other hand, the economics professors of places like Harvard fall kind of short in the realm of reality cognizance.
Jeremy Grantham, the money manager who oversees $150 billion as chairman of Grantham, Mayo, Van Otterloo & Co. LLC, said credit-market declines may force as many as half of all hedge funds to close in the next five years
*snip*
.A total of 717 hedge funds closed last year, leaving 9,800 in business, according to Chicago-based Hedge Fund Research Inc. Fund raising by new hedge funds was hurt by the September collapse of Greenwich, Connecticut-based Amaranth Advisors LLC, which lost $6.6 billion betting on natural-gas prices.Hedge funds are largely unregistered pools of capital that cater to wealthy individuals and institutions and allow managers to participate substantially in profits from investments. They control about $1.74 trillion, more than double the amount five ago.
All financial disasters start on the weak and move towards taking down the strong. Since 99% of the hedge funds alive today wre born less than 5 years ago, a death rate of 1/13th a year is pretty steep. And 90% of the deaths were in the last 4 months! By this time next year, I fear the death rate will be rattling the hearst at 90%+. Amaranth lost its shirt in the natural gas futures. Today, we learn that many hedge funds are rushing into oil futures seeking fast 'growth'. You can bet, the thing that happened to Amaranth will happen to all of them when people decline to use as much oil tomorrow as they use today.
We should plan for $2 trillion to vanish from our account books and anyone thinking this won't have a big effect on the economy must be working for Harvard University's School of Economics. For one of the funds to take a nose dive to the center of the earth is Harvard's brand spanking new fund, Sowood Capital Management LP. 'LP' stands for 'Luckless Professors.'
The Sowood Homepage was erased but I got the text via Google:
Sowood, Capital Management LPSowood Capital Management LP is a private investment firm focused on market-independent investments. We seek to generate superior risk-adjsuted returns for clients by applying our collective skills and experience rather than relying on market conditions. Our investment approach is unconstrained and not limited by mandate, geography or regulatory requirements.
Contact Information
Sowood Capital Management LP
500 Boylston Street, 17th Floor
Boston, MA 02116
T (617) 603-3400
E [email protected]
HAHAHA. Gads. This is too funny. The guy running this fund was a smarty pants from the school. He thought he was very clever. Only a fool who was muffled from reality by life on a campus could say, 'rather than relying on market conditions....nor limited by...REGULATORY REQUIREMENTS.' I do hope the Security and Exchange Commission investigates these people and then arrests them. I keep harping on this: the rules set up by the government are all designed to keep fools from parting with their money. These regulations protect INVESTORS from HARM! DUH!!!!
Sigh. Just last week, the Federal Government, filled with radical neo cons, destroyed one of the last regulations written in the wake of the Great Depression, designed to prevent insider short trading. Now we will see all the creeps in the markets cheat investors at a ferocious rate as they close their accounts and hide their assets and collect their fees. Indeed, the chief function of most hedge funds are two-fold: to collect as many fees as possible by churning stuff like mad and to avoid regulatory requirements!
Here is a Sowood SEC filing from 2005:
Item 4. Purpose of Transaction
Sowood acts as investment manager to President and Fellows of Harvard College (“Harvard”) with respect to its investment in the Issuer. The letter set forth on Exhibit B has been delivered by Harvard to the Issuer, notifying the Issuer of certain matters that Harvard intends to propose for consideration at the Issuer's 2005 annual meeting of stockholders. This Schedule 13D is occasioned by the sending of such letter and Harvard's intention to propose the matters described in such letter for consideration at the Issuer's 2005 annual meeting of stockholders.
Except as described herein or in Item 4 of filings on Schedule 13D by Harvard with respect to the Issuer, Sowood does not have any plans or proposals which relate to or would result in any of the actions set forth in parts (a) through (j) of Item 4. Sowood reserves the right to make any such plans or proposals in the future or to take any other steps to enhance the value of its investment.
*snip*
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer
Sowood and Harvard have entered in the Investment Management Agreement, pursuant to which Harvard appointed Sowood as an investment manager with respect to certain assets of Harvard, including the Common Stock.
Sowood will have to change his dining hall nick name to 'So sorry Sowood.' He probably rubbed his manicured hands together and chortled after he got permission to toy with the USA's biggest endowment funds. Harvard is all about making lucrative connections. This is where one can hobnob with the ruling elites of the world and like Oxford or Yale, move right on towards joining the world's top 1%. But as we have seen in history, in the past, even being über-konnected, it still won't stop life from crashing down like that bridge tonight in Minnesota. I am still waiting for reports about that disaster, to my eyes, it looks like the steel frame holding up way too much cement buckled and had a cascade event like the World Trade Center. Cement is very, very heavy.
And like we are seeing in the financial world, when the superstructure is hit hard by jets with terrorists aboard or this bridge that simply buckled and snapped, when anything is badly engineered, it can fall very fast. The entire concept of hedge funds was fatally flawed. They could suspend the weight of traffic and wind but when they failed, they fail totally and all of them will fail simultaneously because the flaws that killed the first funds are inherent within all the funds!
Amid subprime woes, Sowood says losses topped 50% in July
Date: July 31, 2007Sowood Capital Management, a $3 billion Boston hedge fund launched just three years ago by former Harvard endowment manager Jeffrey Larson, sold most of its holdings in troubled debt markets yesterday after telling investors that it had losses of more than 50 percent this month.
**************************************Citadel to buy Sowood positions
Source: News Wires | Date: Jul 31, 2007
...Investment Group on Monday said it is buying the credit positions of Sowood Capital Management LP, a Boston-based hedge fund that has...related positions. The Wall Street Journal reported Friday that Sowood, founded by a former manager of Harvard university's endowment...
***********************************
So, a hedge fund I have mocked in the past for good reasons, is going to 'save' the Crimson Coward? I don't think so. A 50% loss is pretty steep stuff. Most hedge funds, when they die, produce less than 30%, usually 0%. Like the collapsing bridge or WTC, there may be a very momentary respite before this collapse consumes Citadel too. It also irritates me to see people lose $1.5 billion in less than 3 years. As a person who has had to hoard every penny for much of my life, this sort of reckless abandon is irritating. Harvard could have sat, like a cautious hen on a nest egg fund but instead, wanted to make much more profits so this foolish hen scattered her eggs all over the highway and is now crying as her lovely eggs are smushed into an omlette. But then, Mr. Sowood couldn't live in a very fancy house and drive fancy cars and hobnob with satanic ritualists running countries, could he? He needed to make at least 10% more than simply parking the money in some safe government bond fund, for example. This is why the Chinese and Japanese have been buying most of our national bonds, you know. Harvard didnt' want them!
Here is an article from very early on when Sowood invested in the Korea Fund:
By Allan SloanTuesday, September 20, 2005; Page D02
Mutual funds are designed to be the small investor's friend. By pooling money and hiring a professional manager, the small fry can compete with the giant sharks that dominate the investment world. Or so the thinking goes. But sometimes, the big guy gets a much better deal out of a mutual fund investment than the small guy can dream of getting.
A case in point: the way a money manager for Harvard extracted a far better deal for the Crimson from the Korea Fund than mom-and-pop shareholders got. While it may not seem quite fair, it's all perfectly legal.
You've probably never heard of the Korea Fund, which was created in the 1980s to let U.S. retail investors buy a stake in the South Korean economy. The fund, not to be confused with the zillion other funds with Korea in their names, is what investment types call a closed-end fund.
Closed-ends are different from regular mutual funds, known as open-end funds. You buy and sell shares of an open-end fund by dealing directly with the fund. Closed-end funds, by contrast, trade on stock exchanges just like any other stocks.
Right off the bat, Sowood was making risky chances and forcing issues so 'things can happen' which he probably thought he could exploit for Harvard's benefit. Of course, he was playing with fire and Asian fire, to boot. The confused and confounded relationships we have with all our trade partners is bound up in these sorts of relationships, there are a vast number of these and they are all very confusing and every last one of them has a very strong impact on our foreign policies and our growing trade deficit.
Sowood talked about finding new managers to replace Deutsche Asset Management at the fund's helm and in general made a pest of itself. To make peace, the Korea Fund agreed to buy back shares at 98 percent of net asset value. That's so close to NAV that even for a $300 million holding such as Sowood's, the difference wasn't worth quibbling over. But rather than buying back its shares for cash, the Korea Fund did a stock swap. Holders turned in Korea Fund shares and in return got pieces of the 75 Korean stocks the fund owned. To own South Korean stocks, you've got to register with the South Korean government. You've also got to know what to do with obscure (to U.S. investors) holdings such as Nepes Corp. It's no surprise, then, that most Korea Fund holders didn't accept the offer. But Harvard did. By my math, Harvard is at least $15 million ahead of where it would be if it were a regular old Korea Fund shareholder. (Harvard, Sowood and the fund all declined to comment.)
Right off the bat, this is only 1 year into him running his little hedge fund scheme for Harvard, he is losing money. And note that the Koreans offered tranches of other funds as 'payment'! Very clever of them. One piece of paper losing value can be exchanged for other, hard to grasp what they represent, pieces of paper. This slicing and dicing of funds is all about chopping up crappy losing stuff and mixing it in with winning stocks and bonds. This being the ultimate goal of this scam means it will self-destruct over time since people will obviously use these funds as GARBAGE CANS to get rid of crummy deals! Eventually, they end up being all garbage all the time!
07-18-05 11:16 AM ESTNEW YORK -(Dow Jones)- Two of Korea Equity Fund's (KEF) largest shareholders aren't seeing eye-to-eye on which direction to take the closed-end fund.
A showdown of sorts is looming between Harvard College, the fund's largest shareholder and the D3 Family of Funds over Harvard's proposal to liquidate the fund due to it trading below its net asset value.
The D3 Funds at the end June backed the board of directors in rejecting the plan, just three months after it threw its support behind Harvard. While D3 Funds' public about-face was unusual, the company says keeping Korea Equity Fund's closed-end status is better for shareholders long term and less costly.
"The costs of liquidating the fund, including brokerage commissions, legal, and accounting could eat up at least half the difference between market price and," net asset value, said David Nierenberg, president of Nierenberg Investment Management, who runs the D3 Funds. "It seems like an awful lot of work for a relatively small benefit."
Harvard cites poor investment performance, chronic discounts and high expense ratios as grounds for the fund's termination, as well as its advisory agreement with Nomura Asset Management.
The whole point of these funds is to eat up all the profits. Expecting hell hounds to fetch a leg of lamb and then serve it for dinner is silly. Of course, all you get is a stripped bone with lots of teeth marks! Hell, not even that! Dogs love bones. Nope, you get an empty platter. I also note that this story mentions 'Nomura Asset Management'. That is the group whose little chart I used yesterday to explain those odd little
Pay as you go...under! I love that concept. Of course, asking for more and more money while going down is kind of pointless. Everyone is very anxious to make more than inflation and as inflation picks up thanks to a dying dollar, we export more but that isn't so much fun if we pay more and more just to keep treading water. The logic of the present imperial system is, we are the market of last and first resort. And we love this! We get to consume so much for ourselves!
The fund noted Harvard's history of trying to force other country-specific closed-end funds to liquidate or implement other structural changes in order to get out of their positions. Harvard, a long-time shareholder activist, has been seen moving out of its sizable closed-end fund holdings for some time and Korea Equity is part of that trend, observers say.
Seems Harvard has moved out of closed-end funds and into open-ended loss funds! I hope they use this disaster as a teaching tool in their school. The class must be taught by someone who is very sarcastic.
Shares of Beazer Homes USA Inc. lost as much as 40% Wednesday morning on talk that the company could be filing for bankruptcy, but the home builder strongly dismissed the rumors in a statement as "scurrilous and unfounded."
I love the loud denials of no bankruptcy coming from people who are obviously going bankrupt. A feature of recessions is bankruptcies. Not everyone went bankrupt during the Great Depression. People with jobs did quite well, actually. But more and more bankruptcies occured and they happened week after week, month after month. For years. The rigged system we have today is made to cause bankruptcies! The average American is now overleveraged: 140% of asset value (mainly, the house).
And now, a quick recap of what is going on in the auto industries:
The bilateral trade between China and Russia, which has been growing for eight consecutive years since 1999, may exceed 40 billion U.S. dollars this year, a Chinese official said on Wednesday.Bilateral trade was 20.5 billion dollars for the first half of this year and it is likely to exceed 40 billion dollars for the whole year, said Wang Jingsong, an official with the European department of China's Ministry of Commerce.
The $300 billion trade with the US dwarfs this but the significance is, Russia is right next door to China and has always been a poor market for anyone but the Chinese seem determined to intertwine China with Russia for obvious strategic reasons.
China exported 241,000 motor vehicles in the first half, a growth of 71.2 percent on the same period last year, with Russia the biggest market.
And this is the dawn of the Chinese auto export market. Just like Korea and Japan, it starts small but it will grow, rapidly.
General Motors said its sales fell 23 percent in July compared with 2006, while Ford Motor Company said its sales fell 19.1 percent. The Chrysler Group, which has been enjoying a comeback this year, said its sales fell 9 percent last month.Toyota, which unseated Ford earlier this year to rank as the No. 2 auto company in the United States, said its sales fell 3.5 percent from July 2006, which was a record month for the auto company.
Is this the beginning of a nasty trend? Sales of cars began to decline in the summer of 1929 before the stock market fell of its October cliff. And repossessions of properties was climbing. There are so many parallels to that time! Including the biggest: the collapse of the world's premier imperial currency.
Toyota Motor Corp., the world's biggest automaker, is set to post record quarterly profit tomorrow because of drivers in the U.S, China and Europe. Its only weakness is in Japan.Toyota's first-quarter net income surged 23 percent to 457 billion yen ($3.84 billion) aided by overseas sales and a weaker yen, according to the median estimate of five analysts surveyed by Bloomberg.
Toyota's first-half domestic sales dropped 10 percent as the country's population ages. In response to the decline, Toyota named Akio Toyoda, the 51-year-old descendant of founder Kiichiro Toyoda and a potential chief executive, as head of Japan sales in June.
``It's becoming more difficult to make a large profit in Japan as the market is shrinking and people aren't buying cars,'' said Yoshihiro Okumura, who helps oversee the equivalent of $365 million at Chiba-gin Asset Management Co. in Tokyo. ``Toyota is doing its best to boost sales in Japan by introducing more models than rivals.''
Auto sales has declined the last TEN years! Gads, I hate articles like this! Pretending this is something new! With 25% of the younger workers stuck in part-time jobs, wages declining, housing very expensive, and they talk about old people not buying cars? Are they the only ones left who can buy anything???? GOOD GRIEF! The enforced depression is acting like the one here in the 1930's: car sales fall like a rock! The Toyota chief doesn't give two sushis if Japanese can't buy his cars. He makes his money in the profitable foreign markets! Indeed, he gets hysterical every time the yen gets stronger and sighs with happiness when it gets weaker which it did today!
He would stomp his way to hell if Japanese workers suddenly got to make more money and could buy his cars if this means killing the carry trade financial systems that benefit him so greatly.
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