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Hedge-Fund Guy Atones for His Subprime Bond Sins: Mark Gilbert

2007-08-15 19:34 (New York)


Commentary by Mark Gilbert

Aug. 16 (Bloomberg) -- Dear investor, we'd like to take this

opportunity to update you on the recent performance of our hedge

fund, Short-Term Capital Mismanagement LLP.

As you know, market selection for the entire fund is guided

by a proprietary investing tool we like to call ``a dartboard.''

Once the asset classes are decided, individual security

selections are generated by digitizing our unique hexagonal

cuboid models.

Unfortunately, it transpires that our hexagonal cuboids are

not as unique as we thought. Hundreds of other hedge funds

possess identical dice. The technical term for this is a

``crowded trade.'' You may also see it referred to as ``climbing

on a bandwagon already headed for the wall.''

As our alpha generation collapses, our beta has turned

negative, our delta hedging has gone toxic and, trust me, you do

not want to hear about our gamma. We can't even find our epsilons

in the dark with both hands.

You will appreciate that accurate pricing is essential for

evaluating our investment strategies. This has proven to be

extremely challenging in recent days. Previously, we have relied

on Bob, the sales guy at Hokey-Cokey Bank. Bob assured us the

securities were still worth 100 percent of face value, so

everything was cool. Bob sold the collateralized debt obligations

to us in the first place, so he knows what he's talking about.

Bob, however, appears to have had a nervous breakdown,

judging by the maniacal laughter that greeted our requests for

price verification this week. Our efforts to implement an in-

house CDO valuation framework, using a technique the ancients

knew as ``making things up,'' proved unsatisfactory.


Where's the Bid?


Currently, all of the portfolios we manage are undergoing a

rigorous screening known as ``crossing our fingers and praying

that we don't have to try and find a bid in the market.'' This is

supplemented by a cross-market statistical analysis originally

developed by the U.S. military called ``don't ask, don't tell.''

This ``unmarking-to-unmarket'' procedure has been the benchmark

for the hedge-fund industry for the past, ooh, 72 hours.

We have, of course, been in touch with the rating companies

to update our default-probability scenarios, particularly on the

AAA rated investments we own. They recommended a forecasting

method using stochastics to regress the drift-to-downgrade

timescales for the past 100 years and throw them forward for the

next five minutes. The technical term for this is ``induction,''

though those of you of a less quantitative bent may know it as



AAA or Toast?


We are pleased to report that, contrary to what current

market prices might suggest, all of our top-rated securities

remain absolutely AAA. Provided, that is, the future performance

of the underlying collateral is identical to its history.

Otherwise, the rating companies say our investments are likely to

be reclassified as ``toast.''

We have also been checking our back-up credit lines with our

friends in the investment-banking world. As soon as they return

our calls, we'll be able to update you on our emergency liquidity

position. We are sure they are fine.

Some of you have written to us asking for your money back,

citing clauses in the fund documentation called redemption

rights. Frankly, we never expected you to actually read that

prospectus, which came prepackaged when we bought the Microsoft

Hedge-Fund Guy software. We certainly have no idea what all those

long words mean.

We have filed your letters in a special drawer in the filing

cabinet marked ``trash'' for now. Do you have any idea how much

trouble you all would be in if we actually sold this stuff in the

market today? At these crazy prices? Fuhgeddaboudit. You'll thank

us later.


Not a Rescue


Speaking of crazy prices, we know you'll be thrilled to

learn that we've invited a bunch of our rich pals into the fund

to participate in this once-in-a-lifetime opportunity. But this

is not a rescue. Do not even think the word rescue. This is an

opportunity. Not a rescue. An opportunity.

In fact, we think this is such a fantastic opportunity,

we've agreed to forgo our usual management fee, and we'll only

take half our usual slice of the profits. Provided there are any

profits to slice. You, of course, are absolutely invited to

participate in this offer by sending us yet more of your money on

exactly the same revised terms as our rich pals.

Finally, a word for all of you who have been kind enough to

inquire about my personal financial situation. I am relieved to

report that my directors and officers insurance is fully paid up.

Furthermore, my Bentley Continental was paid out of the 2 percent

fee we levied when you wrote your first check to us, so I will

still be able to trundle into the parking lot each morning in an

open-necked shirt to ignore your telephone calls and e-mails.

Yours, Hedge-Fund Guy.


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We all need a little stress-reliever! This only takes a minute. And don't go all adult - a senior manager is now known far and wide as Dorky Gizzardsniffer!


The following is excerpted from a children's book, Captain Underpants And the Perilous Plot Professor Poopypants, by Dave Pilkey, in which the evil Professor forces everyone to assume new names..



1.. Use the third letter of your first name to determine your New first name:


a = snickle

b = doombah

c = goober

d = cheesey

e = crusty

f = greasy

g = dumbo

h = farcus

i = dorky

j = doofus

k = funky

l = boobie

m = sleezy

n = sloopy

o = fluffy

p = stinky

q = slimy

r = dorfus

s = snooty

t = tootsie

u = dipsy

v = sneezy

w = liver

x = skippy

y = dink y

z = zippy


2. Use the second letter of your last name to determine the first half of your new last name:


a = dippin

b = feather

c = batty

d = burger

e = chicken

f = barffy

g = lizard

h = waffle

i = farkle

j = monkey

k = flippin

l = fricken

m = bubble

n = rhino

o = potty

p = hamster

q = buckle

r = gizzard

s = lickin

t = snickle

u = chuckle

v = pickle

w = hubble

x = dingle

y = gorilla

z = girdle




3. Use the third letter of your

last name to determine the second half of your new last name:


a = butt

b = boob

c = face

d = nose

e = hump

f = breath

g = pants

h = shorts

i = lips

j = honker

k = head

l = tush

m = chunks

n = dunkin

o = brains

p = biscuits

q = toes

r = doodle

s = fanny

t = sniffer

u = sprinkles

v = frack

w = squirt

x = humperdinck

y = hiney

z = juice


Thus, for example, George W. Bush's new name is: Fluffy Chucklefanny.


And remember that children laugh an average of 146 times a day; adults laugh an average of 4 times a day. Put more laughter in your day.


Best wishes from Dipsy Dippin-Shorts






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In reply to: chookboy on Tuesday 21/08/07 01:18pm



greasy gorilla-butt http://www.sharescene.com/html/emoticons/ohmy.gif


cheers PC

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