Andrew Lahde is a hedge fund manager, in case any one's wondering. His letter really resonated with me.

October 17, 2008

Today I write not to gloat. Given the pain that nearly everyone is experiencing, that would be entirely inappropriate. Nor am I writing to make further predictions, as most of my forecasts in previous letters have unfolded or are in the process of unfolding. Instead, I am writing to say goodbye.

Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, “What I have learned about the hedge fund business is that I hate it.” I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.

There are far too many people for me to sincerely thank for my success. However, I do not want to sound like a Hollywood actor accepting an award. The money was reward enough. Furthermore, the endless list of those deserving thanks know who they are.

I will no longer manage money for other people or institutions. I have enough of my own wealth to manage. Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck. Appointments back to back, booked solid for the next three months, they lookforward to their two week vacation in January during which they will likely be glued to their Blackberries or other such devices. What is the point? They will all be forgotten in fifty years anyway. Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.

So this is it. With all due respect, I am dropping out. Please do not expect any type of reply to emails or voicemails within normal time frames or at all. Andy Springer and his company will be handling the dissolution of the fund. And don’t worry about my employees, they were always employed by Mr. Springer’s company and only one (who has been well-rewarded) will lose his job.

I have no interest in any deals in which anyone would like me to participate. I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle. I now have time to repair my health, which was destroyed by the stress I layered onto myself over the past two years, as well as my entire life – where I had to compete for spaces in universities and graduate schools, jobs and assets under management – with those who had all the advantages (rich parents) that I did not. May meritocracy be part of a new form of government, which needs to be established.

On the issue of the U.S. Government, I would like to make a modest proposal. First, I point out the obvious flaws, whereby legislation was repeatedly brought forth to Congress over the past eight years, which would have reigned in the predatory lending practices of now mostly defunct institutions. These institutions regularly filled the coffers of both parties in return for voting down all of this legislation designed to protect the common citizen. This is an outrage, yet no one seems to know or care about it. Since Thomas Jefferson and Adam Smith passed, I would argue that there has been a dearth of worthy philosophers in this country, at least ones focused on improving government. Capitalism worked for two hundred years, but times change, and systems become corrupt. George Soros, a man of staggering wealth, has stated that he would like to be remembered as a philosopher. My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man’s interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles. This forum could be similar to the one used to create the operating system, Linux, which competes with Microsoft’s near monopoly. I believe there is an answer, but for now the system is clearly broken.

Lastly, while I still have an audience, I would like to bring attention to an alternative food and energy source. You won’t see it included in BP’s, “Feel good. We are working on sustainable solutions,” television commercials, nor is it mentioned in ADM’s similar commercials. But hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products. Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term. The original American flag was made of hemp fiber and our Constitution was printed on paper made of hemp. It was used as recently as World War II by the U.S. Government, and then promptly made illegal after the war was won. At a time when rhetoric is flying about becoming more self-sufficient in terms of energy, why is it illegal to grow this plant in this country? Ah, the female. The evil female plant – marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country. My only conclusion as to why it is illegal, is that Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other addictive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers. This policy is ludicrous. It has surely contributed to our dependency on foreign energy sources. Our policies have other countries literally laughing at our stupidity, most notably Canada, as well as several European nations (both Eastern and Western). You would not know this by paying attention to U.S. media sources though, as they tend not to elaborate on who is laughing at the United States this week. Please people, let’s stop the rhetoric and start thinking about how we can truly become self-sufficient.

With that I say goodbye and good luck.

All the best,

Andrew Lahde

From today's New York Times comes this gem:

…an American Express cardholder whose maximum has been reduced to $1,000 from $1,200 has that much less to spend on clothing or meals out, purchases that lift the economy.

I really hope the New York Times business section gets better writers.

An American Express cardholder whose maximum has been reduced by $200 and thus is unable to spend that amount on clothing or dining out has no business buying clothes or dining out in the first place. An economy floating on debts that people can't pay back can't sustain itself. That's the main reason for the current financial crisis. People in America are generally overextended. That's why when they lose their jobs for even a couple of months, they're unable to pay their bills and fall behind.

It's astounding that some people are still advocating unsustainable consumer spending as the primary means of “fixing” the economy.

Status: Am feeling a bit better about life in general. I realized that I had a little more cash than I initially estimated, so that makes me feel relaxed about it, somewhat. (see below for why)

I'm convinced that there's some kind of evil retrograde somewhere.

Why?

My RAM died. The merchant's being as difficult as possible with the return.

My dishwasher died. It needs to be replaced, most likely, since the current unit's old. This is a completely unexpected and unplanned expenditure, but it must be spent.

Yesterday, my site died. It was the new plugin I installed for WP, and it killed my blog. MySQL refused to import my back-ups. I almost died until I found a file that it would import. If you see any errors on the site, please let me know!

Despite it all, I'm trying to stay optimistic. I'm going through the latest draft of Slayer. I can't believe I missed some of the continuity errors that occurred when I made some changes to the story. I was 500% embarrassed when I discovered them. :oops:

One thing that's really difficult for me is the amount of work that is required for the newly added materials. Unlike some writers who I envy, I'm not the most polished writer. It takes me a while to get it to flow just right. So the new materials take several days before they're on par with the other more polished scenes.

Currently I'm using iPod Touch to review my manuscript. I downloaded an app called Files. It works great for me because it can read *.doc and not destroy all my formatting. (I'm very particular about formatting.) So I'm saving money on paper & printer cartridge. The price of paper went up about 50-100% in Japan, depending on what grade, size, etc. So I'm trying to find ways to reduce the amount of paper, etc. I use as much as possible. Does this mean I'll never print my entire ms? Nope. I like to see stuff on papers. I catch different things on different medium. But Files is one of the tools I can use.

The New York Times published an article titled “Given a Shovel, Americans Dig Deeper Into Debt”. I think everyone should read it. It's a sobering look at what happens when you finance your lifestyle with credit cards and other debts.

However, before you read it, I must warn you that the article's author is somewhat…financially illiterate. For example she wrote:

Household debt, including mortgages and credit cards, represents 19 percent of household assets, according to the Fed, compared with 13 percent in 1980.

I hate to say it, but “household debt, including mortgages and credit cards” cannot be called “assets”. They're liabilities. Anything takes cash and/or other assets from you is a liability. And it sucks and must be avoided at all costs.

The article also comes with some videos. They're very sad, but they don't always illustrate exactly what is driving the engine of over-spending and over-consumption. The people featured have absolutely no savings or assets to fall back on. They're living paycheck to paycheck, and they're unable to do anything about it. That's why even a minor disaster can hit them hard and push them into foreclosures and bankruptcies. The absolute tragedy of it all is that it's not uncommon to see people like this in America.

One of the videos features an old lady who didn't save any money because she wanted to give her children better clothes and so on. But she's never given a thought about her financial future. I'm not sure if that was necessarily wise, although I'm sure her children appreciated the lifestyle she's given them.

My parents were the exact opposite. My closet was woefully empty of pretty clothes. I think I had mostly jeans and t-shirts, and to be honest, I hated shopping for clothes because I knew I wouldn't get the kind of stylish clothes my high school friends had. I also owned about four pairs of shoes. But right now, my parents own their home outright (they bought it in 1999) and have some savings to fall back on in case of emergency. They helped me pay for my college education, and with the financial aid and my summer jobs, I graduated without any college loans or credit card debt. They taught me the danger of relying on credit cards, and I wasn't allowed to use mine except for the most extreme emergencies. They also taught me how to balance my check book, how to save and how to manage cash flow. Their mantra still is “hoarding cash or cash-generating assets is the best; borrowing is for the weak-willed”. They think that people who cannot delay gratification or deal with their emotions make poor purchasing decisions and use credit cards to buy non-cash-generating assets (meaning cars, clothes, shoes, handbags, etc.) they cannot afford in the first place.

Although I hated their extreme frugality when I was growing up, now I appreciate the fact that they taught me the value of money. I don't know if I would've been able to survive this long as a non-income generating writer without the financial discipline they'd taught me. And after reading the article, I feel like I'm one of the rarest breed of American women who don't get the therapeutic effect of shopping. I usually find shopping highly stressful because I see it as a cash-flowing-out-of-my-bank-account-and-I-feel-poor event.

How about you? What do you wish you knew about personal finance? Do you have any cool tips and tricks on how to manage money better?