Hilarious, via Fintag, with the following comment
Well the hedgies are in poor shape. Too much corporate jet champagne, hours spent in HR Owen playing with the knobs of the latest Maserati or living it up with USD5000 call girls [Editor: Steady]. Well reality is finally biting in and a wave of realism is ripping apart the quant models and "it has worked for the last 3 years" trading strategies.
The Hedge Fund industry is being clubbed like a bob of seals. But not to worry, for the mothers (investment banks who nurture the next generation of managers) are producing more offspring that are bigger, stronger and can repel the hunters baseball bats. Capitalism works this way. Unlike the soft and cuddly investment banks that have to cry mummy and suckle on Ben Bernanke's breasts, we are hard, ruthless and adaptable.
It is sad to see colleagues struggle and die but it is for the best. The new generation of hedge funds will really show the prop desks of the socialist incompetent banks how to make alpha. As for the marketing gimmicks of replication, 130/30, and other investment bank ideas to destroy our industry, we will grow stronger, better, more nimble, flexible and more successful. [Editor: Are you running for president?]
So we hear Bear Stearns was going to file Chapter 11? 4 days earlier the CFO said Bear Stearns was in great shape. Moral? Never believe an investment bank - although I have to say I am mightily impressed by the CFO of Lehman, Erin Callan who I have fallen in love with. She is very smart and cute at that.
The hedge fund industry is a statistical animal. They cover all the configuration space and the more leverage they have the more positions they cover, which, in theory is a good thing. They also appear as a agent of dynamic feedback as their deleveraging is rocking the markets. Some will die, some will do really well, by definition of the odds.