Third Time’s A Charm?
How Much Investor Money Can John Meriwether Lose In One Lifetime?

Posted by guest, Mar 19, 2008 5:27PM

That was/is his third time. Salomon Bros. was before your time, I presume.

Posted by BruceWayne, Mar 19, 2008 5:33PM

He didn't lose money at Salomon. He was forced to resign because one of his traders ran afoul of the Treasury. It was his record at Salomon that got him so many investors into LTCM.

Posted by guest, Mar 19, 2008 5:34PM

Wasn't he reprimanded by the SEC when he was at Salomon?

Posted by guest, Mar 19, 2008 5:44PM

Salomon was banned from trading Treasuries because of phony bids in Fed auctions. That's when Warren Buffett had to come in and smooth things over. Meriwether was Vice Chairman.

Posted by guest, Mar 19, 2008 5:44PM

Yea, he lost 50,000 of his own $$$ in a fine at Salomon and caused others to lose much more. Salomon ran "afoul" alright and Buffett had to take almost a year personally saving the business. Nice one, John Meriwether. So this is/was his third time.

Posted by Anal_yst, Mar 19, 2008 5:52PM

...hence his 'lifetime acheivement award'...

Posted by BruceWayne, Mar 19, 2008 5:53PM

Again, Meriwether didn't lose money at Salomon. It was Paul Mozer-fucker screwing with the Treasury that got them in trouble. I will grant that it did happen on Meriwether's watch.

Posted by guest, Mar 19, 2008 6:23PM

Excuse me. His "Nobel" designed "models" lost money. He didn't lose money.

Posted by guest, Mar 19, 2008 7:45PM

Meriweather was not a failure at Salomon when his entire record is considered. Hence the raised funds for LTCM.

As the record says:

"Mr. Gutfreund and the two other executives who settled yesterday, Thomas W. Strauss, the investment house's former president, and John W. Meriwether, a former vice chairman, were not charged with any illegal actions. Rather, the men settled civil charges that they had failed to properly supervise their employees."

I think it's a little early to judge his success or failure, in light of the year still being young, and the relative ubiquity of failure.

But of late his hair certainly resembles a nest for black swans.

Posted by guest, Mar 19, 2008 7:59PM

I believe the term 'failing forward' applies here...

Posted by guest, Mar 19, 2008 9:07PM

Does the guy have a learning disability or something? This is the exact same strategy as what blew up LTCM - use leverage to bet on spreads contracting. It's a strategy that gets you moderate returns for a while until you get fucked when abnormal market conditions cause them to expand further. Of course, the Nobel laureates walk away from it convinced that they were right, but that silly irrational market didn't follow the rules.

At least this time he's playing with fewer dollars and won't cause much in the way of externalities. But, seriously, anyone who gives these retards a single penny to manage deserves what's coming to them.

Posted by guest, Mar 19, 2008 9:29PM

Considering the fund has been returning around 10% YoY (and more, I think) for a while now and 100mm plus of capital is the partners, a 25% down year in these markets isn't a huge issue. Nor is it that startling. A lot of funds in the fixed income rv space have extremely volatile return series this year, depending on when they decided/will decide the right time is to get in on these delevered assets (ie. CMBS where valuations are just plain a result of contagion).

Posted by guest, Mar 19, 2008 10:43PM

You do realize it takes four 10% up years to restore a 25% down year, right? Great job, JM, your investors are now probably back to where they were in 2004

Posted by guest, Mar 19, 2008 11:42PM

yes, I am aware that it takes much closer to three years to restore a 25% down year, but I'm also not sure how much in excess of 10% their returns have been in the past couple years. In general, when securities get hit by contagion they mean revert (obviously, one can't take this as a principle--one might claim that hedge funds either mean revert or collapse)--the same way Global Alpha reverted 15% after being down.

I'm just saying that considering JWM's leverage compared to LTCM, its returns series, etc. (and that the fund had positive returns last year) one shouldn't claim the fund is a failure.

Posted by guest, Mar 19, 2008 11:51PM

Another "beautiful mind" tragically gone awry.

Posted by guest, Mar 20, 2008 12:08AM

More surprising than the 24% decline is the question I have - which institutional investor in his right mind can actually invest money with this person. Aren't they just pathetically failing in their fiduciary duties to trust him, his Nobel laureates with their money.

And keep in mind when he launched JWM he mentioned that he has learnt from the lessons of LTCM, so his new venture - i.e. JWM - will be less levered etc.

Can any body actually believe this guy.

Any idea how many people work at JWM? And how many of them are Ph.Ds, professors and Nobel laureates?

Posted by guest, Mar 20, 2008 7:52AM

What do you call these guys then ? Over-achievers ??

http://ftalphaville.ft.com/blog/2008/03/20/11737/hedge-fund-hit-by-jgb-fallout/

Posted by fatfingers, Mar 20, 2008 9:36AM

Just because he's JM doesnt mean he can somehow escape the credit crunch along with other investors in the space.

I wonder what the management fees are

Posted by Debter, Mar 20, 2008 12:53PM

Ya know what, all the people in love with hedge funds fail to realize something. If you're 20% up for 50yrs and it's all wiped out in a few months, what does the history mean...nothing! Now, putting the hyperbole above in check, if you're locked in for x yrs and immidiately after x up years you lose 25%m wtf was that worth from an investor standpoint. I guess what I'm trying to say is you're paying a lot for illiquidity. Your f'in "up 25%/yr for five years" numbers don't mean sh*t until it's realized back in my f'in bank account. I'm not exactly a proponent of mutual funds either, but at least they provide liquidity if not outsized returns.

Posted by guest, Apr 02, 2008 5:58PM

Where do you shmendricks think all the 'alpha' comes from ? Its the just the value of the embedded optionality from the hedges (if any) plus the time value of the lock up

Posted by guest, Apr 29, 2008 1:40AM

Hedge fund managers should all rot in hell. Shut down all the funds.