Wednesday, September 19, 2007

Have the Good Times Gone?

Jim Gust is probably right in his comment to the preceding post. Americans can't be savers, It's our patriotic duty to be consumer spenders.

Hedge fund managers with annual compensation of hundreds of millions of dollars or more have done their patriotic duty in recent years. But today's New York Times sees ominous signs of backsliding.

Southampton's Old Trees estate, with two pools and 21 bedrooms, ought to be a steal at $48 million. But . . .
A few years ago, as markets boomed and the new hedge fund rich banked paydays that surpassed $1 billion, Old Trees, with its Gatsbyesque allure, might have been snapped up by a brash executive looking to crash the old money gates of Southampton.

But a cautiousness has begun to creep in, brought on by recent turmoil in the markets, uproar over a lavish birthday party for the private equity executive Stephen A. Schwarzman, and calls from Capitol Hill to increase taxes on hedge funds and private equity billionaires.

In August, leading hedge funds showed a loss of 2.5 percent, according to the HFRX index compiled by Hedge Fund Research. On the surface, it does not seem like a lot, given the billions of dollars that hedge funds have accumulated. Yet it was the largest monthly reversal since a 3.8 percent decline in April 2000. Taken together with larger downturns at several prominent funds, the number represents a stark reminder that the fast and easy returns of recent years are on the wane.

No comments: