John Meriwether in TROUBLE again....

Discussion in 'Wall St. News' started by marketsurfer, May 30, 2008.

  1. from times online-----

    TEN YEARS AGO this month a hedge fund in Greenwich, Connecticut, started losing money. It was the start of a losing streak that was to make Long-Term Capital Management (LTCM) the most infamous hedge fund in the world.

    Set up by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers, a leading Wall Street investment bank, LTCM counted Nobel prize-winning economists Myron Scholes and Robert Merton among its directors and in its heyday had been generating returns of more than 40% a year. But from May to September 1998 LTCM lost $4.6 billion (£2.3 billion) and helped to plunge financial markets around the world into crisis.

    Now Meriwether is in trouble again. JWM Partners, his latest venture, has laid off staff. Its biggest fund, a bond portfolio, has plunged 26% this year, while another fund is down 12%. Both performed poorly last year and investors are looking to get their money back.

    As with LTCM, this crisis has been exacerbated by panic in the markets following the credit crunch. While investors have fled risky assets, Meriwether has sought to reassure them. In a recent letter to investors he said: “We have sharply reduced the risk and balance sheet of the portfolio.”

    However, as happened 10 years ago, and more recently with the collapse of several high-profile hedge funds, sometimes the ability to control events slips from the hands of even the smartest people.

    Meriwether is not the only LTCM alumnus feeling the pinch from the credit crunch.

    Platinum Grove Asset Management, the $5.8 billion hedge fund group headed by Scholes, has suffered its worst performance since its inception.

    Platinum Grove, which Scholes founded in 2000 with other former LTCM directors, suffered an 11.4% drop for its domestic fund and 10.7% for its offshore sister fund, according to a letter that the fund sent to investors on April 7. Same faces, same problems?

    A decade on, it seems that “not much has been learnt”, said Roger Lowenstein, author of When Genius Failed: The Rise and Fall of Long-Term Capital Management. “The quote I read of Meriwether saying he was going to lower the risk was strikingly reminiscent. I think that’s what he said when he was backing out of LTCM.”

    Lowenstein believes that in many ways LTCM’s collapse was the first [modern] financial meltdown, and provides interesting insights into today’s financial crisis.

    The fund group used arcane financial instruments that few people, not even its overseers, fully understood. When it went under, the geographical as well as financial complexity of LTCM’s investments led to fears that it would trigger crises in financial markets across the world.

    A summit of bankers and regulators eventually brokered a deal to bail out the group. The only Wall Street bank that refused to participate was Bear Stearns.

    continued here:
  2. Liar's Poker in action...........
  3. RhinoGG

    RhinoGG Guest

    Who invests with these guys? I mean, come on, there is dumb money, and even dumber money. For fucks sake, the rich are getting dumber, and a lot less wealthy. Oh well, maybe that'll come in handy some day...
  4. so true. How about Neiderhoffer? Didnt he lose almost the entire funds value?
  5. Cutten


    Looks like the "short gamma and pray" strategy isn't working too well this year.
  6. I believe the guy will come back to trade another day, unlike in 1998.

    He will survive this time.
  7. dont


    I've said it before and I'll say it again. These Guys can't trade all they can do is sell gamma using other peoples money while it works look we are heroes when it goes pear shaped sorry but thanks for the two and twenty or bonus.
  8. oh , no...bad news for me…I need these PhD’s and qaunts to take the other side of my trades…
    It’s liquidity, stupid

  9. hughb


    This thread was started in May of this year.

    Today's WSJ is reporting that Meriwether flew to London to try to convince his investors to stay with him and to even get new investors. His current company, JWM Partners was down 26% for the year going into last week.

    I guess he'll just call mulligan again and the so-called smart money will give him another few billion.
  10. It was highly educated smart people that bought all the subprime repackaged garbage too!!

    I've always hated academics, most of them could not survive, and their philosophies and world view would not survive, without public funding really. Then to have them take their ideas and get even more funding from private capital.... stupid to even look their way to make money... think like a barbarian!! That is what I like to do, and view these geniuses as big dinosaurs lumbering around waiting to step in a trap and provide a huge meal for the tribe.....

    The guys that own this site made $100 million in their own lifetimes by trading... but we have had academics come on here and start threads with the idea that they can prove it's impossible to make money trading..... and they are living off our tax monies..
    #10     Sep 20, 2008