Hedge-Fund Guy Is Up SIV Creek Without a Paddle: Mark Gilbert

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(Bloomberg) Dear investor, we'd like to update you on this year's performance of our hedge fund, Short-Term Capital Mismanagement LLP.

Actually, we'd prefer not to. We'd rather disappear. We read somewhere that Panama is a really nice place to retire to, but our lawyer says that would be a bad idea. So here goes.

This has been without doubt the most turbulent period we have experienced in our 15 minutes of multistrategy, multiasset- class, Bentley-driving hedge-fund manager fame.

Our Widows & Orphans Enhanced Money-Market Fund is under investigation by the Federal Trade Commission. It seems our use of the word ``enhanced'' is deemed incompatible with ``real sorry we gambled that dollar you gave us for safekeeping on collateralized-debt obligations and ended up losing a cent or seven. Or 20. We're not entirely sure yet.''

Our Structured Investment Vehicle has burst its tires and looks like it was designed by a teenager on acid after seeing one too many documentaries about Frank Gehry. Our off-balance sheet conduits have maxed out their MasterCards and every time we try to value them, we are reminded that some things in life really are priceless. Our only investment that made money in December was our long position in Led Zeppelin concert tickets.

Nevertheless, we are proud, nay, ecstatic, nay, absolutely flabbergasted to report that our fund is still sashaying on the dance floor, which looks less and less like a ballroom and more like the aftermath of a frat party.

Kayaking to Panama
Admittedly, we broke a heel an hour ago, the rip in our tutu threatens to reveal more about us than money ever can, and the sick, dizzy feeling has nothing to do with the seventh banana daiquiri and everything to do with yearend money-market rates. We can still hear music, though, even if it does sound increasingly like a funeral march.

Frankly, there have been times when we've considered leaving a pile of clothes on the beach, climbing into a shiny red kayak and paddling away for five years. Did we mention what a nice retirement destination Panama is? It's just a shame that we lost the paddle when we headed up SIV creek all those months ago.

You know the saying ``pay peanuts, get monkeys''? It isn't true. We have been paying our traders peanuts since the fund's inception, and it turns out that the annual rate of nut inflation is killing us at 11.5 percent given how low our investment returns have been.

Memory Chimps
So we're shifting to bananas to hire some real chimps. Not just any chimps, though. Memory chimps. You may have seen some on television recently, thrashing college kids in memory tests. Hell, these chimps can buy and sell and eat a banana simultaneously, whereas Bob, our recently departed mortgage-bond trader, couldn't even walk and chew gum at the same time without blowing the P&L on some cockamamie subprime-debt security.

We figure these 5-year-old chimps might have a better chance of remembering stuff like Russia's default or the savings-and- loan crisis or the collapse of Long-Term Capital Management, from their financial-market history classes. They can't be any worse than the monkeys who decided to bet on the creditworthiness of U.S. bond insurers last month.

Still, we remain optimistic about the coming year. That's mostly because while Santa Claus only pops down the chimney once a year with his sack of presents, Helicopter Ben Bernanke flies by every six weeks and showers us with bags of cash in the form of lower interest rates.

Under Ben's Umbrella
God bless the policy makers at the Federal Reserve. As Grammy-nominee Rihanna would undoubtedly have sung if she only knew of our plight, ``They're gonna cut their rates forever, now that it's raining more than ever, so we can stand under Ben's umbrella, ella, ella, eh, eh eh.''

Not like those monetary fascists at the European Central Bank. Just because inflation is running at a six-year high and money-supply growth is the fastest in almost three decades, they didn't just close the lending window, they slammed it shut on our grasping hands. How can they contemplate an interest-rate increase at a time like this?

Finally, a cautionary tale. It is customary at this festive time of year for our schedule to be even busier than usual, as our brokers escort us to the finest establishments in town and ply us with drink in gratitude for this year's business and in anticipation of the trades that will flow their way next year.

Oddly, the telephone hasn't rung and the mailbox is bereft of embossed invitations. It seems our relationship managers are too busy schmoozing their new clients in Dubai and Singapore and Shanghai and Abu Dhabi to bother with their old hedge-fund customers.

Fine. Don't come crying to us, Mr. Hokey-Cokey Bank, when the combination of a plummeting share price and a devalued dollar makes your institution a takeover target for some Sovereign Wealth Fund turbocharged by petrodollars.

Yours, Hedge-Fund Guy.