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Strategies & Market Trends : Asia Forum
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To: Mark Myword who wrote (6693)9/25/1998 10:45:00 AM
From: Robert Douglas  Read Replies (1) of 9980
 
Ramsey, et all - speaking of "long terms", what about some good old fashioned jail time for the crooks who run these operations? That might straighten things out in a hurry!<g>

It is unlikely that these hedge-fund “crooks” will spend any time in jail since they were really not doing anything illegal. Presently in America recklessness, arrogance and stupidity aren't against the law; in fact they are often rewarded. Do you think that the massive fees paid to these managers will be refunded? Not likely. LTC had returns of 43%, 41% and 17% the last three years and the managers were taking one- fifth of the profits. I can only hope that LTC was structured so that the managers take was invested in the fund itself, if not these “geniuses” walked away with hundreds of millions for their troubles.

If I sound overly hash on these men it's because they should know better. Some of these men are the fathers of their disciplines. The Black-Scholes model was one of the first things I learned as an undergraduate finance student. The lesson I can draw from their failure is that sometimes success makes us forget that we can be wrong – nothing fails like success. To be so oblivious to the risks they were taking is astounding. On the other hand maybe they knew that the risks were being borne by others and the returns would flow directly to them. If this is the case, in a perfect world, they would spend some time in jail.

The only other solution I can see (Lawrence may disagree) is to close down Harvard and MIT, since they seem to be breeding grounds for these dangerous men.<g>

-Robert

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