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To: Jim McMannis who wrote (1222)	8/9/2007 9:54:57 PM
From: SouthFloridaGuy	Read Replies (1) \| Respond to of 1718

I don't know what to think. It's impossible to be an allocator (me) and not get hit with this. We are exposed to market neutral in a small way and leveraged loans in a slightly larger way. Hopefully it ends up being a nuisance instead of multiple major blow-ups. The risk was in credit, we all knew it, we just thought we were smart enough to diversify away from it. Problem is there is no real diversification when you need it, other than mean reversion/dispersion/trend-following, but all that stuff has done poorly for 3 years so it's very difficult to convince others it's time to buy especially after people have been burned year after year. The impetus for these quant funds was non-correlation. I never liked them because these are implicit Value over Growth bets no matter how sophisticated the model. In 1999 these guys got blown away by the growth bubble. This go-around growth was cheap. I personally thought growth would outperform, but admittedly I thought it would be because it would gain more than value, not lose less...nonetheless, it's the spread between V-O-G that's played and I was right on that. When vol went outside the range, the quants were forced to delever and now they are fighting each other to get out of the exit. I've done a good job, my firm will survive, but whether I can make significantly more $$$ in the next few years is questionable because this may end in tears for a lot of funds and the Street. I am getting calls from funds trying to poach me for significantly more $$$ and now I may have to take the bait. Gotta take the 3 year guarantee and feed the kids and wife.