About Those Enrollment Documents You Signed in Front of a Notary Public
Dearest Investor:
It’s been an interesting week for me (Howard) here in Santa Fe and my partner Garrett in Jackson Hole. Lots of parties, some wonderful wines, a couple of memorable babes, a great hike in the Tetons for Garrett and a fabulous dinner for me (Howard) with some awesome friends at The Arrested Taco. Let’s just say Chef Luigi has sent the humble taco soaring to new heights here in the New Mexico high desert.
About your investment in Wake-Up Call Capital Partners. Yes, I have some news!
If you’ve been watching CNBC or reading the Wall Street Journal, you probably noticed a considerable amount of turbulence in the global financial markets recently. Central banks infusing capital, markets in derivitives and other obscure financial instruments crashing and just general panic from Wall Street to Berne and even far away in some of those obscure Asian countries where they seem to have a lot of money.
Garrett and I have been Blackberrying like crazy non-stop for several days trying to make sense of it all and — no doubt, most importantly to you — figure out what your investment with Wake-Up Call Capital Partners is worth. So here it is:
As of 12:01 a.m. today, your investment with Wake-Up Call Capital Partners was completely gone. It’s toast. Nada. Vanished. Finito. And that’s the good news.
The bad news? Because of the strange way some of those wacky financial derivitives we invested in behave, you now owe us –Howard and Garrett — 52.3492 percent of your original investment. I’ll spare you the arcane mathematics that explains that number. But, take it from me, that’s what you owe us.
Just so we are all on the same page about this: if you originally invested $100 million with Wake-Up Call Capital Partners when we opened our doors six months, 23 days and six hours ago, that money is all gone and you now owe us an additional $52,349,000. If you are wondering how this could be, let me refer you — and your legal counsel — to the enrollment documents you signed, in front of a notary public, thank you Jesus, at the time you joined me (Howard) in Santa Fe and Garrett in Jackson Hole in our little adventure.
I’m sure you must be saying to yourself, how did this happen? I’m not completely sure myself, but permit me take a shot at explaining.
I think it is about an investment strategy getting too crowded, as other successful strategies both quantitative and non-quantitative have gotten many times
in the past, and then suffering when too many try to get out the same tiny door.
Of course, it could also be de-levering on account of several factors, including redemptions by fund-of funds, reductions in gearing levels brought on by the recent change in the volatility regime, some managers shifting from second gear to fourth gear and skipping third gear and other managers selling multi-strategy funds looking to raise cash to compensate for losses and reduced liquidity in their sub-prime and other fixed-income holdings and the fact that some managers have to make burdensome alimony payments.
Here at Wake-Up Call Capital Partners, we attempt to make money by intercepting cash flows moving from securities of lesser value to those of higher value. But, as you know, investment flows that ignore security-specific value, such as broad liquidations to meet margin calls, can cause losses to one’s portfolio. If market participants make historically-precedented, value-oriented security selections, then I (Howard in Santa Fe) and Garrett (in Jackson Hole) are susceptible to high or sustained levels of market activity that run contrary to such selections.
As someone once said, “Stuff happens!”
In any case, you are required to transfer funds in the amount of 52.3492 percent of your original investment into the account of Wake-Up Call Capital Partners by 11:59 p.m. today. Let us know if you have lost our wire transfer routing instructions.
Please feel free to call or send e-mail if you have any questions.
Howard in Santa Fe
Garrett in Jackson Hole