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CurAlea Associates LLC is an independent risk and due diligence advisory firm focused on hedge funds and family offices.

Wednesday, December 31, 2008

Year End 2008

2008 can you please hurry up and end,
Perhaps skip right past Christmas, as we’ve no money left to spend.
We started out the year expecting just some regional recessions,
We’re finishing it out with bankers seizing our possessions.
Our assets and liquidity have all gone up in smoke,
Our equity has vanished, we’re simply just flat broke.
Jobless, homeless, hopeless are now words in our vernacular,
The failure of the system has been sadly quite spectacular.
So let us now review events, of this year that’s passed us by,
Disasters there were many, an unlimited supply.

Peloton crushed it in ‘07 and was everybody’s hero,
By February end their NAV had dwindled down to zero.
The Ides of March spelled doom, for the folks over at Bear Stearns,
For the investment banking model, we began having real concerns.
All year banks were going belly up, and July felled Indy Mac,
Though that was just a prelude, to September’s heart attack.
The first week of that grim month, brought Fan and Fred’s demise,
Trillions is how they measure, their impaired asset size.
Mother Merrill then decided, it must hook up with a mate,
BofA came courting, proposing marriage on the first date.
That was quickly followed by the fall of dear old Lehman,
Letting that one go, may prove to be Paulson’s demon.
Too big to fail returned, the following day with AIG,
Whose balance sheet was filled, with heaps of foul debris.
Wamu was close behind, with the biggest bust in banking history,
Where exactly TPG saw value, remains a shrouded mystery.
Wachovia was next, which Citi quickly lost to Wells,
Buying Golden West right at the peak, is one that really smells.

The hedge funds, how’d they navigate these failures I recite?
Poorly, in a word, since I’m keeping this polite.
Through June they rode real assets up a steep and soaring climb,
They shorted the financials, the dollar and subprime.
And then it all went sour, the bottom it fell out,
Commodities went down the toilet, and then turned into a rout.
The trades were all quite crowded, the unwind it was vicious,
The shorts were squeezed and banned, the margin calls malicious.
Leverage crushed the wise guys and so did net exposures,
Who knew the hedge fund beta was tied to home foreclosures?
The VIX broke right through eighty, as vols spiked through the roof,
Currencies fell to pieces, as the carry trade went poof.
Counterparties failed, the TED spread grew and grew,
Some lost big in the convertibles, some on Porsche/VW.
Money funds soon hit the skids, and some then broke the buck,
If you let Lehman rehypothecate, you sure feel like a schmuck.
It mattered very little, if you chose value, growth or GARP,
Nothing sustained a rally, not even Kashkari’s TARP.
As credit markets froze, for redemptions all were braced,
Side pockets became the home, for assorted toxic waste.
Drawdowns grew severe, at Glenview, Tosca and Spinnaker,
The victims of the carnage include Gendell, Dubin and Dinakar.

And the regulators, how’d they handle this mess that we’re now in?
Randomly, it seems, much to Dick Fuld’s chagrin.
Over weekends they did work, the dynamic duo Ben and Hank,
And pleaded on bended knee, to Pelosi, Schumer and Frank.
Through facility upon facility, they grew Fed’s balance sheet,
They accepted all collateral, from desperate firms across Wall Street.
“We’re all banks now” became the mantra if you wanted to be saved,
If you asked for their assistance, you found yourself enslaved.
Forget the leverage and the bonus, those days are now long past,
The last shall now be first, and the first shall now be last.
And the legacy of Greenspan, how will we remember him?
I’m sad to tell you Alan, it’s looking pretty grim.
Maestro we’ve now decided, was a terrible misnomer,
A Simpson seems more fitting, not Bart or Marge, but Homer.

Ah, it’s easy to point fingers, when we all share in the blame.
We all helped inflate the bubble, and did so without shame.
The leverage proved intoxicating, it felt just like a drug,
Any problems that developed, we swept under the rug.
Our nation became infected with the borrowing disease,
We shipped out all our dollars, to the Saudis and Chinese.
We all built the fancy houses, we each drove in a Hummer,
Not just Kravis and Schwarzman, but even Joe the Plumber.
And now we pay the piper, the repo man is at the door,
He’s asking for his money, we can’t defer him anymore.
And Bush up in the White House, asleep on the job in a pajama,
So disgusted all his countrymen, they picked some new guy named Obama.
Mr. President Elect, good luck to you with all these troubles,
Iraq, LIBOR, Depression, and the bursting of these bubbles.
So I’m sorry I’ve depressed you, but these straits are very dire,
I wish I had some words, with which I could inspire.
I suppose it could be worse, despite the big destruction of your wealth,
In this land hope still springs eternal, and you still have got your health.
Happy Holidays to you, I hope you spend it in good cheer,
Let’s raise the glasses up in unison, and hope for better come next year.

Tuesday, July 1, 2008

July 2008

Midway through the year of 2008,
Performance is grim through June year to date.
Of industry sectors, banks have fallen the most,
As they’ve watched their loan books turn quickly to toast.
The brokers of course, they too have had issues,
For the memory of Bear, we can but cry in our tissues.
Mortgage insurers as well, are now in a mess,
Happy are those who’ve owned a dose of their CDS.
Regional banks have succumbed and are now in a jam,
IndyMac is the newest possession of dear Uncle Sam.
Of Fannie and Freddie, what will they write of their tale?
That when they came close to the edge, they were too big to fail.

Who or what is to blame for our terrible plight?
For these problems that keep us awake in the night?
The home builders, for one, who just built way too many,
Why build one or two, when there’s financing for twenty?
Mortgage bankers and brokers, who provided the grease,
In this religion of lending, they were the priests.
Wall Street played its part, with the securitization,
Those bonuses you know, can be quite a temptation.
The rating agencies, they too, were all part of this trade,
Triple A they all called it, no matter the grade.
And the borrowers of course, we must not forget,
Liar loans they filled out, without any regret.

Who can now save us, who will come to our aid?
We all bought these big houses, and now feel so betrayed.
Mister Bernanke, can you please lower that rate?
What do you mean, you worry that prices will start to inflate?
Mister Paulson, please continue the bailouts without quarrel.
What’s this that you say, you’ll create hazard moral?
Mister Bush, your people in need you will surely remember?
Oh, how could I forget, you’ll be gone come November.
Mister Buffet, buy these homes before they’re all repossessed,
You say there’s no value so you won’t come invest?

So we’re all by ourselves, to fend on our own,
To make do with our problems, to pay off that loan.
Stay calm and don’t panic, let’s think this one through.
After all we’re Americans, we’ll know what to do.
Don’t cool down your house and please skip that vacation,
Don’t buy food or energy, that’s not part of core inflation.
That tax rebate check, don’t you spend it on shopping,
Didn’t you hear, the housing bubble is popping?
Sell the jewels, sell the gold, sell the family possessions,
It’ll help ease the pain of this beast of recessions.
And when you’re feeling depressed, by our debt in the trillions,
Have a beer, try a Bud, it’s now owned by Brazilians.