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

Friday, January 1, 2010

January 2010 - A Decade In Review


And so we find ourselves at the start, of a decade that is new,
The one just ended wasn’t pretty, if you look in the rear view.
When it started in 2000, Nasdaq was climbing to new heights,
On its way beyond five thousand, where it was read its final rites.
The harsh road back to reality, crushed many a banker and VC,
With business plans and sock puppets, filling Sand Hill Road’s debris.

The tragedy of nine eleven, changed the mindset of a generation,
That we never forget that fateful day, is our eternal obligation.
Shortly after that disaster, we were greeted with many a business sham,
Kozlowski, Ebbers, Skilling, Rigas, up the river they all swam.
All the while Mr. Greenspan, kept on chopping at the rate,
Convinced was he that the risk, was that prices would deflate.
Recovery was soon at hand, as the markets all shot higher,
For any asset or derivative, there was many an eager buyer.

The silliness soon began, in the market for the housing,
Bidding wars were all too common, animal spirits were arousing.
A virtuous cycle was upon us, with many players in the game,
Home buyers, brokers, and appraisers, all proceeded without shame.
An Option ARM and a HELOC, will you please get down with the lingo,
If you want that beach house in Miami, with the cheesy pink flamingo.
Investment bankers always clever, sliced and diced the toxic paper,
The regulators and rating agencies, they blessed the shady caper.

And over in corporate America, things were heating up as well,
The buyout kings they were ascending, as their funds began to swell.
The nonsense soon was spewing, just as it was in the late eighties,
Lighten my covenants and toggle my PIK, as I drive off in my Mercedes.
Activists ruled the day, demanding buybacks and dividend recaps,
Any CEO who resisted, was shown the door or busted kneecaps.
And our governmental finances, how did they fare amidst this boom?
Deficits every year, it happens when you take in less than you consume.

The carry trade was running rampant, fueled by Japanese free money,
That some bought it for two and twenty, is somewhat sad and slightly funny.
The BRICs were off and running, and took on a life all of their own,
Impacting the status quo global order, the G7 they did dethrone.
And in so doing caused commodities, to go on an unrelenting climb,
The peak oilers said we would run out, in a short amount of time.
Correlations all were rising, as the world was busy flattening,
Ags became all the rage, as its citizens were busy fattening.

What marked the top of all the frenzy, what took us into the red zone?
Was it Cerberus buying Chrysler, or the public offering of Blackstone?
While Chuck Prince was still out dancing, and Jimmy Cayne was out back toking,
Liquidity was draining from the system, leaving many addicts choking.
Subprime mortgages were just the first, of many things that did implode,
The collapse of other asset classes, their meltdown did forebode.
The quants blew up rather early, despite their fancy qualifications,
Up in their ivory towers, they misjudged their peer group’s concentrations.

With the world around it melting, Wall Street still carried on denying,
Bogus concepts like decoupling, it persisted on supplying.
And then the old houses started falling, like a line of children’s dominoes,
Bear, Lehman, AIG, and Merrill, they all did decompose.
Even Morgan and mighty Goldman, were saved by the bank charter,
For the warmth of the TARP blanket, they were forced to go and barter.
With no more fear of moral hazard, the bailouts came quite quickly,
All you had to do was ask politely, and demonstrate that you were sickly.
To cap a heinous 2008, we learned of the Ponzi scheme of Madoff,
While millions of Americans, were being furloughed and laid off.

But to finish out the decade, it was time for a party in ’09,
Hosted by Ben Bernanke, serving potent monetary moonshine.
For appetizer zero interest rates, for dessert quantitative easing,
Speculators found his menu, extremely succulent and pleasing.
While the rally that we’ve seen, is salve for our financial cuts and gashes,
It’s just postponed our day of reckoning, and ensured further market crashes.
Unemployment, deficits, foreclosures, and your very large unfunded pension,
Are just a few of our collective problems, which I feel that I must mention.

So what comes next in this new decade, what’s in the cards and what’s in store?
At best some serious belt tightening, at worst a collapsing dollar and holy war.
How to prepare for these calamities, how to shield oneself from all this pain?
Learn to live with less, from gratuitous consumption please abstain.
Have faith in our America, this is the land of hope and dreams,
Built not by economic foolery, or no money down financial schemes.
Dig deep within your being, against our challenges now stand fast,
Let’s bid farewell to the decade of naught, and leave it resolutely in the past.