But back to the jolly business at hand and that is the soon to arrive financial Armageddon. The fact of the matter is, without putting too fine a point on it, forgoing the diplomacies if you will. Well dash it people, let me just come out and say it: The end times are upon us.
I must confess to feeling like one of those loonies dressed in a cardboard sign walking around the streets of New York screaming about the end of the world knock, knock, knocking on our door. Just a few weeks ago we saw yet another indication of how close we are to being on the receiving end of the giant heave-ho.
Apparently hedge funds are now beginning to chase smaller clients, you know, as opposed to the “sophisticated investors” they normally go after. In the world of finance the term “sophisticated investor” is defined as anyone who is sitting on a big enough pile of money. If they’ve inherited it, won it in the lottery or squandered shareholder money as executive incentives it matters not. The size of your wallet correlates directly to your level of sophistication.
Ask yourselves, why would hedge funds do this? Why on earth with their top level contacts and access to bazillions of dollars, pounds and euros of investable cashish would they go after the money of the investors with a thousand or two to invest?
Even with the limited mathematical capabilities of a private banker it’s easy to calculate that from a pain in the Gluteus Maximus perspective it is preferable to have one client with 10 million to invest than 1000 clients with 10 000 to invest.
So let this be a fundamental investment lesson to you:
Whenever an investment that was prior available solely to the wealthy becomes mainstream, it is followed by a crash in that investment.
You want proof? Oh you want proof do you? Well I’ve got some of that. Actually I’ve got one name for you. Madoff?
Bernie Madoff had to tap smaller and smaller sources of money to keep his scheme up and running. Now I’m not suggesting hedge funds are a Madoff type Ponzi scheme, but whenever you have an industry tapping into an ever-decreasing sources of revenue it is an indication that the end is coming.