Those gabby hedgies.

They’re not all Andrew Lahdes, but the latest batch of hedge fund letters are somewhat entertaining. NakedShorts has a collection; we’ve published some excerpts below:

“If the banks are made more bureaucratic and risk-averse – and less aggressive and
competitive – I’m sure independent boutiques will arise and prosper. The model I have
in mind is a forest fire: a year after, bright green shoots grow from the ashes; in fact, I
think they’re fertilized by the ashes. Think what a landscape like that means for advisory
firms like Moelis, Evercore, Gleacher and Greenhill …

In the third stage of a bear market, on the other hand, everyone agrees things can only get worse. The risk in that – in terms of opportunity costs, or forgone profits – is equally
clear. There’s no doubt in my mind that the bear market reached the third stage
last week. That doesn’t mean it can’t decline further, or that a bull market’s about
to start. But it does mean the negatives are on the table, optimism is thoroughly
lacking, and the greater long-term risk probably lies in not investing.”
– Howard Marks, Oaktree Capital

“Who’s at Fault? We All Are.

We all took our eye off the ball through this indulgence. We outsourced jobs and technology to third world countries which could produce goods less expensively because producing the goods ourselves was deemed too much work for too little gain. The American spirit of capitalist stewardship and drive was overcome by the lure of Easy Street. We could acquire wealth beyond our dreams with far less sweat and very little equity. We believed that the leverage door swung only one way. Unfortunately, the far reaching corners of this debt dilemma have not yet been mapped and the current bailout plan will need to allocate much more money and resources along with a well-run “RTC-2” in order to be successful. Rather than selling goods and services, we as a nation created a substantial amount of our GDP from selling loans and financial products - Financial Alchemy.” — Thomas J. Barrack, Jr., Colony Capital

“There will be a time to buy stocks. My best guess is that time is a few years into the future when the strong have separated themselves from the weak…a time when unemployment has hit 10% and US GDP has dropped 4-5% (maybe more). Be wary of “trusted” individuals telling you
everything is fine today and that it is safe to buy equities in general. Mr. Buffet has enough
money to be able to have his holdings drop 50% and still fly in his jets and live the way in which
he has become accustomed. Do you have enough capital to take what you have left, cut it in half, and continue to live the way you have for the past few years? I don’t.” — J. Kyle Bass, Hayman Advisors