‘Pigweed’; Food for Thought
I received a call today from a well-known trend following firm. My friend wanted to vent/laugh a little at the irony in the definition of Amaranth:
1. Any of various annuals of the genus Amaranthus having dense green or reddish clusters of tiny flowers and including several weeds, ornamentals, and food plants. Also called pigweed.
2. An imaginary flower that never fades.
But he quickly turned serious about the $4.6 billion dollars transferred in the zero sum game of the markets. He noted that Morgan Stanley had declined to invest with his firm due to perceived ‘riskiness’, but that same Morgan had lost their shirts in Amaranth.
He went on to question the blind sheep plowing money long only into “commodity funds.” He then told me that 21 of their 26 positions in their portfolio are “shorts.” Market is down - follow the trend.
So how bad was the ‘Pigweed’ fund blowup?
“Many investors, meantime, want out. Some are so anxious to exit their positions that they’re willing to sell their stakes in the fund for less than half what they were worth at the end of August, according to Hedgebay, which operates a secondary market for hedge fund holdings. For example, people who had $1-million (U.S.) invested in the fund a few weeks ago are now willing to sell their position for $400,000, said Hedgebay co-founder Jared Herman in an interview from Connecticut. Investors are now willing to pay $300,000 for that stake.”
Put all your eggs in one basket (one market) and allowing a young thirty something to pull the trigger with no risk management…and none of this is a surprise. The surprise to me is who was invested in this donkey show.
