Most of us have jobs that pay us according to the responsibility we are entrusted with. In France this week one young man must have thought he was pretty important. His bosses discovered that this young banker, dealing in ” plain vanilla hedging,” had lost the bank; are you sitting down, 4.9 billion euros. In dollars that comes out to around 7.1 billion. And you thought the market dropping 300 points was a bummer to your week!
So this got me thinking about Hedge Funds. According to Cliff Asness of AQR Capital in a story for New York Magazine, “Hedge funds are investment pools… relatively unconstrained… relatively unregulated (for now), charge very high fees, will not necessarily give you your money back when you want it.” Hmm, that doesn’t sound good. While the risk must just be unreal, the opportunity for profit must be equally as rewarding. But then again the word “private,” keeps coming up when you read about Hedge Funds, and no one seems to be asking me to join them in refinancing an Abu Dhabi YMCA, so best I stick to my CD’s. I did however discover in my searching for information on Hedge Funds, that it appears some of the Presidential Candidates, know a lot about them.
Mitt Romney made a majority of his money in Hedge funds. He is reportedly worth two hundred plus million dollars. Pretty much can go to Wal-Mart and buy anything he wants, and splurge for a large frosty on the way home without even thinking about it. Democrats are no slouches when it comes to this secretly veiled often misunderstood form of investing either. Guess who is the richest Democrat in the race? Two points off if you said Hillary. She has around thirty million give or take a house or two. Not bad considering Bills legal fees from a few years ago. Three off if you guessed Mr. Obama. He actually is just a neighborhood away from the Kucinich’s money wise, but truthfully isn’t even in the running. The richest Democrat is John Edwards, with a cool net worth of 57 million give or take a trial case pending or so. His Hedge fund investments reported in his net worth are at around 24 million! Meaning of course, he could be in line for a serious windfall himself, if the fund pays off as I am sure he hopes it will.
So actually getting elected President could cost these guys some money! Thank goodness John Kerry decided to opt out of the race; he and Teresa conservatively speaking are billionaires! Can you hear their accountants now; what are you thinking? Why are you doing this? Must be the allure of free lunch for the rest of your life!
Yet on the bright side, their keen knowledge of investing might be just what we Americans are looking for. Maybe Social Security could be helped out tied to a Hedge Fund. Oops; that sounds terribly Republican, but in all seriousness people who make this kind of money know what they are doing; at least when it come to making money. After all in a country where the median net worth is about $93,000 and the median yearly income is about $46,000 who couldn’t benefit from the voice of this kind of experience! Don’t look for it to be a campaign slogan anytime soon though!