The Hog is in the Tunnel
That's not what the Goldman Sachs fund manager said on the call this AM. He said the hundreds of billions in private equity deals that stopped dead in their tracks and got stuck on the balance sheets of deal underwriters when the market for collateralized loan obligations (CLO) ground to a halt last week were a "rat swallowed by a snake." Another manager said the "deal machinery has ground to a halt." There were lots of mixed metaphors, none quite on the mark, so to speak. The one that rings true was not used, first popularized by Hunter S. Thompson in "Fear and Loathing in Las Vegas," who February 2005 blew his brains out with a revolver and had his remains fired out of a cannon in the desert at a funeral attended by a few dozen of his closest friends.
The hog is in the tunnel when deals that were flying through The System for years at the rate of over 1,000 in 2006 alone... suddenly stopped. They did not slow. The rat analogy doesn't work. A rat eating snake eats rats on purpose. The snake digests the rat, eventually. The only part of the analogy that works is what comes out at the end.
The call was an all-star lineup, including Former member of Fed Board of Governors Laurence H. Meyer waxing optimistic on the economy and the outcome of the current crisis compared to the bad craziness that happened in 1998 under his watch. It was all very comforting, unless you happened to be one of the clients on the call with money in the hedge fund that also made the news this morning. In Goldman's Global Alpha Falls 26% in 2007, People Say:
"Goldman's largest hedge fund, managed by Mark Carhart and Raymond Iwanowsk, has dropped almost 40 percent since July 31, 2006, said the people, who declined to be named because the fund is private. The Standard & Poor's 500 Index of the biggest U.S. stocks has returned 16 percent during the same period. It's hard to imagine how investors can maintain confidence, because their losses have been taking place over a long period of time, starting last year," said Virginia Parker, who helps oversee about $1.8 billion at Parker Global Strategies LLC in Stamford, Connecticut. "There has been a broad range of market climates, and the fund has not demonstrated the ability to excel in any of them."
There's the reason iTulip has refused to even call these funds hedge funds, because they are not hedged. They are long. That's why we call them USIPs, for Unregulated Speculative Investment Pool–if you are long, or are long by any other name.
EDIT
http://www.itulip.com/forums/showthread.php?p=13776#post13776