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Hedge Fund Bubble About To Burst

February 13th, 2007 by Stephen Roman

The always entertaining Daniel Gross of Slate gives 5 reasons why(summary from FT, original article in Slate):

    1. Public investors are getting really excited when insiders sell, believing they’re being cut in on a great deal – The Fortress IPO – need we say more? (Well, yes – are these people stoned?)
    2. Everybody and their mother is getting into the business – From Madeleine Albright to Boyz II Men
    3. As the naive newbies are plunging in, the successful early adopters move on to the next big thing – “Spectrem Group, which tracks the spending and investing habits of the very wealthy, in January reported that those individuals with household net worth of more than $25m have recently cut back sharply on their hedge investments. The percentage of such homes with hedge-fund investments fell from 38 per cent in 2005 to 27 per cent in 2006. Generally speaking, the truly, filthy rich are truly, filthy rich because they know something you and I don’t,” writes Gross.
    4. In the late stages, the investment craze crosses over into the broader consumer culture – Witness the Kenneth Cole hedge-fund shoe, in black, of course – because brown shoes will get you fired.
    5. Hollywood starts to take notice – “If there’s one group of businesspeople that is even slower on the uptake when it comes to hot trends than politicians, it’s Hollywood executives. Which is why television shows are often excellent signs that a bubble is popping,” writes Gross. He cites the follow-fashion television show, the $treet, that premiered at the height of the tech bubble in 2000 – and was cancelled a few months later, “when the American public suddenly fell out of love with stocks.” Now, Doug Ellin (of HBO’s Entourage), is developing another HBO series based on a hedge fund.

Posted: February 13th, 2007 under Equities, Gambling, General.
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