August 12, 2008<br /><ul><li>Dear investors, dear friends:
Managing money tax-efficiently is getting more and more difficult and time-intensive. With a full-time job and a family I no longer feel able to dedicate enough time to take care of your money.
Furthermore I believe that, despite recent losses, most of the "pain" in equities markets is still to come, as banks are under tremendous pressure to reduce their balance sheets and credit is no longer available for a lot of companies and individuals. This must lead to a significant reduction in company earnings that will top the recessions of the years 2001/2 and 1991/2 by far.
The US equity market reached its peak in October 2007 - the bear market is not even a year old, and could last for a couple of years. A stabilization of house prices in the US is not expected before 2010 or 2011.
I therefore decided to liquidate HPF-funds after almost 23 years and return your money. I will begin selling our assets tomorrow and work out ways of returning cash with each investor individually.
Thank you very much for your long-lasting trust. I hope I will be able to manage money professionally at a later stage, as over the long term we have outperformed our benchmarks systematically and substantially.
With best regards,</li></ul>2<br />(c) Lighthouse Investment Management<br />3/24/2010<br />
August 15, 2008 – March 12<br />3<br />(c) Lighthouse Investment Management<br />3/24/2010<br />
Just 3 bits of information<br />4<br />(c) Lighthouse Investment Management<br />3/24/2010<br />Consumer = 2/3of GDP<br />Impact of MEW on GDP<br />Future of residential home prices (Whitney Tilson)<br />Ignore everything else (e.g. Bernanke, Paulson)<br />
“Person of the Year” 2009:<br />5<br />(c) Lighthouse Investment Management<br />3/24/2010<br />
Statements by Paulson/Bernanke<br /><ul><li>July 12th, 2007 – Paulson: "This is far and away the strongest global economy I've seen in my business lifetime.”
August 1st, 2007 – Paulson: "I see the underlying economy as being very healthy,“
October 15th, 2007 – Bernanke: "It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions.“
February 14th, 2008 – Paulson: (the economy) "is fundamentally strong, diverse and resilient.“
February 28th, 2008 – Paulson: "I'm seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street.“
February 29th, 2008 – Bernanke: "I expect there will be some failures. I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.“
March 16th, 2008 – Paulson: "We've got strong financial institutions . . . Our markets are the envy of the world. They're resilient, they're...innovative, they're flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong."</li></ul>6<br />(c) Lighthouse Investment Management<br />3/24/2010<br />
Statements by Paulson/Bernanke<br /><ul><li>Mar 18th, 2008 - Bear Stearns Bailout Announced
May 7, 2008 – Paulson: 'The worst is likely to be behind us,”
May 16th, 2008 – Paulson: "In my judgment, we are closer to the end of the market turmoil than the beginning," he said.
June 9th, 2008 – Bernanke: Despite a recent spike in the nation's unemployment rate, the danger that the economy has fallen into a "substantial downturn" appears to have waned.
July 16th, 2008 – Bernanke: (Freddie and Fannie) “…will make it through the storm”, "… in no danger of failing.","…adequately capitalized“
July 20th, 2008 – Paulson: “It's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation."
August 10th, 2008 – Paulson: ``We have no plans to insert money into either of those two institutions.” (Fannie Mae and Freddie Mac)
Sept 8th, 2008 - Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated 1 - 1.5 trillion dollars. Over 5 trillion is added to the nation’s balance sheet.
September 16th, 2008 - $85 Billion AIG Bailout “Loan”
September 19th, 2008 - $700 Billion Bailout Plan Announced </li></ul>7<br />(c) Lighthouse Investment Management<br />3/24/2010<br />
Commodities: Gold<br />61<br />(c) Lighthouse Investment Management<br />3/24/2010<br /><ul><li>All gold ever mined (163k t) would fill only 1/3 of Washington Monument (17% available for investing)
Storage (bankrupt bank, at home, securitized, abroad)
Low volatility</li></li></ul><li>What NOT to expect <br />87<br />(c) Lighthouse Investment Management<br />3/24/2010<br /><ul><li>Tracking performance of stock indices like Dow Jones or S&P 500 (cheaper ways to do that, e.g. SPY)