Tremendous

An angel investor's take on life and business

  • Hedge Fund Giant D1 Loses $7 Billion in 2022

    Yet another massive crossover hedge fund is facing serious losses. New York-based D1 Capital Partners has lost approximately $7 billion this year.

    From a Bloomberg report that broke yesterday:

    …D1 has told investors who selected a 50-50 mix of public and private assets that the strategy lost 23% through May. The firm attributed most of the damage to public investments, which fell 44%. It marked down private assets only 8% — including 0.05% last month.

    This 50-50 mix was the most common choice for D1 investors.

    D1 still has about $17 billion in private equities and $7 billion in public stocks, implying losses of about $5.5 billion and $1.5 billion respectively. The firm’s total loss for 2022 alone appears to be about $7 billion.

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    D1’s losses, large as they are, are probably severely understated.

    It has marked down its private company stocks by only 8%. However, the Refinitiv Venture Capital Index is down 47% for the year.

    If D1’s portfolio mirrors the broader markets, the real losses on this $17 billion pile of private company stocks could be billions more.

    To make things even more interesting, D1 borrowed billions and poured it into illiquid private company shares. From Bloomberg:

    Hedge funds were tallying gains on their hottest bet in years when Dan Sundheim reached an unusual deal with JPMorgan Chase & Co. to go even further.

    With the bank’s help in August 2020, Sundheim’s D1 Capital Partners used its stakes in private companies as collateral for borrowing $2 billion that the firm could put toward yet more of those stakes, among other things. Last year that focus on private companies looked brilliant, as D1 updated its valuations and posted a whopping 70% gain in that part of its portfolio.

    Now, the industry is bracing for a reckoning.

    I invest in startups myself, but I would never borrow money to do so.

    Borrowing money to invest in tech startups is completely reckless. These companies are volatile, speculative, and illiquid.

    It’s telling that the best venture capital firms in the business, like Sequoia and Benchmark, don’t play these shell games to boost returns.

    Losses for crossover hedge funds like D1 are so severe that some cannot even meet redemption requests from investors:

    In the starkest sign yet of the strain on hedge funds, Tiger said last week that it couldn’t continue to fill redemptions the normal way because so much of its portfolio was invested in hard-to-sell stakes in private companies. As the firm saw losses and some redemptions in the first quarter, it exited 83 stocks. Now if investors want to pull money from Tiger’s hedge and long-only funds, a portion of the liquid assets will be sold, but private investments will be placed in a separate account to be cashed out later.

    I expect a similar move at D1 soon.

    This isn’t the first time D1 has gotten itself into trouble.

    According to a report in The Wall Street Journal, it lost 30% of its public portfolio in January 2021. As meme stocks soared, D1 was badly burned by short positions.

    The overall impression I have of D1 is of a reckless firm casting about in vain for a winning strategy. It rushed into venture capital with a risky and untested scheme, then lost a fortune betting against volatile meme stocks.

    Were I an investor in the firm, I’d be asking for my money back. The question is: can you get it?

    What do you think of D1’s losses? And who do you think is next?
    Leave a comment at the bottom and let me know!

    This is the last blog for this week. There will be no blog next week — I’m heading off for a vacation!

    See you on Monday, June 20th. Have a great weekend! 👋

    More on markets:

    Hedge Fund Tiger Global Losing $136 Million a Day, Down 52%

    $6B Hedge Fund Cut Off from Trading As Investigation Looms

    Citadel Adds Millions to AMC Options Bet

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    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    Photo: “the Great Hedge Fund Hei$t” by eyewashdesign: A. Golden is licensed under CC BY-NC-ND 2.0.

  • Managing a Crisis the Sequoia Way

    Control what you can control. Be steady but decisive. And most importantly, build a sustainable business where you are in control of your destiny.

    Roelof Botha, Sequoia Capital



    Lately, I’ve been seeing something I’ve never seen before in the eyes of some of the founders I meet: desperation.

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    Fundraising is increasingly difficult, tech has gotten crushed and the economy is almost surely in recession. Companies that were doing great just a few months ago are staring death in the face.

    With that in mind, I spent this afternoon digging into Sequoia Capital’s recent presentation on what the downturn means for startups.

    It offers the best advice available for startups navigating this difficult market. Sequoia’s partners advise startups to be prepared to cut back to ensure survival, if necessary.

    If your runway (time until you run out of money) is getting short, you may have to make painful cuts in spending.

    Do the cut exercise (projects, R&D, marketing, other expenses). It doesn’t mean you have to pull the trigger, but that you are ready to do it in the next 30 days if needed.

    Doug Leone, Sequoia Capital

    Sequoia also emphasizes that this crisis offers many opportunities. Many companies are more focused once they cut back and hunker down for a bear market.

    What’s more, recruiting, which has been extremely difficult for many startups, is about to get much easier. As Leone notes, all of the FANG companies have hiring freezes.

    This means startups can have their pick of the best possible people.

    Even better yet, some of your competitors are about to go out of business! But if you carefully manage cash, you’ll survive and have a chance to dominate your market.

    Look at this as a time of incredible opportunity. You play your cards right and you will come out as a strong entity.

    Roelof Botha

    This downturn doesn’t mean that you have to stop growing. But it may mean paring back side projects to focus like a laser on driving efficient growth in your core business.

    You can still sign up customers in a downturn if you have a strong value proposition. Since I mostly invest in SaaS, I found this passage on proving value to business customers especially helpful:

    Three reasons why people buy regardless of market conditions (enterprise POV):

    ● Drive growth

    ● Save money (real, hard ROI)

    ● Reduce risk

    ● Everything else is fluffy “

    Carl Eschenbach, Partner, Sequoia Capital

    Finally, it’s important to remain hopeful even if things get hard!

    “Whatever we are facing today, it can’t be any worse than the uncertainty we faced at the beginning of the pandemic. We will prevail.”

    Alfred Lin, Partner, Sequoia Capital

    You created your company for a reason. You have a mission to fulfill.

    A downturn doesn’t change that. You just have to manage it correctly and seize the opportunity it presents.

    The very best of luck to all you brave founders!

    What challenges are you seeing in startupland today? Leave a comment at the bottom and let me know!

    More on tech:

    TALKING STARTUPS AND TODAY’S FUNDRAISING PULLBACK

    TALKING ABOUT TODAY’S STARTUP MARKET ON THE ACCELERATOR PODCAST

    THE BURN MULTIPLE: WHAT IS IT, AND WHAT CAN IT DO FOR YOU?

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    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    Photo: “Sequoia Capital” by isriya is licensed under CC BY-NC 2.0.

  • SEC May End Payment for Order Flow

    The SEC may soon propose an end to payment for order flow. This controversial practice lets market makers buy the right to execute trades, particularly those of retail investors.

    From a report that broke in The Wall Street Journal last night:

    Chairman Gary Gensler directed SEC staff last year to explore ways to make the stock market more efficient for small investors and public companies. While aspects of the effort are in varying stages of development, one idea that has gained traction is to require brokerages to send most individual investors’ orders to be routed into auctions where trading firms compete to execute them, people familiar with the matter said.

    The SEC’s proposed trading changes could take effect later this year or in early 2023:

    After a year of internal deliberations, the agency has homed in on a narrowing set of proposals. If the SEC votes to release them for public comment later this year, they would have a path to implementation, as Democrats hold a majority of seats on the commission.

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    Market makers competing against each other to offer the best price should be much fairer than the current system. Today, large market makers like Citadel Securities can pay brokers like Robinhood Markets for the right to execute trades.

    Citadel and other major firms may be dragged kicking and screaming into this fairer market:

    A spokesman for Citadel Securities said the firm looks forward to reviewing the SEC’s proposals and working with the agency.

    “It is important to recognize that the current market structure has resulted in tighter spreads, greater transparency and meaningfully reduced costs for retail investors,” the spokesman added.


    Citadel’s spokesman conveniently fails to mention that the firm was fined $22 million by the SEC for not giving investors the best price on their trades.

    But in fairness, one study found that payment for order flow has resulted in lower costs. Those payments have let many brokers reduce their commissions to zero.

    Despite zero commissions, the price brokers give investors may be so bad that the investor loses in the end.

    Brokers claim that payment for order flow trades are being executed at the best available price. But to this day, I’ve never seen a broker release a data set proving it.

    An auction model is much more transparent. It could go a long way to restoring retail investors’ confidence in financial markets.

    What do you think of payment for order flow? Leave a comment at the bottom and let me know!

    More on markets:

    Hedge Fund Tiger Global Losing $136 Million a Day, Down 52%

    $6B Hedge Fund Cut Off from Trading As Investigation Looms

    Credit Suisse May Need Up to $1 Billion After Huge Losses

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    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    Photo: “CMI 101: Demystifying Derivatives with CFTC Chairman Gary Gensler” by Third Way is licensed under CC BY-NC-ND 2.0.

  • A Special Weekend in Stokes State Forest

    I walked up the cracked country road, wildflowers on either side. The birds sang and a rustle in the bushes made me turn my head.

    A chipmunk! The little grey man stood still, awaiting my next move.

    I tried to get a picture, but he was too fast!

    This weekend I had the joy of visiting Stokes State Forest in northwestern New Jersey. Our state may be known for chemical plants and garbage dumps, but in these verdant woods, you’d never know it.

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    The land undulates gently, slowly rising into broad, thickly wooded mountains. Tucked away in that woods was our campsite.

    I returned to our temporary homestead after my stroll, dropping into my lawn chair with a groan. Burgers sizzled on the grill.

    After a wonderful dinner and many laughs with friends, I retired to my tent on the edge of the forest. There’s something peaceful about making your bed in nature.

    Stokes State Forest has excellent camping facilities that I’d recommend to anyone.

    There are real bathrooms nearby, and they’re actually clean! The dispensers always have soap, a rare amenity in the woods.

    A short drive away were the showers, and I felt like a new man after lathering up there on Saturday!

    The campsites themselves are spacious and provide a good distance between you and other campers. But the water might be the best thing of all!

    Stokes has an artesian well that provides some of the best-tasting mineral water you’ll ever drink! Locals who aren’t even camping drive into the forest to fill dozens of plastic bottles from this pristine spring.

    When we’re camping, my friends and I don’t have to worry about getting home. Home is a tent just a few feet away!

    There is no other time in this hectic modern world where I get to spend days at a time with some of my favorite people. That’s why camping is special.

    If you’ve never camped, give it a try! Stokes is just over an hour from New York City and its natural beauty is more than worth the trip!

    What are some of your favorite experiences in nature? Leave a comment at the bottom and let me know!

    More on the outdoors:

    How Camping Is Improving My Life

    Pine Barrens Glamping in Brendan Byrne State Forest

    My Camping Essentials: The Basics, The Wishlist, And The Things I Never Thought I’d Need But Can’t Live Without

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    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Dealgrace: Uber for Everything Else

    Uber is great for rides and food. But what if you need an oil change?

    You’re stuck wading through Google listings and making phone calls, trying to find an affordable option that isn’t 20 miles away. Until now.

    Dealgrace is basically Uber for everything else. Request an oil change through the app and you get a text within minutes with an excellent price at a shop near you.

    Dealgrace can help you with auto repair, home repair, moving, even finding a dentist! It replaces the painful, time consuming process of comparison shopping with a slick app that gets you what you need right away.

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    The team at Dealgrace carefully vets every business on the platform to be sure you get awesome service. And the prices are very hard to beat.

    I think the opportunity for Dealgrace is huge and I’m delighted to be an investor in their recent seed round. They’re live in over a dozen cities so far and are adding more every day!

    Check out Dealgrace and save yourself time and money!

    More on tech:

    Have a great weekend everybody! 👋

    Why Tech Stocks Are Oversold

    Talking Startups and Today’s Fundraising Pullback

    The Autonomous Weapons of the Future…and Present

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    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Hedge Fund Tiger Global Losing $136 Million a Day, Down 52%

    The pain continued in May for Tiger Global Management. The hedge fund giant is losing money at a rate of over $130 million a day and most of its capital is gone.

    From a Bloomberg report that broke this morning:

    Losses at Tiger Global Management reached 52% this year, prompting the firm to cut management fees and create separate accounts for the illiquid wagers of customers who want to redeem. 

    The firm’s hedge fund sank 14.2% last month, buffeted by losses in several stocks and substantial markdowns in its private assets, according to an investor letter seen by Bloomberg and a person with knowledge of the matter. 

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    This comes after massive losses in April:

    By April, the hedge fund’s 44% tumble, along with losses in its long-only and crossover funds, wiped out about $16 billion.

    These figures put Tiger’s capital at the beginning of 2022 at around $36 billion. After April’s loss, a further 14% slide in May represents a $2.9 billion wipeout for the month.

    May’s losses came to about $136 million per trading day. Every day.

    As colossal as these losses are, they may be an underestimate of the true damage. Tiger has taken markdowns on its shares in private tech startups, but we have no way of knowing if those markdowns reflect reality.

    Another large late stage investor, Fidelity, has taken only minor markdowns on its portfolio, including a 13% haircut on Stripe. Block, a similar fintech giant that happens to be publicly traded, is down 70% from its August high.

    Tiger too may be engaging in this sort of wishful thinking.

    If that wasn’t bad enough, Tiger may soon face attack from other hedge funds. It has allowed investors to pull out more money than usual, which will require huge stock sales.

    Other funds are likely to short Tiger’s positions, knowing that Tiger has to sell regardless of price. This could make Tiger’s losses even worse.

    So what’s next for Tiger? Their high-water mark means that until the fund recoups all its losses and a lot more, fees will be minimal.

    Those fees pay the fat bonuses hedge funders are used to. Without them, many employees may jump ship.

    Indeed, Tiger could shut down completely, daunted by the need to more than double their fund just to get back in the black. Melvin Capital Management recently closed after facing a long future with no juicy performance fees.

    I expect to see Tiger’s losses grow as other funds attack its positions. However, a sudden, major run-up in tech stocks could save them at the last minute.

    One thing I do know: I’m glad I don’t have any money in Tiger.

    What do you think lies ahead for Tiger? And what hedge fund will be next?

    Leave a comment at the bottom and let me know!

    More on markets:

    Hedge Fund Giant Tiger Global Losing $28 Million an Hour

    $6B Hedge Fund Cut Off from Trading As Investigation Looms

    Citadel Adds Millions to AMC Options Bet

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    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    Photo: Tiger Global CEO Chase Coleman

  • Why Tech Stocks Are Oversold

    It’s no secret that tech stocks have gotten kicked in the face in the last 6 months. The NASDAQ index of tech stocks is down 26% since November:

    I’m convinced that public tech stocks are oversold right now. That’s been my gut feeling for at least a month, but today I came across some fascinating statistics.

    Sequoia Capital, the best venture capital firm in history, released some stunning figures in a recent presentation to its founders:

    – “61% of all software, internet and fintech companies are trading below pre-pandemic 2020 prices”

    – “That’s despite many of these companies more than doubling both revenue and profitability”

    – “⅓ are trading below COVID lows, when uncertainty and fear was peaking”

    “- Growth-adjusted multiples [valuation divided by revenue] have fallen even further and are well below the 10-year average and pushing the 10-year lows”

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    If a company doubles its revenue and profits but actually trades for less money than before, that is a bargain! If you liked it at $100 a share and $10 a share in earnings, for example, you have to love it at $75 a share and $20 in earnings!

    But what about interest rates?

    The NASDAQ is actually cheaper now than it was when the federal funds rate hit its recent peak in July 2019. At that time, the NASDAQ had a PE ratio of around 30 with the federal funds rate at 2.4%.

    The current federal funds rate is a paltry 0.33%. Even if you look at rate expectations, they’re only around 2.8%.

    Meanwhile, today’s NASDAQ PE is just 22.

    And don’t forget, the Fed may not raise rates as much as expected.

    Companies are laying off workers, the economy is on the edge of recession, a war is raging in Europe and COVID may return in the fall. There are many potential reasons why the Fed could back off.

    Could tech stocks fall further? Absolutely.

    But with every company and household pulling back at once, I think inflation will begin to moderate soon. And if it does, the Fed has a lot less reason to raise rates further, putting more pressure on tech stocks.

    Fundamentally, here’s the question you have to ask yourself:

    “Do I think the value of technology companies will be greater in 20 years or less in 20 years? Will they have more innovative products and paying customers, or fewer?”

    The answer is obvious. Technology has transformed every industry and will continue to do so, resulting in massive profits.

    And I want to be there when it happens.

    What do you think is ahead for tech stocks? Leave a comment at the bottom and let me know!

    More on markets:

    Hedge Fund Giant Tiger Global Losing $28 Million an Hour

    $6B Hedge Fund Cut Off from Trading As Investigation Looms

    Credit Suisse May Need Up to $1 Billion After Huge Losses

    Never miss a post…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    Photo: “Nasdaq Take 4” by bfishadow is licensed under CC BY 2.0.

  • Credit Suisse May Need Up to $1 Billion After Huge Losses

    Credit Suisse may soon raise over $1 billion in new capital after a string of huge losses last year. From a Reuters report this morning:

    Credit Suisse is in the early stages of weighing options to bolster its capital after a string of losses has eroded its financial buffers, two people with knowledge of the matter told Reuters.

    The size of the increase would be likely to exceed 1 billion Swiss francs ($1.04 billion), but this has not yet been determined, said one of the people, who declined to be named because the deliberations are still internal.

    The cash injection would help Switzerland’s second-biggest bank to recover from billions of losses in 2021 and a series of costly legal headaches.


    Credit Suisse lost $5.5 billion last year just in trades with failed hedge fund Archegos Capital Management. It has since closed the prime services business that serviced Archegos and other funds.

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    Risk controls have been almost nonexistent at the Zurich-based bank. Big dealmakers have routinely overruled compliance staff, with predictable results.

    In my view, Credit Suisse would not be seeking to raise capital in this bear market unless it badly needed it. Stocks are crashing, the IPO market is closed, and bond markets are volatile.

    If the Reuters report is accurate, I suspect Credit Suisse is getting desperate.

    If Credit Suisse is in a bind, investors are apt to drive a hard bargain. The terms of a financing may be punitive, if it happens at all.

    Any new equity financing would also dilute existing shareholders, making their shares worth less. Those shareholders are already reeling from a 37% loss in the last year.

    The best way for Credit Suisse to avoid scandals and massive losses in the future is to change its employees incentives. When a banker that brings in a big deal gets a huge bonus and a promotion regardless of how risky the deal is, other bankers take note.

    Rather than compensating employees for individual success, Credit Suisse should take a page out of Silicon Valley’s playbook.

    Tech companies incentivize employees to work together for the long term success of the business by granting equity. This equity often comes in the form of Restricted Stock Units (RSU’s) that vest over 4 years.

    Employees only win if the business as a whole wins. And there’s no incentive to make a reckless deal for a short-term pay-off.

    I’ll be closely following any Credit Suisse fundraise. But even billions more in fresh capital won’t change the bank’s dysfunctional culture.

    Do you think Credit Suisse is in trouble? And what other financial institutions could be next?

    Leave a comment at the bottom and let me know!

    More on markets:

    This Is Why Credit Suisse Keeps Getting Punched in the Face

    $6B Hedge Fund Cut Off from Trading As Investigation Looms

    Citadel Adds Millions to AMC Options Bet

    Never miss a post…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    Photo: “Image” by eflon is licensed under CC BY 2.0.

  • Hedge Fund Ponzi Scheme Steals $39 Million from Investors

    Another day, another hedge fund scandal. The SEC announced charges this week against a Detroit hedge fund for bilking investors of tens of millions of dollars.

    From Financial Advisor magazine:

    The Securities and Exchange Commission today announced fraud charges against Detroit-based EIA All Weather Alpha Fund Partners I LLC (EIA) and its sole owner, RIA Andrew M. Middlebrooks, for an alleged multiyear Ponzi scheme that the agency said included the misappropriation and loss of nearly $39 million in investor funds.


    The commission said in its complaint that from at least mid-2017 to April 2022, EIA and Middlebrooks deceived investors in their hedge fund, the EIA All Weather Alpha Fund I LP, by making false and misleading statements that “wildly” misstated the fund’s performance and total assets. The SEC also said in the complaint that the fund and Middlebrooks provided falsified investor account statements, misrepresented that the fund had an auditor and created and disseminated a fake audit opinion to investors.


    In addition to being a rotten trader, Middlebrooks had a taste for the finer things in life. He paid for them with investor money:

    Middlebrooks also misappropriated investor funds for personal use, allegedly transferring at least $470,000 to his wife’s business, making more than $750,000 in transfers to his personal bank account and using $64,000 in investor money to pay for jewelry, the agency said.

    It seems likely that his victims will lose their entire investment:

    “Middlebrook’s losing trading strategy coupled with his misappropriation has resulted in near total loss of investor funds,” the SEC said.

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    The hedge fund describes itself rather differently on its website:

    We are active investors, not closet indexers, and we have structured an investment process and environment that enables us to be disciplined, to be patient and to exercise good judgment.

    It turns out investors would have been far better off with that boring index fund. Indeed, they form the core of my portfolio.

    The fund’s LinkedIn profile comes closer to telling the truth:

    This intellectual framework allows the Portfolio Manager to manage the Fund unencumbered by emotions or inherent bias.

    Emotions definitely didn’t stop Middlebrooks and his cronies from bilking unsuspecting investors.

    I was able to find what appears to be the actual slide deck that Middlebrooks used to pitch investors. The scariest part about it is that the pitch seems fairly plausible, proposing a long/short strategy that combines value and momentum.

    https://www.slideshare.net/AndrewMiddlebrooks/ei-all-weather-alpha-partners-fund-i-lp

    In addition to their thieving, it appears that EIA partners were paid well. Glassdoor records total compensation of $254,000.

    I guess that wasn’t quite enough to cover their expensive tastes.

    We see one case of shady behavior after another in the hedge fund world. The SEC and DOJ need to step up and start seriously scrutinizing these funds.

    I’m as pro-free enterprise as anyone you’re likely to meet. But fraud doesn’t qualify.

    As Memorial Day approaches for those of us in the United States, one of the more patriotic things we can do is to safeguard that free-enterprise system by purging its bad actors.

    What do you think will be the next hedge fund to fall? Leave a comment at the bottom and let me know!

    There will be no blog on Monday for the holiday. Have a great Memorial Day weekend everyone! 🥳🇺🇸

    More on markets:

    $6B Hedge Fund Cut Off from Trading As Investigation Looms

    Hedge Fund Giant Tiger Global Losing $28 Million an Hour

    Citadel Adds Millions to AMC Options Bet

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    Photo: EIA Alpha Partners CEO Andrew Middlebrooks

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    Fundrise

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  • Talking About Today’s Startup Market on The Accelerator Podcast

    I had the pleasure of chatting with angel investor Michael Conniff on his The Accelerator podcast recently! We talk about how to find a great startup to invest in, some of my recent investments, and the robot pizza future.

    I’ve provided some links to key parts below. Enjoy!

    3:28: What I look for in a startup

    4:50: The technique for judging startups quickly that I learned from Jason Calacanis

    6:31: Why I like SaaS

    7:00: Problems with D2C companies

    9:00: Why I invested in VADE, which is changing parking forever

    13:29: My recent investment in Fathom, which is letting us search podcasts the way we do text

    15:52: Why I invested in Capbase, the best way to start your start-up

    19:17: Will robots make our pizza in the future? 🍕

    22:35: Why I started this blog

    25:06: What sectors I invest in

    What did you like about the podcast? What did we miss?

    And would you like to see more podcast content like this? Leave a comment at the bottom and let me know!

    More on tech:

    Talking Startups and Today’s Fundraising Pullback

    Why Investors BS You

    Robot Pizzas and the Future of Fast Food

    Never miss a post…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order.