Life is “solitary, poor, nasty, brutish, and short.” Thomas Hobbes might say the same about life in the stock market for hedge fund managers. The mortality rate found in the hedge fund world is extremely high; it is an ecosystem that is filled with predators and would-be predators. By mid-2007, an estimated 9,700 hedge funds controlled approximately $1.7 trillion in assets. According to Hedge Fund Research, 1,518 launched in 2006 and nearly as many called it quits. The battle for investment survival mirrors Hobbes’ State of Nature found in his …

A few days ago, I remarked how precariously positioned the investment banks had become. Today, we witnessed something spectacular as these once proud institutions accelerated their fall. Bear Stearns (BSC) will be taken over in a fire sale for approximately $2 per share by JPMorgan Chase & Co. (JPM) with backing from the Federal Reserve. Lehman Brothers (LEH), which has a similar business model to Bear, saw its stock take a dive on fear that it too faces liquidity problems.
Yesterday, Fed chair Ben Bernanke took the unusual step of lowering …

Bear Stearns plunges amid trade risk worries – Bear Stearns (BSC) was a pathfinder in the securitization of mortgages, but its over-reliance on mortgage-backed securities led to big losses in a couple of its hedge funds. Now external hedge funds, clients of its prime brokerage, are fleeing in droves for fear the bank lacks sufficient cash or liquidity. Oh how our mighty investment banks have fallen. Funny how the top in these stocks coincided with record numbers of MBAs coming out of our business schools to join the likes of …