Off-Topic Friday: A Hedge Fund Roach Motel?

Since this blog is dedicated to the pursuit of commercial and residential cash flow properties, I want to introduce a new feature this week that will let me stray and post my observations on various things that have happened throughout the week that don’t relate to real estate.

I’m calling it Off-Topic Friday, although because of the holiday I’m posting a day early.

Today there are a couple of items to review:

Item #1: Rush Limbaugh Signs New $400 million Deal Through 2016

I dare say that except for that abortion called Air America, one of the toughest, bare knuckle free markets on the planet is functioning quite nicely. And that’s commercial radio. Why? Because on radio (except for Air America and NPR of course), you get paid in DIRECT proportion to the value that you create. And this contract is a beautiful thing – because it demonstrates perfectly that the market is working like it should because it passes the ultimate test – someone was willing to take money out of their pocket and give it to someone else.

More incredibly though – think about the radio network that signed the contract. Their total take will probably end up north of $800 million. A very nice margin indeed.

Item #2: Grasso Gets What He Negotiated! Spitzer Cries “UNFAIR!”

One of my pet peeves is all the talk about “fairness”. This has to be fair. That has to be fair. The problem is, who the hell is the arbiter of “fair”? I have always STRONGLY held the position that you don’t get what’s fair or what you “deserve” (don’t get me started on THAT one).

You get what you NEGOTIATE. Why is this so hard to understand?

And in the spirit of getting what you negotiate, I direct your attention to Mr Dick Grasso – former Chairman of the New York Stock Exchange. It seems that Mr Grasso negotiated a compensation package of – get this – $187 million for his tenure at that head of the NYSE from 1995 to 2003. $20 million and change per year. Not bad.

Well it seems that Eliot Spitzer, before he – ahem – got caught with his pants down as “Client #9”, sued Grasso because his pay was excessive.

Excuse me??? Maybe I’m confused, but shouldn’t you be suing the guy that signs the checks and NOT the guy cashing them? Spitzer didn’t agree and sued Grasso anyway.

A New York appeals court ruled this week that Grasso gets to keep what he negotiated. Good for him.

And finally,

Item #3: The Hedge Fund Roach Motel – Investors Check in but They DON’T Check Out.

This is no joke. The Wall Street Journal reported earlier this week that a noted hedge fund, Ritchie Capital Management, that just last year had to beat investors with a stick to keep them away is NOW saying that the investors that are in CAN’T get their money out. How’s that for irony? Oh and by the way – the fund has lost 50% of it’s value in the last 2 years.

All the more reason why you should be investing LOCALLY. Where you can sit across the table from the person that you’re investing with – and here’s a RADICAL concept – actually TOUCH the thing that you’re investing in. (This is a not-so-subtle pitch for my Great Lakes Investment Fund. You can see more here: Fixed, stable, and secured returns. With no Hedge Fund or Private Equity guys anywhere to be found.)

Have a good weekend and let’s not forget what we celebrate on July 4th.