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From Barron's 10/05/1998:
Hey, Hedge-Fund Fans, Here's Quite a Deal By BENJAMIN J. STEIN and PHIL DEMUTH D ear Friend: This will reply to your expression of interest in becoming a limited partner in The Friends in High Places Fund, hereinafter called "The Fund," an aggressive investment vehicle that seeks to exploit differences in the prices of similar but differently priced assets and liabilities, and to trade large amounts of them to distribute risk and to make profits beyond avarice. Although to invest in The Fund you must meet certain strict guidelines, which will be spelled out in a mind-numbingly long and densely phrased document available from our lawyers, the basic requirements are these: • A net
worth of $20 million exclusive of first home, second home and
polo ponies. The Fund will operate from a proprietary computer-driven arbitrage trading model developed by mathematicians and physicists from the atomic weapons program of the former Soviet Union, using a computer of the same power (the "People's Vengeance on Capitalist Hyenas 6600Z") as was used to simulate the effects of the explosion of a 60-megaton device over lower Manhattan. Our strategy: The Fund will, for example (and not to be divulged publicly), trade, buy or sell very large quantities of Uzbekistan state bonds, while at the same time buying or selling municipal improvement bonds or notes of Ouagadougou, capital of Burkina Faso. Or, to use an example closer to home, we will buy or sell large quantities of antique Coca-Cola trays while simultaneously buying or selling similar amounts of classic 1966 red Ford Mustangs. All of The Fund's trades will be fully hedged, using a method devised by rocket scientists in the former Soviet Union who developed the still-formidable SS-29 (a/k/a "Workers' Honest Vengeance on Wall Street Bloodsuckers, Parasites and Running Dogs") ICBM with multiple independently targeted warheads. This method of hedging, known as the "Tovarishchi Droogi," involves the purchase or sale of an entity and the simultaneous cutting in of a high government official or close friend of a high government official in the trade's profit at no cost to the official or friend. Other funds have sought to utilize this method by employing and involving highly placed personages in their funds' operations. But we believe that The Fund has carried this concept to a previously unheard-of level. We will have on our board of advisers ("The Board") not only Nobel prize winners in economics, but also Nobel Peace Prize winners, the children of the Lubavitcher Rebbe ("The Rebbe"), close colleagues of The Holy Father ("The Father"), persons from The Holy See ("The See"), and at least two members each of the Supreme Court ("The Court") and the Securities and Exchange Commission ("The Commission"). While past performance doesn't guarantee future results, The Fund believes, based upon our trading history while the fund was run privately by its two founders, Phil DeMuth and Ben Stein ("DeMuth" and "Stein"), that with a reasonable degree of risk, The Fund can deliver returns of not less than half of those obtained by investing in a no-load, no-fee S&P 500 Index fund. The Fund cautions, however, that, in some years, all of the invested principal of the partners can be wiped out by occurrences not known at present. However, the notional value of the invested funds is hedged by The Fund's unique Dinner Table Guarantee ("The Guarantee"). The Guarantee states that even if all of the investor's contributions are wiped out, the fellow investors in the Fund (also wiped out) will be such famous and interesting personages ("The Personages") that the investor will be able to dine out on stories of his losses with them forever. Investments in The Fund are in units of not less than $1,000 with a minimum investment of 10,000 units. Please call us to arrange for lunch at your club to discuss this investment. We expect it to be sold out within two weeks. Sincerely, Benjamin J. Stein and Phil DeMuth
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