Hedge Crunch Financial

In an insightful and timely article written for Forbes.com, Alan Quasha of Quadrant Management expresses more than a little dismay at the state of current finances of the United States government. Quoting Thomas Jefferson, who wrote in a letter in 1802 to his Treasury Secretary, “We might hope to see the finances of the Union as clear and intelligible as a merchant’s books, so that every member of Congress and every man of any mind in the Union should be able to comprehend them, to investigate abuses and consequently to control them.” Quasha points out that Jefferson would be very disappointed indeed at the present state of affairs of the federal government.

Only with tremendous exertion could a comprehensive financial statement including income, balance sheet and cash flow report be published by our government today.

Quasha explains that the Office of Management and Budget prepares the annual budget through the executive branch, while the Congress also determines the budget through the Congressional Budget Office. But these budgets are not comprehensive since they only address cash flow which helps the government recognize whether there was a deficit or surplus.

This type of analysis is certainly useful, but it is not complete. Billions of dollars are spent each year for liabilities which, although not yet due, will be coming due in the future.
The true amount of accrued spending is hardly ever reported. This figure can only be discovered through the perusal of another document which the U.S. Treasury publishes. A hard look at this figure reveals a fact which is shocking; in addition to the fact that the real deficit is consistently underreported, the deficit is dangerously high.

Optimism has taken hold of hedge fund managers lately as the major indexes, such as the Eurekahedge Fund Index and MSCI World Index show gains in the month of July. This month’s gain continues a 5 month upward trend for hedge fund managers.

According to the Eurekhedge Index, July posted a 2.1 percent gain, while the MSCI showed a remarkable 8.4% rise. The year to date improvement comes to 12 percent for the Eurekahedge and 14 percent for MSCI.

Hedge fund managers are feeling relief to finally be leaving the difficult times of the 2008 financial markets. They are hopeful that the rest of 2009 will leave the recession behind in the dust bowl of history. Many analysts view 2008 as the worst economic downturn since the Great Depression of late 1929 and the 30′s.

We expect some of the hedge fund managers we have been covering to react to the hopeful news, and we will keep you posted as to what Gregg Hymowitz of EnTrust Capital has  to say about the current economic trend.