Hedge Funds Need No Oversight
Marc Lasry is one of the pioneers of the distressed securities market, which has been the exclusive focus of his professional career. Marc is a Founder and Managing Partner of Avenue Capital Group, the distressed fund manager with assets totaling over $5 billion.
He is also the Founder and Senior Managing Director of Amroc, one of the largest broker/dealers of distressed securities. Prior to operating Amroc as an independent entity, Marc and Amroc were affiliated with Acadia Partners L.P., an investment partnership whose general partners include Keystone, Inc. (an investment partnership firm that was affiliated with the Robert M. Bass Group), American Express Company, and the Equitable Life Assurance Society of America.
Marc previously was Co-Director of the Bankruptcy and Corporate Reorganization Department at Cowen & Company. Prior to that time, he served as Director of the Private Debt Department at Smith Vasiliou Management Company.
Question: Why didn’t hedge funds require bailouts? (Arnold Kling, Econlog)
Marc Lasry: I think it's pretty obvious. I mean, there was no hedge fund that was leveraged 40 times. There's no hedge fund that was leveraged 20 times. So there was always this focus, because people I think focused on the individual investor, and people were worried about fraud within a hedge fund. It's amazing when you look at it, if you really look at sort of '08, even '07, if you look at the amount of money that was lost in hedge funds, just from fraud, right? Or funds blowing up and closing down. It was pretty de minimis. And when you look at what happened, I think, with financial institutions, the dollars that people talk about is sort of trillions of dollars. So -- and the reason for that is because of the leverage; it's not because of the equity that was involved. So I think on -- I think there was just a real lack of understanding, and it was easier to sort of pick on hedge funds because people believed that banks were safe. And I think what was clear, and what's been show, is that it's really the banks that needed the oversight, not the hedge funds.
Question: Is there too much emphasis on going public in the US? (Arnold Kling, Econlog)
Marc Lasry: Yeah, I mean, I think there is. I think part of the reason is there's a big focus on -- that people want to sort of monetize the value that they have in a company, and by doing that you go public. I think being private -- there's a huge amount of benefits in being private, but ultimately the reason people go public is to monetize and to capture that value.
Question: What do you think of the practice of managers taking a company private and then doing an IPO a few years later? (Arnold Kling, Econlog)
Marc Lasry: You can't blame the people for doing that. I think what ends up happening is, they're taking it private, and they think -- when somebody takes a company private, they believe they're doing it at a very good price. And the reason they're going to take it public is, they think they're going to get a much higher evaluation. So I think the vast majority of people in that same situation would probably do the same thing. Does that mean it's right? That's a different issue. But there's a huge amount of focus on sort of what people make. And as you look at that, I think that's why people end up taking companies public.
Question: Aside from capping salaries, is there anything the government should have done to make the American public feel better about the bailout?
Marc Lasry: Look, I think what they should have done was very simply said, we're putting our money in; we're going to be senior; we're going to get paid X; and we can end up doing anything we want until you take us out. I don't blame the government for sort of imposing things. I just think they've gone a little bit too far, because what they're doing now is dealing more with popular sentiment as opposed to sort of business reasons. And that's the real issue. It's that the government has its own pressures. It's hard for -- you know, if you're voting for your congressman and you're saying, well, you voted -- and that congressman votes on the bailout -- to say to that congressman, look, why is that person making $1 million a year? I don't think that's right. I'm out of a job. And if I bailed him out, I want to limit what he can make. Well, I get it, but what they should have done was say, we're putting in money; we're going to be an investor, and we're going to get paid. And if we don't get paid, then ultimately we're going to end up owning this company.
Recorded on December 4, 2009
Prior to the crisis, regulators were more concerned with hedge funds than with banks. Why didn’t the government bailout hedge funds? Avenue Capital chairman Marc Lasry explains.
Why do people with bigger hands have a better vocabulary? That's one question deep learning can't answer.
- Did you know that people with bigger hands have larger vocabularies?
- While that's actually true, it's not a causal relationship. This pattern exists because adults tend know more words than kids. It's a correlation, explains NYU professor Gary Marcus.
- Deep learning struggles with how to perceive causal relationships. If given the data on hand size and vocabulary size, a deep learning system might only be able to see the correlation, but wouldn't be able to answer the 'why?' of it.
One of the scientists with the Viking missions says yes.
- A former NASA consultant believe his experiments on the Viking 1 and 2 landers proved the existence of living microorganisms on Mars
- Because of other conflicting data, his experiments' results have been largely discarded.
- Though other subsequent evidence supports their findings, he says NASA has been frustratingly disinterested in following up.
Gilbert V. Levin is clearly aggravated with NASA, frustrated by the agency's apparent unwillingness to acknowledge what he considers a fact: That NASA has had dispositive proof of living microorganisms on Mars since 1976, and a great deal of additional evidence since then. Levin is no conspiracy theorist, either. He's an engineer, a respected inventor, founder of scientific-research company Spherix, and a participant in that 1976 NASA mission. He's written an opinion piece in Scientific American that asks why NASA won't follow up on what he believes they should already know.
Image source: NASA/JPL
Sunset at the Viking 1 site
As the developer of methods for rapidly detecting and identifying microorganisms, Levin took part in the Labeled Release (LR) experiment landed on Mars by NASA's Viking 1 and 2.
At both landing sites, the Vikings picked up samples of Mars soil, treating each with a drop of a dilute nutrient solution. This solution was tagged with radioactive carbon-14, and so if there were any microorganisms in the samples, they would metabolize it. This would lead to the production of radioactive carbon or radioactive methane. Sensors were positioned above the soil samples to detect the presence of either as signifiers of life.
At both landing sites, four positive indications of life were recorded, backed up by five controls. As a guarantee, the samples were then heated to 160°, hot enough to kill any living organisms in the soil, and then tested again. No further indicators of life were detected.
According to many, including Levin, had this test been performed on Earth, there would have been no doubt that life had been found. In fact, parallel control tests were performed on Earth on two samples known to be lifeless, one from the Moon and one from Iceland's volcanic Surtsey island, and no life was indicated.
However, on Mars, another experiment, a search for organic molecules, had been performed prior to the LR test and found nothing, leaving NASA in doubt regarding the results of the LR experiment, and concluding, according to Levin, that they'd found something imitating life, but not life itself. From there, notes Levin, "Inexplicably, over the 43 years since Viking, none of NASA's subsequent Mars landers has carried a life detection instrument to follow up on these exciting results."
Image source: NASA
A thin coating of water ice on the rocks and soil photographed by Viking 2
Levin presents in his opinion piece 17 discoveries by subsequent Mars landers that support the results of the LR experiment. Among these:
- Surface water sufficient to sustain microorganisms has been found on the red planet by Viking, Pathfinder, Phoenix and Curiosity.
- The excess of carbon-13 over carbon-12 in the Martian atmosphere indicates biological activity since organisms prefer ingesting carbon-12.
- Mars' CO2should long ago have been converted to CO by the sun's UV light, but CO2 is being regenerated, possibly by microorganisms as happens on Earth.
- Ghost-like moving lights, resembling Earth's will-O'-the-wisps produced by spontaneous ignition of methane, have been seen and recorded on the Martian surface.
- "No factor inimical to life has been found on Mars." This is a direct rebuttal of NASA's claim cited above.
Image source: NASA
A technician checks the soil sampler of a Viking lander.
By 1997, Levin was convinced that NASA was wrong and set out to publish followup research supporting his conclusion. It took nearly 20 years to find a venue, he believes due to his controversial certainty that the LR experiment did indeed find life on Mars.
Levin tells phys.org, "Since I first concluded that the LR had detected life (in 1997), major juried journals had refused our publications. I and my co-Experimenter, Dr. Patricia Ann Straat, then published mainly in the astrobiology section of the SPIE Proceedings, after presenting the papers at the annual SPIE conventions. Though these were invited papers, they were largely ignored by the bulk of astrobiologists in their publications." (Staat is the author of To Mars with Love, about her experience as co-experimenter with Levin for the LR experiments.)
Finally, he and Straat decided to craft a paper that answers every objection anyone ever had to their earlier versions, finally publishing it in Astrobiology's October 2016 issue. "You may not agree with the conclusion," he says, "but you cannot disparage the steps leading there. You can say only that the steps are insufficient. But, to us, that seems a tenuous defense, since no one would refute these results had they been obtained on Earth."
Nonetheless, NASA's seeming reluctance to address the LR experiment's finding remains an issue for Levin. He and Straat have petitioned NASA to send a new LR test to the red planets, but, alas, Levin reports that "NASA has already announced that its 2020 Mars lander will not contain a life-detection test."
Scientists discover the inner workings of an effect that will lead to a new generation of devices.
- Researchers discover a method of extracting previously unavailable information from superconductors.
- The study builds on a 19th-century discovery by physicist Edward Hall.
- The research promises to lead to a new generation of semiconductor materials and devices.