What has really happened with our money?

Dear Followers,

One of the major topics this week in the international financial press was the arrest of yet another hedge fund owner, Helmut Kiener, for the suspicion of fraud and malpractice. He was arrested this week in Germany in his hometown Aschaffenburg for the suspicion of having misused funds obtained through agreements with a number of English and French banks and FBI as well as German officials are investigating. After what has recently happened in the world the question we should ask ourselves is
“Can we trust hedge funds and banks with our money?"


An article from the Wall Street Journal and therefore from America clearly states the story and the current assumptions of what has taken place. It also gives some brief explanation about Kiener himself and the assumptions of what has taken place including some figures regarding the investments and the losses from the fraud. Overall it is very brief though and doesn’t really go into depth, it is easy to read and every reader will easily be able to understand the story and the problems. In my opinion there is no bias of any form involved.

The article published in the German Die Welt is a lot more in depth and explanatory which is caused by the fact that the case and problems are far closer. It also involves the legal questions and the problems the German officials reportedly had with the case. The author clearly states that the officials try to declare themselves not responsible for what has happened and in my opinion he clearly doesn’t agree, which means he shows a clear bias against them. The article states facts and figures very clearly, but is in general more precise and more explanatory than the WSJ. Overall its easy to read and understand and seems to sum the whole story, background and scenario up very well.

The article released in the Financial Times is similar to the WSJ article a lot briefer and more or less only states some facts and numbers. It is easy-reading financial press that does not include any form of bias and is easily understandable for any reader with basic knowledge. Another point it has in common with the WSJ article is that it is written from a quite distant perspective and therefore completely different to the German Welt.

Overall comparing the three, one could say that the WSJ and FT articles are very similar whereas the Welt article is far more involved, in depth and biased which I see caused by the geographical distance to the problem. One thing that surprises me is that the figures in the three articles all vary and don’t really match. The volume for the hedge fund capital varies from €600 million to €800 million for example while possible losses vary from €220 million to €400 million.
“How severe is the damage really?”

As it can be read in the articles the banks and officials did not really want to comment on the problems and scenario, if they did it was very brief, which in my mind shows that they’re well aware that what happened was not just and also partially their fault.
Also with regards to the current Madoff case I think that there has been a lot of fraud and malpractice involved in the hedge fund industry which now comes to light in the financial crises where organisations and people demand their invested money back or some proof of where it went.
“What have funds and banks REALLY been doing with our money?”

I think it is very doubtful what some of the funds and investment vehicles did since they gamble or even steal people hard earned money they rely on. The problem is that due to special models they can still get around regulations and restrictions as done by Kiener’s K1 fund with the British Virgin Islands.
The situation we currently have with crashed global markets just reveals what has been going wrong for far too long. As Warren Buffet very correctly stated some time ago in an interview;
“Only when the tide goes out you learn who’s been swimming naked.”