The Start of the UNRAVELING TIME

Jamestown Settlement was a wonderful place to visit this past spring near Colonial Williamsburg. The settlement is spartan in contrast to the re-creation of late 18th century Williamsburg. Jamestown Settlement is a re-creation of the English encampment in the early 17th century. The first settlers did not fare too well. Winters, even in the mid-Atlantic, were brutal in those days as the world was coming out of the trough of the Little Ice Age. As provisions ran out in Jamestown times became desperate leading to what was known as the "STARVING TIME". The male only settlers, who neglected to properly hedge their supplies by planting early enough, had to rob graves for food.

Jamestown was all about making money. Entrepreneurs in London were granted a charter by the King (some guy named Jim) to set up a satellite colony on the east coast of North America. The Virginia Company investors could get rich, or so it was thought, by settling and exploiting the resources and commodities of the New World.

Today we've got a whole different set of far less courageous dudes who think they're living on the edge in the quest to make money. With earthly frontiers long ago conquered, modern era trailblazing can take place in the comfort of a quiet office with the goal of exploiting financial opportunities out of reach for most, just as the New World was out of reach for the masses of 400 years ago.

I'm taking hedge funds.

Yet another is in distress. The evidence is mounting that this is the start of an UNRAVELING TIME in the hedge fund industry that is bound to be fraught with pain and likely to bring an even greater degree of uncertainty into the markets.

The latest, beyond the present travails of Bear Stears, is United Capital Asset Management of Key Biscayne, Florida which specialized in asset backed securities. They've stopped investor withdrawals in four funds with a total of $500 mln under management. United Cap says it will not only post losses for June but for all of 2007. 36 year old John Devaney, the founder of United, hasn't taken any money out of the funds, according to the Wall Street Journal.

Expect more of these little blow ups to occur since the funds that have gotten themselves waist deep in this mortgage related slime are all subject to the same extremely wide spreads and lack of liquidity that are in the process of killing the two Bear funds and which are now taking down United Cap.

Should Mr. Devaney be getting his shovel ready for some good eats??