According to today's Wall Street Journal, "Brian Hunter, whose bad bets triggered the collapse of hedge fund Amaranth Advisors LLC, says a federal investigation into his possible involvement in an alleged multibillion-dollar manipulation of the natural-gas markets is hurting the start-up of his new fund venture."

The Federal Energy Regulatory Commission has been investigating the firm and Hunter while he tries to launch his new fund, Solengo Capital Advisers.

DealBreaker sums up Hunter's whining pretty well: "Yes, Brian, up until now, everything was going swimmingly for Huntengo. Until this. Yes, yes, THIS is the thing that will ruin Huntego's reputation. Not that bit of bad luck at Amaranth, not the less-than-stellar reference from Nick Maounis, or that TAKE NO PRISONERS lawsuit launched against a blog, no, no, it's THIS. Do you hear yourself talk? Carney might kill you tonight."

In other news, Michael Vick is upset that his new puppy-training class isn't doing well because of negative publicity in the media. Jeff Skilling says his pesky orange jumpsuit is interfering with his efforts to revive Enron.

While Goldman Sachs (NYSE: GS) is at the pinnacle of the global financial world, it still has some issues. Perhaps the biggest is the lagging performance of its main hedge fund.

But Goldman is determined to change things on that front. How? Well, ironically, it may get some help from one of the biggest hedge fund disasters.

Last year, Goldman picked up some key traders from the defunct hedge fund, Amaranth Advisors, which lost $6.5 billion in about a week.

According to Greenwichtime.com, Goldman has also taken over the Amaranth lease in Greenwich, CT. The total square feet: 123,074. It makes sense as the facility already has the necessary infrastructure for a major hedge fund – in terms of security, IT and backup power.

However, I'm still not convinced. Could there be some bad karma in that building – perhaps? Then again, isn't the main headquarters of Google (NASDAQ: GOOG) in the former campus for Silicon Graphics, which also went bust?

Goldman shares are trading up 3.25% so far this morning (11:30 a.m.) to $213.21.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Over the past couple years, a variety of new hedge funds have hit the market to capitalize on the bull market in commodities. However, things have not been so good lately. After all, it was a bad bet on natural gas that sunk the $9 billion hedge fund, Amaranth Advisors.

Well, according to a report from the Wall Street Journal [a paid service], there may be some more carnage. That is, the high-flier fund, Red Kite, is apparently trying to delay investor redemptions.

The problem? The fund lost a whopping 20% in January. Basically, there a terrible bet on copper.

But, with an delay on redemptions, Red Kite can take time to unwind its positions and hopefully get better value. The issue is that investors realize there is "blood in the water" and will no doubt try to profit from the misery. Actually, this was the case with the Amaranth implosion, which turned out to be a nice payday for JP Morgan Chase & Co. (NYSE: JPM).

Actually, I wrote about this in a recent piece for BloggingStocks.com.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

For 2006, the hedge fund, Amaranth Advisors LLC, was definitely a black eye for the industry -- as well as an indication of the high risks of such investments. That is, back in the summer, the fund imploded as a key trader made a bad bet on the energy market.

Well, according to a report from MarketWatch, it looks like investors may have recovered 55% to 60% of the remaining capital in the fund. Unfortunately, there is still a good amount of illiquid assets that need to be worked-out.

The big beneficiaries from the mess may actually be top Wall Street firms like Goldman Sachs (NYSE:GS) and J.P. Morgan (NYSE:JPM). For example, it looks like J. P. Morgan got a big boost in trading because of its efforts to unwind half the energy portfolio of Amaranth during the fourth quarter.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

I recently wrote a piece for Bloggingstocks on how former employees of Amaranth – a hedge fund that melted down – had no problems finding jobs (one of the employers was actually Goldman Sachs NYSE:GS).

Well, according to the WSJ (subscription only], Amaranth's former CEO and cofounder, Nick Maounis, is thinking about starting a new fund.

It seems that prospective investors would ask about how he recently lost $6.4 billion, right? But, then again, the hedge fund world can be quite mysterious.

If he can pull it off, it would certainly be remarkable. But, hey, as seen with his investment moves at Amaranth, Maounis likes taking long shots.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

The Canadian Income Trusts meltdown has been all over the news lately, but it has received only a few mentions thus far on Blogging Stocks. Perhaps investment news north of the border simply don't make Blogging Stocks' top ten business stories of the week? But if you appreciate patriotism, allow me to demonstrate some as I add in my two cents. Sometimes, these market turmoils may prove profitable for opportunistic investors.

I've been a very disloyal Canadian investor. For the last two years, I've only batted eyes at U.S. companies while the Canadian indexes kept creeping higher. However, I've recently taken interest in beaten-down Canadian companies such as Loblaw, and Canadian oil and natural gas income trusts. My interest started with these income trusts due to their pricing issues in July and August, as well as the Amanranth hedge fund debacle. Such negative news always peaks the interest for the contrarian in me. I can't believe my new interest in income trusts has come at such a time of opportunity!

I didn't know the Wall Street Journal was a humor paper. But good for them. Perhaps they will sell more papers this way. They ran a piece this weekend that provided true belly laughs. And tears.

"Amaranth Trader Dreams of Second Act After Loss" the paper proclaimed. Wow ! Brian Hunter, the guy who lost only six billion dollars four weeks ago and wiped out retirement money for dozens of institutions, "is exploring whether to get back in the game". "He approached Wall Street contacts to gauge investor interest in backing him," the paper went on to say. They did not mention if these were very short conversations.

Hmmmmm.

Now, I thought that Hollywood was the only economic environment wherein the larger you failed in your career, the better you progressed. It used to be that Hollywood had a monopoly on the Land of Failing Up. If you made a really lousy picture for ten million, they would put you in charge of a $100 million picture. That one then goes $100 million over budget, subsequently grosses 300 Rupees, and they immediately made you a studio head in charge of billions. What a country !!

The Amaranth fiasco and implosions at other hedge funds raises an interesting question for hedge funds. Where's the hedge?

Hedge funds were originally designed as a lower risk alternative to mutual funds. Mutual funds were primarily long investment vehicles and thus were susceptible to extended downturns in bear markets. Hedge funds allowed both long and short positions in stocks. The short positions were supposed to benefit from bear markets and thus act as a "hedge" to reduce the risk of the investment portfolio.

However, this definition has been expanded to include all types of investment strategies unrelated at all to the original definition of a hedge fund. They all do still seem to have one common characteristic - large fees! Hedge funds get paid a percent of assets under management; this can be as little as 1% but can be as high as 5% or more. That's not all though. Hedge funds also get a percent of the profits; this can vary from as little as 20% to as high as 50% or more. Not bad work if you can get it!

What do we get on average for these high fees? If the numbers compiled by Dow Jones are to be believed, not much. The returns for the last several years lag those of small cap index and in most cases do not exceed the return on long-term government bonds. This is not to say that there are not some truly gifted hedge fund managers such as Stevie Cohen. However, for the most part you are paying a lot of money for inferior performance.

In the hedge fund world, death can be relentlessly quick and efficient. That's certainly the case with Amaranth Advisors LLC, which lost over $6 billion in a week.

The fund desperately tried to sell itself to Citigroup (which, by the way, wants to get more involved in hedge funds). But despite the extensive talks and negotiations, Citigroup decided to walk according to a report from the Wall Street Journal.

Now, it's just a matter of liquidating the fund.

The leader of Amaranth, Nick Maounis, wrote a letter to his shareholders about the matter. Basically, all requests by shareholders for redemptions will be suspended. This is in order to give the fund enough breathing-room to effectively sell-off the positions.

According to the letter: "We estimate that, as of Friday, September 29, 2006, the Net Asset Value of the multi-strategy funds had declined approximately 65% to 70% month-to-date and approximately 55% to 60% year-to-date."

The lessons from all this? Well, no matter how smart your team is, the market is often smarter. In the case of Amaranth, the firm was apparently too lax in its internal controls. It allowed a young trader to take huge bets on the direction of a highly volatile commodity: natural gas.

This episode also shows that mutual funds, in comparison, are actually a good investment. They are provide diversification and low costs (keep in mind that hedge funds have very high fee structures). More importantly, mutual funds are very transparent. In fact, the disclosures for investors can be overwhelming.

True, you are probably not going to make a killing from a plain-vanilla mutual fund. But, then again, you'll probably not lose your shirt, either.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.

Amaranth Advisors LLC shows the perils of fast money in the hedge fund world. While the fund had a sterling performance since 2000, things came to a stunning conclusion over the past week.

Because of risky bets on natural gas, it looked like the fund lost roughly 35% this year (ironically, one of the selling-points of this fund was its alleged focus on reducing volatility).

Well, the results have been much worse – according to a letter from the fund's leader.

You see, the fund had to unwind its positions. And, as the old saying goes, there is lots of money to be made when there is "blood in the streets." So, this week, Amaranth lost an additional $1.4 billion.

Those who bought a large amount of these positions include Citadel Investment Group, a $12 billion hedge fund, and JPMorgan Chase. This certainly gives new meaning to another old Wall Street phrase: "pass the trash."