We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
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Wednesday, December 17. 2008
Once again, posting early because busy in the AM. Outside of the finance biz, lots of work in NYC this year.
Just a photo suggestion for the fellas: If you have any $ left, and she is kind and gentle, worries about your contentment, speaks soothingly to you after a tough day, and takes good care of you, why not give her some diamonds?
Fairfield, CT: What sort of dumb town would put 14% of their pension assets into a single hedge fund? And to read about that Orthopedic group is pathetic. Even docs should know better than that. Are these guys going to do hips and knees into their 90s?
The return of the Old Left. Oh man, not again. How many times can they crawl out of their grave?
When the economy is good, taxes go up because supposedly people can afford them. When the economy is poor, taxes go up to cover govt deficits. See NYS for example. But people can't raise their incomes to cover them, can they? Where's the $ supposed to come from?
For shame! Illegally cutting down trees in a nature preserve. Are they legally culpable?
Secular decline of the semiconductor biz, plus the Kondratieff Wave Theory
Iowahawk: My Five-Year Plan Failed
Rangel Watch: Yet another Rangel scam. Will it ever end? No doubt there wil be more to come. It's the Rangel Circus.
Obama talks good, doesn't he? Let's watch the grammar, O, or we'll set a bad example.
Only for those without Econ 101. Coyote
Watching TV ruins womens' love lives. Want perfection? Try a different planet.
Nude models on strike in Paris. Some strikes are good.
Via Insty, this is both smart and wise (a rare combo):
Re-Volting! At Maggie's Farm they spend a lot of time pandering to perverts with images like this: I can assure my readers that they'll never see that image here. I, at least, have some standards!...
Tracked: Dec 18, 17:40
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Other signs of the demise of the semiconductor biz - Bell Labs shut down their R&D on semi's this year. R&D in India is booming. Chip mfg is cost-driven; the U.S. can not compete with unit costs in China, India, and almost anywhere in Southeast Asia. A return to protectionism will essentially Balkanize the global market and lockout U.S. manufacturers from lucrative overseas markets.
Hey! I saw that very same poster of that diamond-dripped tart in the library next to the Jackie Collins books. Cool.
I think that diamond- dripped tart is the mighty fine lookin Molly Sims from the show Las Vegas. Can you define tart for me. You high tootin stiletto wearing fox! : )
Yeth, sointinly. Me when I've had two glasses of wine and I'm with a hot date. I move away from him about twenty feet, usually in a restaurant, and take off my stilettos and throw them at him.
Just once before I die. I would love to see a Senate ,or Congress without a Kennedy in it. I'm sick of all of them.
I am with you there. I think that we all could use a break from the Kennedy, Clinton and Bush families.
She may actually be in competition with Obama for the thinnest resume of the year award!
You're killing me with that illustration. Killing me.
Regarding the meltdown of hedge funds in general and Madhoff in particular, I had dinner a couple of years ago with an author of several books on hedge funds. I had been studying various hedge fund strategies and approaches to due diligence on hedge funds. He arranged this dinner with me and a couple of others essentially to recruit new investors.
Given that compounding is the holy grail of the financial world, I was intellectually intrigued by market neutral strategies that ideal produced absolute returns.
To make a long story shorter, I decided to pass on the opportunity. Here's why.
First, I was the equivalent of a retail investor in the hedge fund world. Getting to me meant that fund raisers had essentially gathered what could be had from the people who really had money. I looked at the democratization of hedge fund investing with skepticism. Retail almost always gets slaughtered.
Second, the hedge fund train had left the station a number of years before. That meant the out-sized gains held out as bait were made in easier times. To illustrate, if there are a couple of hedge funds focused on convertible bond arbitrage, the market is deep enough so everyone can make money. If there are a hundred funds pursuing the same strategy, by definition the strategy becomes commoditized and the returns are greatly diminished.
Third, I would have had to make a commitment larger than one should especially when talking about an illiquid, opaque, long-term investment.
Fourth, money had been pouring into hedge funds by the billions. Whenever money floods into a market, the outcome is usually not good. The last ones often get the worst treatment.
So I declined not because I did not value the concept of alpha, but for common sense reasons. I am glad I did.
Which brings me to Madhoff, it is impossible to deliver the consistent results he claimed given his strategy. The red flags such as an auditor without the resources to effectively audit such a large fund were there.
If you don't understand it, don't invest in it.
If you don't understand it, don't invest in it.
I couldn't agree more. If in these days when we are responsible for our investment decisions I have found that very few investors have done any educational preparation. Most couldn't tell you the difference between a stock and a bond. They either need to educate themselves or be sqatified buying CD's. Usually even then they don't have a clue as to how to ladder them to protect themselves against changing interest rates (when we use to have interest rates).
Good advice....If you don't understand it, don't invest in it.
Do you know how difficult it is to be truly "sqatified" ?
well in English it's "squatified" and refers to a state of being where one is buried under layers due to not knowing squat.
first question should always be "if this is so great, how come it needs me?"
IOW, the good stuff --the good private stuff as oppo to public offerings --is not likely to get beyond the immediate circle of idea generators. They'll buy debt before selling equity --if it's a good deal, wouldn't you?
It looks like Bernie Madoff has replaced Arnold "The Brain" Rothstein who fixed the 1919 World Series as the leading bad guy in the tribe.
What is condign punishment? In the old west if you stole a mans horse they hung you due to the fact that the horse was such a valuable and indispensible item for a person to have.
Now we must guide our own retirements,usually with the help of a "professional financial advisor" tested through examination and monitored by the SEC, yet they con people every day and walk away with millions. Micheal Milken did time in Club Fed but left after two years with 800 million dollars. Is that justice?
I propose that certain white collar crime be punishable by death. That would be condign punishment for the lives these people destroy, often when they are old and have no way to regain what they have lost. Public hangings would do nicely.
This character (Madoff) was generating steady returns regardless of market conditions with a strategy he called 'split-strike conversion'. Absolute nonsense since it was a simple 'collar' strategy usually employed to protect concentrated positions. The fund of fund guys who directed money to his management should be ashamed of themselves. Utter stupidity cloaked in exclusivity and all of the smoke and mirrors bs common to wall street. The simplicity of this guys supposed complex, black box methods should have warned the FoF jokers. The killer was the fact that Madoff didn't charge the normal 2/20 fees so the FoF guys took it for themselves. Criminal. The legal implications are mind-blowing.
I would love to agree with you on your and others split-strike conversion assessment of exactly what Bernie Madoff did, however don't you believe it's a bit premature to make any call, much less a definitive one on exactly what he did and how
The entire story is barely over a week old, his record keeping, what may exists of it, hasn't gone through any analysis that I have heard reported and we're talking about a scheme that ran for decades involving billions of dollars.
I believe prudence dictates we gather a few more facts prior to defining how Bernie performed his alchemy.
my hedge fund is reaching topiary and this Spring will need doo diligence
you recon ya ca do sum possumtater topiary?
From the Habu..he learned yeasterday through a cousin whosw been doing family geneaology that he is a direct decendent of Brig. Gen. Jon Hunt Morgan, Cavalry, CSA. Habu toasted his long dead relative.
He was quite good.
Habu- That's how he sold it. That's how the FoF guys sold it. He described the strategy in those very terms, i.e 'split strike conversion'. They're his words, not mine. Fund of Fund managers add value by their supposed due dilligence regarding the strategy and the manager. That's it. BTW, I've seen some statements. They are available on-line. It's 100% bunk just like the long-term taming of volatility he magically produced. Take a look at the long-term performance of his 'Fairfield Sentry Fund' and tell me what you think.
"He described the strategy in those very terms, i.e 'split strike conversion'. They're his words, not mine."
Not to be obtuse but you're willing to take the word of a man who evaporated 50 billion dollars through some mechanism?
Tom that surprises me. I wouldn't believe a word this man says. As is often said, The man has issues the major ones being honest and truthful. So when you say "those were his own words" and use them in defense of your stated position, mirth runs amuck.
The guys a con man. His word is useless.
I fully realize that the 'split strike conversion' is getting plenty of play but as I said, its way too premature to make any assessment of what happen when and how.
Do you know a book about Black September?
Is now a good time to buy a house for my son?
If I can stick my nose in here on buying a house, it depends on where. I would look at the cost of renting versus the cost of owning in his local area. The price to rent ratio can be quite helpful.
Here is an example, although the data is about a year old and I would try to get more current. http://money.cnn.com/magazines/fortune/price_rent_ratios/
In some places the differential remains very high, while in others it has contracted to more normal levels. I'd wait unless it was near historical levels.
There are also a number of rent versus buy calculators on the internet. Just make sure you understand the calculations. I have not looked at them closely. I believe most have been developed by real estate interested parties and so I would have a degree of skepticism until I understood and agreed with the calculations.
Of course, comparatives, condition and local trends are key too. It will also be a time when historically low mortgage rates can be had.
Thanks, Barrett. I'm not sure I followed everything, but I'm 30 miles south of where the conurbation of Northern Virginia ends - in horse country. I also am not looking to rent but rather to buy a house for my son. I keep seeing interest rates go down and the price of houses go down, and I feel pressure to take advantage of that.
Good advice on not asking an agent about it. I never have liked dealing with anyone who makes money off mine.
One of the many elements that may be uncovered in the investigation of the Madoff scam is this. The man has been Wall Street and the world for fifty years. During that time the market has changed beyond recognition to the one he began scamming. I do not know but I would bet that the "split strike conversion " wasn't even developed for may years after Madoff began the scam so it is extremely doubtful that he employed it during the entire time he conned his friends,associates , and others. Other methods must have been utilized including the generic , off the shelf, Ponzi scheme.
Anyone care to find out when the split strike conversion was approved as a strategy by the SEC or when it came into being?
Habu- It's a strategy as old as the option markets. Long puts/short calls. Protected on the down side and limited on the upside.
Habu- Of course his word is worthless. What I find amazing are the 'Fund of Fund' managers who were taken in. The entire marketing of this guy was based on the 'strategy' and the lack of volatility in good markets and bad. This wasn't a long/short fund so his returns were in fact too good to be true. People should have known better.
So essentially no matter what strategy he was using he could not , and in fact did not produce the returns he claimed. What he was doing was paying out the newer money he was bring into his firm. A classic Ponzi.
Right now no one that I am aware of has even taken a look at any trading sheets he may have kept , if in fact he ever made any trades since he cleared his own trades if he made any. Wow.. This guy was slick and probably could have made just as much money doing things legally. What a waste of a brain, and what a tragedy for those who lost perhaps everything.
The one big hole in the Ponzi scheme you identified Tom, volitility. He got caught in the biggest downdraft since before we were born and his world cratered along with all his clients, or should we say "marks"
If he doesn't go to prison he won't last a month out in the open. He's a dead man walking.
Thanks for the info Tom, always a pleasure. H.
Can someone explain to me on what basis Madoff's scheme is a criminal Ponzi scheme, other than that is how a despondent Mr. Madoff characterized what he did? At this point, the forensic investigators have not reconstructed his books and are unable to say how he handled individual accounts. If he actually made no trades over the years, then, of course, the answer is clear. Otherwise, however, how does this situation differ from one in which my investment in a mutual fund is devastated if knowledgeable investors in the same fund withdraw their funds and close their accounts at the first sign of a precipitous market collapse, leaving me and other uninformed investors with only the depleted assets of the fund to salvage our investments?
I have no knowledge nor understanding of Madoff's manipulations. I will say though that 'insider' knowledge is the rot at the core of Wall Street malfeasance. A condition not likely to be cured in my lifetime. It's all in who you know, you know.
I come over here from Vanderleun to see naked women and I find one of my posts linked. (Secular Decline)
How lucky can you get?
BTW thanks for the link and the naked woman.
The Chinese are closing fabs.
Most of the semi-conductor work in the USA is fabless. Fabs are a commodity. The real money is in intellectual property and selling. We still do that better than any where else.
When fabs close they lose their capital. What is left in the USA is brains - which is overhead. But not much overhead compared to the interest on the capital. Or worse the loss of capital.
The Chinese take the bigger risk. We get the bigger reward. I like them odds.
it always has been a 'spread' game, hasn't in --as long as corporate profits beat the cost of the debt, it works great. problem with cash flow is it isn't really a model (unless risk is seen as already discounted via the cost of the dollar borrowed) so much as a transaction. And of course when that spread goes to zero (or worse) all those transactions--the open bonds being serviced--still need completing per contract, regardless.
So we inflate, and of course all those foreigners stuck with the one global-trade reserve currency become much more amenable to raising their own military budgets.
We're facing the ''bad cop'' problem --as the bad cop.
Of course a bad cop still keeps the neighborhood order (usually, and for a time) but his very being prevents having a good cop.
If the moral requirements are too hard, or indecipherable, or (most likely) too sacrificial of fun, we can still be a good cop just by changing the definitions. For example if the whole neighborhood is bad too, then how can the cop be bad? In that case, the word 'bad' is just an opinion --a what is 'is' question.
agent coopper asks a pertinent question. what prob happened is that the slow-down--ok the recession --caused more clients to pull cash out of their acc'ts. That caused a squeeze that normally causes funds to have to sell at any price--thus these price collapses (hedge funds gone mad).
This assumes that the fund owned registered securities (owned cusips not 3rd party contracts) bought dollar for invested dollar.
A fiduciary who loses your money in a legal transactions is no criminal. But if he doesn't tell you he lost it, he is. Even then, he has to have broken an agreement to tell you (to furnish legal certified statements and audits).
Okay on all that, Buddy.
Just so you know someone was down here midst the white space.
(*whew*) thanks --felt like i was in the bottom of a well there for a minute
> Krauthammer on Caroline Kennedy. Is this a family
You mean like the Bushes?