MasterFeeds: 2012

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December 27, 2012

This is an office of the Muslim Brotherhood” #AlJazeera has become the mother of invention


From the Call Me Cynical Blog comes this translated interview with the former Al Jazeera German correspondent who recently resigned claiming the station has become nothing more than a mouthpiece for the Muslim Brotherhood - something most rational people knew long ago...
I have excerpted some of the more interesting passages below:
Aktham Suliman’s farewell to Al Jazeera

I took the liberty of translating this excellent piece by Akhtham Suliman, Al-Jazeera’s longtime Germany correspondent, in which he details the reasons for his recent resignation from the station. There are interviews with Suliman circulating in English, but this piece,published in the FAZ, includes a number of poignant anecdotes, which paint a disturbing picture of Al-Jazeera’s decline. 
A farewell to Al Jazeera: Forget what you have seen!  
By Aktham Suliman
11.12.2012, Frankfurter Allgemeine Zeitung
The news station Al Jazeera was committed to the truth. Now the truth is being twisted. It is about politics, not about journalism. For reporters this means: it’s time to go.
Aleppo, December 2012: An Al Jazeera correspondent had images relating to Syria that didn’t suit the station’s headquarters and which were not broadcast. This is no isolated incident.
...
... Resistance to occupation is an internationally recognized right, irrespective of sympathies. It was the time of – at least relative – clarity and self-confidence at Al Jazeera. One felt committed to the truth and principles of independent journalism, no matter what the cost. Criticism of the channel from the outside and especially in front of rolling cameras was seen as confirmation, as welcome promotional material that was spliced together and repeatedly rebroadcast on our station.
The declining station 
...
“Ali! It’s me, your colleague from Berlin. Have you seen the alleged e-mail correspondence between you and Rola circulating on the Internet?” I asked Ali Hashem,  the Al-Jazeera correspondent in Lebanon, on the phone earlier this year. I had just stumbled upon the alleged email communications between Al Jazeera staff published by the so-called “Syrian Electronic Army”, a Syrian pro-government hacker group. In one of the emails, the correspondent Ali Hashem had  told Syrian TV presenter Rola Ibrahim, who was working at the network’s headquarters in Qatar, that he had seen and filmed armed Syrian revolutionaries on the border with Lebanon in 2011. 
The channel didn’t broadcast the images because they showed an armed deployment, which did not fit the desired narrative of a peaceful uprising. “My bosses told me: forget what you have seen!” Hashem wrote to Rola, as published. She is said to have replied that she was faring no better. She had been “massively humiliated, just because I embarrassed Zuhair Salem, the spokesman for the opposition Muslim Brotherhood in Syria, with my questions during a news broadcast. They threatened to exclude me from interviews relating to Syria and to restrict me to presenting the late night news, under the pretext that I was jeopardizing the station’s balance.”
Mistakes become the routine
“Desirable” and less desirable images? Penalties for interviews that are “too critical”? At Al Jazeera? Here it must be said that in the online propaganda war between supporters and opponents of the Syrian regime, anything is possible, including lies and deception, as the months since the outbreak of the uprising in mid-March 2011 have shown. Regime supporters wanted to show that the rebellion is solely waged by “armed gangs.” Regime opponents wanted to show that the Syrian army is the only [party] committing [acts of] violence. 
That’s why I asked Ali Hashem whether the story was true. His answer was devastating: “Yes, it’s true. Those are really my emails with Rola. I do not know what to do now.”
Several days later, he knew the answer. Ali Hashem left.
Leaving is the only option that remains when these mistakes, which are altogether common in the fast-paced news industry, become the routine and are no longer recognized, treated or penalized as mistakes. 
“There must be consequences. What do we do if the supervisor who told Ali that he should forget what he had seen, tells us one day: Forget that a hand has five fingers! Does a hand have more or fewer fingers based on the whims and needs of our superiors?” I remarked on Al Jazeera’s Talkback, an internal platform for employees. 
No reaction. Internal discussions were no longer fashionable at Al Jazeera. 
This process did not remain an isolated case. On the contrary: it became a lesson. It quickly became clear to employees: this is about politics, not about journalism. More precisely: about Qatari foreign policy, which had subtly started to employ Al Jazeera as a tool to praise friends and attack enemies.
A hostage becomes a turncoat
It was not the first incident. When Al Jazeera’s Japan correspondent, Fadi Salameh, came to Doha at the end of 2011 to help out for a month at the channel’s headquarters, colleagues asked him how he – as a Syrian – assessed or felt about their Syria coverage. He responded evasively with something like: So-so. And why was that? He said: well, the issue of accuracy is no longer taken as seriously as it ought to be, and mentioned the story of his cousin, who  had been depicted as a deserter from the Syrian military only a few days earlier in a video broadcast on the channel. He was said to have defected to the Free Syrian army in a short recording placed online by the rebels.
But that could well be true, replied a colleague. “Not at all.” Fadi replied. “That was a hostage video. The fear apparent on my cousin’s face, having just been captured by the rebels, was unmistakable.” 
Later Fadi went on to say that Al Jazeera now presumes to know better than one’s own family members what is happening to someone in Syria. “Only when I said that my cousin had disappeared two days before his wedding, were some people willing to reconsider,” Fadi said. “Thank God no one got the idea that the groom was trying to escape a forced marriage.” He doesn’t muster a laugh. His cousin never returned and is presumed dead. When the story was leaked to a Lebanese newspaper, this was the response from a person in charge at Al Jazeera: “Oh, those [damn] yellow papers…”
“This is an office of the Muslim Brotherhood”
Al Jazeera has become the mother of invention: Those who have protested to the editorial board or turned their backs on the station are “supporters of the Syrian regime,” as  Yaser Al Zaatra, the Jordanian author affiliated with the Islamist camp, wrote this spring in a guest article published on –  it almost defies belief – Al Jazeera’s very own website.
The attacks against its employees [waged] on its own website are meant to obscure the fact that Syria is not the core issue in this internal conflict, but rather the station’s lack of professionalism. Cairo’s Al-Jazeera correspondent Samir Omer moved to Sky News earlier this year not because of Syria, but rather, as he told his colleagues: “Because I could not stand it anymore. This is no longer an Al-Jazeera office. This is an office of the Muslim Brotherhood” – in other words, the very group that is supported by Qatar in all Arab countries, and is heralded as the winner of the” Arab Spring.”



Aktham Suliman’s farewell to Al Jazeera


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December 25, 2012

Merry christmas!! Brevan Howard Paid Partners 270 Million Pounds Last Year - Bloomberg


Brevan Howard Paid Partners 270 Million Pounds Last Year

Brevan Howard Asset Management LLP paid its partners as much as 269.8 million pounds ($436 million) in the 12 months ended in March, more than double the amount it paid them a year earlier, after the hedge fund’s investment performance beat rivals.
The highest-paid partner, who wasn’t identified, got 78.9 million pounds, up from 64.8 million pounds in the year earlier, according to a filing by the London-based fund posted Dec. 22 on the U.K. Companies House website. Brevan Howard had 49 designated members during the period, meaning each partner received an average pay of as much as 5.5 million pounds, the filing showed,
A sign is displayed on the wall outside outside 55 Baker Street, the building housing the offices of Brevan Howard Asset Management LP, in London. Photographer: Chris Ratcliffe/Bloomberg
Brevan Howard’s Master Fund, the firm’s biggest hedge fund, with more than $25 billion of assets, gained 12 percent in 2011. Competing macro funds, which trade currencies, interest rates and bonds to try to take advantage of global economic trends, declined 7.4 percent on average, as they were tripped up by the euro-area sovereign-debt crisis and slowing growth in Asia.
Officials at Brevan Howard, which manages a total of $39 billion, declined to comment.
Hedge funds earn money from fees to manage clients’ assets and for positive investment performance. Brevan Howard, Europe’s second-largest hedge fund based on assets, made 371.9 million pounds in fees in the year ended March 31, compared with 236.8 million pounds a year earlier.

Further Gains

The Master Fund has advanced about 3 percent this year through Dec. 14, according to investors. The firm has been hiring credit traders in 2012, including Goldman Sachs Group Inc.’s Wayne Leslie and Credit Suisse Group AG’s Josh Bertman, as the Master Fund trails its historical gains.
Alan Howard, 49, founded the hedge fund in 2002 with four other traders from Credit Suisse’s proprietary fixed-income trading desk. Howard, whose personal wealth was estimated at 1.4 billion pounds by the Sunday Times in April, relocated in 2010 to Geneva from London after the U.K. government announced plans to raise taxes on top earners.
BlueCrest Capital Management LLP, Europe’s third-biggest hedge fund, with $32 billion of assets, made 502 million pounds in fees for all of 2011, according to a Companies House filing in September. Winton Capital Management LLC, the fourth-biggest, with $28 billion of assets, generated 351 million pounds of fees last year, the hedge fund said in an October filing. Europe’s biggest hedge fund is Man Group Plc (EMG) with $60 billion of assets.
To contact the reporter on this story: Jesse Westbrook in London at jwestbrook1@bloomberg.net
To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net
Brevan Howard Paid Partners 270 Million Pounds Last Year - Bloomberg

December 19, 2012

#Greek #bond bet pays off for hedge fund

#Loeb's Third Point sits on $500m profit after making a bet that Greece would not be forced to leave the eurozone, bucking the trend in the industry

Financial Times, 3:27pm Tuesday December 18th, 2012
Greek bond bet pays off for hedge fund
--
By Sam Jones, Hedge Fund Correspondent
--
Loeb's Third Point sits on $500m profit after making a bet that Greece would not be forced to leave the eurozone, bucking the trend in the industry
Read the full article at: http://www.ft.com/cms/a11f5be4-4940-11e2-b25b-00144feab49a.html



December 11, 2012

Three men arrested in UK Libor inquiry

Serious Fraud Office says it arrested three men

Financial Times, 5:54pm Tuesday December 11th, 2012
Three men arrested in UK Libor inquiry
--
By Caroline Binham, Daniel Schäfer and Brooke Masters in London
--
Serious Fraud Office says it arrested three men aged 33, 41 and 47 and suspects were 'all British nationals currently living in the United Kingdom'

Read the full article at: http://www.ft.com/cms/s/0/814cafd2-4388-11e2-a68c-00144feabdc0.html

December 5, 2012

Syria: Al Assad Reportedly Considering Seeking Asylum In Latin America - Stratfor


Syria: Al Assad Reportedly Considering Seeking Asylum In Latin America

December 5, 2012 | 1416 GMT
Syrian President Bashar al Assad is considering seeking political asylum in Latin America for himself, his family and his associates if forced to flee Damascus, an unnamed source in Caracas said Dec. 5, Haaretz reported. Syrian Deputy Foreign Minister Faisal al-Miqdad held meetings in Cuba, Venezuela and Ecuador over the past week and delivered classified personal letters from al Assad to local leaders, the source said.

November 28, 2012

Costco leader Wotherspoon $7 dividend: Companies Shelling Out Billions to Beat the 'Fiscal Cliff'

Companies Shelling Out Billions to Beat the 'Fiscal Cliff' CNBC.com

Companies are racing the clock to hand out billions in special dividends before year end—and some of them are taking on debt to do it.

Full Story:
http://www.cnbc.com/id/49993082



Egypt's Defining Moment | Stratfor


We are now facing a defining moment of Egyptian history. Analysts are constantly proclaiming defining moments, but this is certainly one.

The Egyptian military has held power since 1952 when Gamal Abdul Nasser overthrew the Egyptian monarchy. From then until the unrest known as the Arab Spring, the military's power went unchallenged. After the fall of Hosni Mubarak and his replacement by the Supreme Council of the Armed Forces -- a military junta -- it appeared that while Mubarak had fallen, the military regime remained in place. The military held elections and Mohammed Morsi, known as a moderate member of the Muslim Brotherhood, was elected president.

On the surface, this would appear to have meant that power had passed from the military into the civilian hands of the Muslim Brotherhood. But it was unclear whether Morsi -- the formal president -- held power or the military actually still had control.

Read the rest of the article online: Egypt's Defining Moment | Stratfor


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French threaten to nationalise #Mittal #steel operations in #France

French threaten to nationalise Mittal steel operations in France

·         European harmonisation does not seem to apply when French jobs are at stake

·         There is massive unemployment in Spain, Greece and in other Eurozone states but it appears that unemployment in France is unacceptable

·         We have not seen Spain or Greece threaten to nationalise any industry

·         Perhaps other Eurozone countries should take control of key industries to reduce unemployment and perhaps to pay down debt

·         The Mittal assets are in Lorraine, an area which was fought over during the 1870 Franco Prussian war and the WWI

·          We knew that Francois Hollande was socialist but we did not know he was communist

From S.P. Angel's Morning note


November 26, 2012

Bruce #Berkowitz: The return of a star fund manager - $FAIRX

Bruce Berkowitz and his Fairholme Fund have made a comeback - relying on the same stocks that cost his fund so dearly in 2011.

Bruce Berkowitz
FORTUNE -- Only a handful of mutual fund managers have ever had the sort of epic run that Bruce Berkowitz (and his investors) enjoyed. In the first decade of this century, his 13.2% annual returns obliterated the S&P 500 (SPX), which averaged 1% yearly losses. He was crowned U.S. stock manager of the decade by Morningstar, and Fortune anointed him "the Megamind of Miami" in a late-2010 profile. Then came 2011. Berkowitz's Fairholme Fund (FAIRX) plunged 32% amid huge losses in stocks like AIG, Sears, and Bank of America. Clients yanked $7 billion, and critics said Berkowitz, 54, was finished. But instead of retreating in 2012, he doubled down on his favorite stocks. Today he looks like a genius again: Fairholme has roared to a 37% return this year, tops among U.S. stock mutual funds. Is his comeback for real? Berkowitz made his case by phone from his home near Miami. Edited excerpts:

You were criticized last year for poor performance. Was that fair?

I think it's fair. What's not fair is to believe that a manager or a businessperson is in such control of companies that they can control any one-year period or two-year period. I've not seen it done. There's a reason Warren Buffett judges Berkshire Hathaway's (BRKA) book value against the S&P 500. He doesn't use Berkshire's stock price. My question to you is, Can someone like me or anyone else avoid a 2011?

What were you expecting?

I always knew we'd have our day of negative performance. I'd be foolish not to think that day would arrive. So we had billions in cash, and the fund was chastised somewhat for keeping so much cash. But that cash was used to pay the outflows, and then when the cash started to get to a certain level, I began to liquidate other positions.

Was 2011 beyond your worst-case scenario?

The down year was definitely not outside of what I thought possible. I was not as surprised by the reaction and the money going out as I was by the money coming in. When you tally it all up, we attracted $5.4 billion in 2009 and 2010 into the fund and $7 billion went out in 2011. It moves fast.

AIG's stock, which makes up 40% of your fund, has returned 50% this year. What does it need to do to deliver the 20% a year you think is possible? Will Hurricane Sandy claims prevent that?

It's too soon to tell, but it's not critical. AIG (AIG) is priced for 10 Sandys. More broadly, the company needs to reduce expenses, which will naturally occur. There's been a huge amount of time and energy placed in dealing with the Federal Reserve and the U.S. Treasury, and building new information systems. So you'll start to see significant cost reductions over time.
They're also moving away from low-frequency, high-severity insurance, which, in my opinion, is picking up pennies in front of a steamroller. But I think Peter Hancock, who runs their property-and-casualty business, understands that the one-in-100-year storm happens every five years.

Lately you've begun talking about the real estate value of Sears, which accounts for 10% of your fund.

The value of Sears (SHLD) [which trades near $60] would be over $160 a share if the land on the books was fully valued. You can look back at recent transactions and ask a question: How can Sears close stores and generate hundreds of millions of dollars of cash? It gets at the inventory. The liquidation value of its inventory approaches its stock price. Forget the real estate.

You make Sears sound like a liquidation play, not a retail recovery.

The retail recovery is a potential upside. Regardless, you'll see gigantic cash flows from the closing of locations, the pulling-out of the cash from inventory, work in process, and distribution centers. They're not idiots when it comes to real estate. They understand that today's standalone store can be tomorrow's multi-use hotel/residential-retail center. I think Eddie Lampert will end up being one of a few unbelievable case studies on what it means to be a long-term investor.

You own shares of both Bank of America and MBIA. When will they settle their multibillion-dollar lawsuit?

Bank of America's legal issues are the only thing stopping its rise right now. [MBIA's suit accuses BofA (BAC) of fraud related to bad home loans underwritten by BofA's Countrywide unit; BofA denies the allegations.] I know BofA doesn't want shareholders to overpay, but I'm one large shareholder who says, "Settle up!" And yes, it's in part because I'm a large MBIA (MBI) shareholder, but it's also because it's time to move on. I've e-mailed [BofA CEO] Brian Moynihan and said, "Settle." BofA is now the best capitalized bank in the U.S. It generates $5 billion of cash every three months. Its book value is $20 a share, but the stock trades near $10. Everything else is pretty obvious. Moynihan has done a really good job of moving to the Wells Fargo (WFC) model: client-centered. BofA has a huge franchise in the form of a trillion-dollar deposit base. They are America's bank.

Your portfolio is concentrated [see chart, above]. If you get new money to invest, will you buy different stocks?

Are there other investments out there? Yes. Better than what's in the fund today? No.
This story is from the December 3, 2012 issue of Fortune.
 Bruce Berkowitz: The return of a star fund manager - The Term Sheet: Fortune's deals blog Term Sheet

November 16, 2012

The Hostess Liquidation: A Curious Cast Of Characters As The Twinkie Tumbles | ZeroHedge

in many ways Hostess is now indicative of that just as insolvent larger corporation, the USA, whose insurmountable balance sheet liabilities will be the eventual catalyst for its collapse, but only once the Income Statement and the Cash Flow sheet join in. For now, the Fed provides the flow needed to avoid the day of reckoning, but everything ends eventually
The Hostess Liquidation: A Curious Cast Of Characters As The Twinkie Tumbles | ZeroHedge

Perhaps one of the most interesting aspects of the just announced Hostess liquidation, one that will be largely debated and discussed in the media, or maybe not at all, is the curious cast of characters and the peculiar history of this particular bankruptcy. Some may not be aware that the company's Chapter 11 (or colloquially known as 22) bankruptcy filing this January, which today became a Chapter 7 liquidation, was the second one in the company's recent history, with Hostess, previously Interstate Bakeries, emerging from its previous protracted multi-year bankruptcy in 2009. What is curious is that its emergence had all the drama of a anti-Mitt Romney PAC funded thriller, with a PE firm, in this case Ripplewood holdings, injecting $130 million in order to obtain equity control of Hostess as it was emerging last time. There were also more hedge funds, investment banks, strategic buyers, politicians involved in this particular story than one can shake a deep fried numismatic value Twinkie at. More importantly, however, as America has been habituated following the last season of the reality TV show known as the presidential election, if Private Equity then "bad." Only this time there is a twist: because it wasn't really PE that was the pure evil in the Obama long-term campaign, it was associating PE with Republicans, and thus: with jobs outsourcing. And here comes the Hostess twist: because Tim Collins of Ripplewood, was a prominent Democrat, a position which allowed him to get involved in the first bankruptcy process in the first place, due to his proximity with the Teamsters' long-term heartthrob Dick Gephardt (whose consulting group just happens to also be an equity owner of Hostess). In other words, the traditional republican-cum-PE scapegoating strategy here will be a tough one to pull off since the narrative collapses when considering that it was a Democrat who rescued the firm, only to see it implode in a trainwreck that has resulted in the liquidation of a legendary brand, and 18,500 layoffs.
But it only gets better. Because the full cast of characters involved here is quite stunning, as David Kaplan summarized so well recently:
Ripplewood is run by Tim Collins, 55, who's been at the center of other famed PE transactions. Known as a brilliant capitalist-philanthropist-networker, he's an eclectic character: a Democrat in an industry of Republicans; an Adirondack enthusiast dreaded by pheasant and fish; a board member at the Yale divinity and business schools; and someone who took a year at 31 to work at a refugee camp in the Sudan. Ripplewood orchestrated the $1.1 billion turnaround in 2000 of the Long-Term Credit Bank of Japan, which marked the first time that foreign interests controlled a Japanese bank. (Collins made the cover of Fortune Asia for it.) The bank was renamed Shinsei, and in 2004 it had a lucrative initial public stock offering. Far less fortunately, in 2007 Ripplewood acquired Reader's Digest -- and saw its $275 million investment vanish in Reader's Digest's bankruptcy filing in 2009. (Collins reportedly had visions of merging Reader's Digest with the magazine division of Time Warner (TWX), which owns Fortune.)
Ripplewood's foray into Hostess was partly enabled by Collins's connections in the Democratic Party. He wanted to explore deals with union-involved companies and sought the help of former congressman Gephardt, who in 2005 founded the Gephardt Group, an Atlanta consulting firm that provides "labor advisory services." In his 2004 presidential bid, Gephardt -- whose father was a Teamsters milk truck driver -- was endorsed by 21 of the largest U.S. labor unions; in 2003, Collins was one of 19 "founding members" of Gephardt's New York State leadership committee. (Today, Ripplewood and Hostess are listed online as major clients of Gephardt's consulting group, which is also an equity owner of Hostess.) Back when Hostess was coming out of the first bankruptcy, Gephardt's credibility with both Ripplewood and the Teamsters gave them each a little more room to break bread.
During this first bankruptcy, Hostess was almost sold. In 2007 it warded off a $580 million bid from its biggest competitor, Bimbo Bakeries USA. Bimbo Bakeries USA is part of Grupo Bimbo, the Mexican baking giant that owns such brands as Sara Lee, Entenmann's, Freihofer's, Arnold, Boboli, Ball Park Buns, and Thomas' English Muffins. Joining Bimbo in the bid were the union-friendly investment arm of supermarket titan Ron Burkle and the Teamsters themselves.
Hostess was able to exit bankruptcy in 2009 for three reasons. The first was Ripplewood's equity infusion of $130 million in return for control of the company (it currently owns about two-thirds of the equity). The second reason: substantial concessions by the two big unions. Annual labor cost savings to the company were about $110 million; thousands of union members lost their jobs. The third reason: Lenders agreed to stay in the game rather than drive Hostess into liquidation and take whatever pieces were left. The key lenders were Silver Point and Monarch. Both are hedge funds that specialize in investing in distressed companies -- whether you call them saviors or vultures depends on whether you're getting fed or getting eaten.
Based in Greenwich, Conn., Silver Point was founded in 2002 and has approximately $6.5 billion under management; its two co-founders are 49-year-old Edward Mulé and 47-year-old Robert O'Shea, both former Goldman Sachs (GS) partners. Silver Point helped bail out Krispy Kreme Doughnuts, Delphi, CIT Group, and various TV stations. Monarch, based in Manhattan, was created in 2008 as a spinoff from the Quadrangle Group. It reportedly has more than $3 billion under management; among its three co-founders are 52-year-old Michael Weinstock and 48-yearold Andrew Herenstein, both formerly of Lazard. Monarch has invested in Eddie Bauer and the Texas Rangers. (In 2010, after Herenstein sent a letter to baseball teams warning them not to approve a sale of the Rangers "at a price below fair market value," the letter became public, and the Dallas Morning News ran this ominous blog headline: MONARCH ALTERNATIVE CAPITAL THREATENS BASEBALL.)
Silver Point and Monarch, along with about 20 other lenders, owned about $450 million of Hostess secured debt at the time of the bankruptcy filing in 2004, according to court records. Remarkably, though -- given that Hostess's financials are now supposed to be an open book in federal bankruptcy court -- it's unclear how much the lenders actually paid for those notes. But it's presumably less than face value. Opportunistic investors like Silver Point and Monarch commonly buy distressed debt at a considerable discount. Their strategy: Invest in fundamentally "good" companies that have "bad" capital structures brought about by overborrowing, bankruptcy, or other corporate stresses.
Neither the specific amount put up by each investor nor the percentage of the total debt is public record (In re Hostess Brands, Case No. 12-22052). So it's impossible to know for sure how much "skin in the game" the creditors have. But according to sources with knowledge of Hostess's debt structure, Silver Point owns about 30% of the debt; Monarch, also about 30%; and the other lenders combined own the remaining 40%. Clearly, it was Silver Point and Monarch, along with Ripplewood, that had the biggest bets going forward.
Confused yet? Here it is summarized in a schematic:

November 15, 2012

Guess What They Are Not Cutting In The Fiscal Cliff... | ZeroHedge

If entitlements are not cut, there is no way the US will get out of their fiscal mess. 

From zerohedge.com:

Guess What They Are Not Cutting In The Fiscal Cliff...


Submitted by Simon Black of Sovereign Man blog,
In his farewell address to Congress yesterday, Ron Paul blasted the dangers of what he called 'Economic Ignorance':
"Economic ignorance is commonplace. . . Believers in military Keynesianism and domestic Keynesianism continue to desperately promote their failed policies, as the economy languishes in a deep slumber."
He's dead right. Around the world, economic ignorance abounds. And perhaps nowhere is this more obvious today than in the senseless prattling over the US 'Fiscal Cliff'.
Here's the deal: You may remember the Debt Ceiling debacle of 2011. At the time, the US government was about to breach its debt ceiling, and there was an embarrassing standoff between Congress and President Obama.
As part of their eventual compromise, the debt ceiling increased by $400 billion in August 2011... then again by another $500 billion five weeks later... and finally by another $1.2 TRILLION twenty weeks after that.
In return, President Obama signed into law the Budget Control Act of 2011. The law stipulates that, unless another compromise is reached, a series of tax increases and budget cuts will automatically take place on January 1, 2013, including the expiration of the Bush tax cuts and the temporary 2% payroll tax holiday, plus new taxes related to Obamacare.
They call this the 'Fiscal Cliff' because everyone is terrified that all the budget cuts and new taxes will bring the US economy to its knees once again.
I've spent days analyzing the bill... and frankly, it's a joke. You can read the 200+ pages yourself if you like, but here are the important points--
As we've discussed before, US government spending falls into three categories.
  1. Discretionary spending is what we normally think of as 'government.' It funds everything from the military to Homeland Security to the national parks.
  2. Mandatory spending covers all the major entitlement programs like Social Security and Medicare.
  3. Then there's interest on the debt, which is so large they had to make it a special category.
The latter two categories are spent automatically, just like your mortgage payment that gets sucked out of the bank account before you have a chance to spend it. The only thing Congress has a say over is Discretionary Spending. Hence the name.
But here's the problem-- the US fiscal situation is so untenable that the government fails to collect enough tax revenue to cover mandatory spending and debt interest. In Fiscal Year 2011, for example, the US government spent $176 billion MORE on debt interest and mandatory spending than they generated in tax revenue.
In Fiscal Year 2012, which just ended 6 weeks ago, that shortfall increased to $251 billion. This means that they could cut the ENTIRE discretionary budget and still be in the hole by $251 billion.
This is why the Fiscal Cliff is irrelevant. The automatic cuts that are going to take place don't even begin to address the actual problem; they're cutting $110 billion from the discretionary budget... yet only $16.9 billion from the mandatory budget.
Given that the entire problem is with mandatory spending, slashing the discretionary budget is pointless. It's as if the US economy is a speeding train heading towards a ravine at 200 mph, and the conductors are arguing about whether they should slow down to 150 or 175.
Oh, and there's just one more problem.
The government thinks that they will collect a few hundred billion dollars more in tax revenue when all of these new taxes kick in. Again, wishful thinking.
In the six+ decades since the end of World War II, tax rates in the US have been all over the board. Yet during this time, the US government has only managed to collect roughly 17.7% of GDP in tax revenue.
Conclusion? Increasing taxes won't increase their total tax revenue. Politicians have tried this for decades. It doesn't work. The only way to increase tax revenue is for the economy to grow... and higher tax rates do not pave this path to prosperity.
Ron Paul was spot on. Economic ignorance abounds. And all the Talking Heads in the mainstream media blathering away about the Fiscal Cliff are only reinforcing his premise.
Bottom line-- the Fiscal Cliff doesn't matter. The US passed the point of no return a long time ago.


Guess What They Are Not Cutting In The Fiscal Cliff... | ZeroHedge


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This week's #Economist cover on #France economist.com



This week's #Economist cover on #France economist.com:
This week's #Economist cover on #France economist.com  on Twitpic

This week's #Economist cover on #France economist.com

November 14, 2012

Hints of Disunity Among #Greece's International Lenders #IMF #EU


In an unprecedented show of disunity Tuesday, International Monetary Fund head Christine Lagarde clashed publicly with Luxembourg Prime Minister Jean-Claude Juncker, the chair of the Eurogroup of finance ministers, over plans for handling Greece's financial woes. While the European Union is making little progress toward resolving its internal disagreements, negotiations with outside institutions such as the IMF will prove even more complicated since such players have interests that extend beyond the preservation of Europe's status quo.

Hints of Disunity Among Greece's International Lenders

November 9, 2012

Africa Calling: #Brazil in #Africa: A new Atlantic alliance | The Economist

In 2001 Brazil invested $69 billion in Africa. By 2009... [it] had swelled to $214 billion.

Africa Calling

A new Atlantic alliance

             
IN THE sweaty heat of northern Mozambique, Vale, a Brazilian mining giant, is digging up coal at its mine near the village of Moatize. A 400,000-tonne mound sits ready to burn. The mine can churn out 4,000 tonnes an hour but the railways and ports cannot cope. Vale is working to improve a line through Malawi to take the coal for export. OAS Construtora, another Brazilian firm, has signed a deal with the miner to build part of a new port at Nacala, 1,000km (620 miles) to the north-east, to do the same.
The continent is an important part of Vale’s future, enthuses Ricardo Saad, the firm’s Africa boss. He is not alone in his excitement about Brazil’s prospects. Relations with Africa flourished during the presidency of Luiz Inácio Lula da Silva. He travelled there a dozen times and African leaders flocked to Brazil. His zeal was in part ideological: he devoted much of his diplomacy to “south-south” relations—at the cost, critics say, of neglecting more powerful (and richer) trade partners, such as the United States.
Lula stressed his country’s “historic debt” to Africa, a reference to the 3.5m Africans shipped to Brazil as slaves. Outside Nigeria, Brazil has the world’s biggest black population. Dilma Rousseff, Brazil’s current president, is continuing those policies—though with more emphasis on how the relationship benefits Brazil. There are many ways that it can. Africa needs infrastructure and Brazil has lots of construction firms. Africa sits on oil and minerals in abundance; Brazil has the firms to get them out. Its agribusiness giants are also eyeing up Africa. If the continent’s economy continues to grow as it has in recent years, it will produce millions of customers much like Brazil’s new middle class.
Brazilian businesses seem keen. In 2001 Brazil invested $69 billion in Africa. By 2009, the latest figures available, that had swelled to $214 billion. At first Brazilian firms focused their efforts on Lusophone Africa, Angola and Mozambique in particular, capitalising on linguistic and cultural affinity to gain a foothold. Now they are spreading across the continent.
So far a few large firms dominate. Vale’s coal mine in Mozambique is its biggest operation outside Brazil. Odebrecht has been building things in Africa since the 1980s. Early on it was involved in construction of the vast Capanda dam in Angola. It erected the country’s first shopping mall in the capital, Luanda. In Ghana, where demand for homes is so fierce that tenants have to pay up to two years’ rent in advance, OAS, a contractor of Camargo Corrêa, a big conglomerate, is putting up social housing.
Andrade Gutierrez, another construction firm, works on everything from ports to housing and sanitation projects in Angola, Algeria, Congo and Guinea. Petrobras, Brazil’s state-owned oil behemoth, is already pumping oil in Angola and Nigeria and is on the hunt for more in Benin, Gabon, Libya, Nigeria and Tanzania. Consumer companies are setting their sights on a growing market, too. O Boticário, a Brazilian cosmetics firm, has been peddling its products in Angola since 2006.
Brazil v China
Since Brazil cannot compete with the likes of China in the scale of its investment, it has to offer something extra: in particular, technical expertise. With similar climates, agriculture has been a fruitful field of collaboration. In 2008 Embrapa, a Brazilian agricultural-research institute, set up an office in Ghana. Through Embrapa, Brazil has provided technical assistance to the cotton industry in Benin, Burkina Faso, Chad and Mali. Brazilian companies that produce soya, sugar cane, corn and cotton were sniffing out investments in Tanzania earlier this year.
Brazilian firms hope that their reputation will ensure that opportunities keep coming. They are keen to distinguish themselves from competitors, especially the Chinese. They do not want to be seen as grabbing everything they can, says Rodrigo da Costa Fonseca, Andrade Gutierrez’s president in Africa. Whereas Chinese firms are lambasted for their working practices, their Brazilian counterparts emphasise that they play by the rules, are good employers and want to build enduring relationships by offering development aid as well as private investment.
In particular, Brazilians stress that in Africa they employ Africans (Chinese firms are often criticised for shipping in their own people). Around 90% of Odebrecht’s employees in Angola are locals, as are 85% of Vale’s employees in Mozambique.
The Brazilians have not managed to avoid all criticism. Vale has come under fire for its resettlement of over 1,000 families to make way for its coal mine. Most have been moved to a brand-new village at Cateme, 40km away from Moatize. Disgruntled villagers say the cost of living has soared because of the added expense of getting to Tete, the provincial capital. The ground is less fertile and water less plentiful at the new location, say inhabitants, and the houses provided by Vale are shoddily built. In January angry villagers blocked a nearby railway line in protest.
Vale says it is dealing with these problems—fixing the houses and putting on a bus into town. The company is paying the price for being first in, says Altiberto Brandão, who runs Vale’s mine at Moatize. Vale has a 35-year concession so it needs to keep locals on its side: “we don’t want 35 years of problems,” Mr Brandão insists.
Brazil is still enjoying its honeymoon in Africa, says Oliver Stuenkel of the Global Public Policy Institute, a think-tank. Still, Brazil should learn from the mistakes of others, he says. With its prominence in mining, there is always a danger that Brazil is seen as a new colonial power. Though its presence is growing, it is still paltry compared with China’s. Unlike China, Brazil does not need Africa’s resources but is more interested in diversifying its markets. There is no construction in Europe—there is nothing left to build there, laughs OAS’s Africa head, Leonardo Calado de Brito. “Africa is the place to be.”


See the article online here:   Brazil in Africa: A new Atlantic alliance | The Economist

October 30, 2012

Building façade comes crumbling down in #NYC #Sandy

Sandy's trail of devastation: 13 dead, 6.5 million people in the dark -- and it's not over - CNN.com
Here is the video showing the building façade falling!
Sandy's trail of devastation: 13 dead, millions in the dark -- and it's not over - CNN.com

October 23, 2012

Billionaire Ross Interested in Buying #Spanish #Bank Assets - Bloomberg

At least someone is looking to buy...

Billionaire Ross Interested in Buying Spanish Bank Assets

Wilbur Ross, the billionaire who’s taken stakes in distressed U.S. and European lenders, said he’s interested in Spanish banking assets as the country takes steps to resolve bad loans stemming from its real-estate bubble.
Ross’s WL Ross & Co., which holds about 10 percent of Bank of Ireland Plc. (BKIR) and teamed up with Richard Branson to buy part of Northern Rock Plc, is in talks “almost every week” with representatives of the large Spanish banks, he said in an interview in Abu Dhabi, without naming potential targets.
“Maybe next year will be the year for Spain,” he said. “We’ve been doing a lot of work in Spain. We’ve put a lot of time and effort into Spain but haven’t put any money in yet.”
Officials in the euro zone’s fourth-largest economy are setting up a bad bank, similar to one in Ireland, to help lenders shed soured real estate loans and to boost lending growth. The government is seeking to purge about 180 billion euros ($235 billion) of bad assets linked to property, which its central bank says remain on lenders’ balance sheets.
“Spain has yet to go through the catharsis of real estate,” Ross said. “I don’t know if it’ll be another six months or another 12 months or whatever, but at some point we might very well do something in Spain.”
The country’s economy contracted for a fifth quarter, with gross domestic product shrinking 0.4 percent in the three months through September from the previous quarter, the Bank of Spain said today in an estimate in its monthly bulletin.

Northern Rock

Ross’s firm invested about 350 million pounds ($560 million) with Branson’s Virgin Money to take over the retail operations of Northern Rock, the British bank whose reliance on short-term financing resulted in its becoming the first casualty of the global liquidity crunch.
Ross was also among five investors who took a 35 percent stake in Bank of Ireland, one of six lenders guaranteed by taxpayers in 2008, for 1.1 billion euros. He has a board seat.
He has taken stakes in institutions such as Oregon’s Cascade Bancorp (CACB)New Jersey’s Sun Bancorp, and union-owned Amalgamated Bank in New York, all of which required financial aid after writing down bad real estate loans.
Spain secured a 100 billion-euro financial-sector lifeline earlier this year and may request a European Union bailout, putting the region’s newest crisis-fighting tools to the test in an economy that’s twice the combined size of Greece, Ireland and Portugal.

‘Interesting Country’

“Spain in many ways is a very, very interesting country,” Ross said. “But we’re thinking they’re just now beginning to recognize the magnitude of the problems. Until now they’ve been in total denial.”
Bad loans as a proportion of total lending in Spain jumped to a record 10.5 percent in August from a restated 10.1 percent in July as 9.3 billion euros of loans were newly classified as being in default, according to data published by the Bank of Spain on its website on Oct. 18. The ratio has climbed for 17 straight months from 0.72 percent in December 2006, before Spain’s property boom turned to bust.
The country’s request for European Union financial aid to shore up its banks is increasing concern about its growing liabilities. Standard & Poor’s downgraded the country’s debt rating by two levels to BBB-, one step above junk, from BBB+ on Oct. 10, saying it wasn’t clear who will bear the cost of recapitalizing banks.

Bad Assets

“Bad assets are going to have to be removed from the banks,” Ross said. “It’s very, very difficult to have a bank simultaneously managing a huge amount of bad assets and trying to grow its good assets. It’s just tough.”
The firm would probably look to invest when there is a need for a cash injection after assets are removed into a so-called “bad bank,” he said. Many of the Spanish regional banks which expanded into other areas need to “shrink” back to their original locales and focus on building core deposits, he said.
Spanish banks expanded lending by 3.5 times from 2000 to 2008 when the credit boom peaked, according to Bank of Spain data. The lenders had more than 46,000 branches open in 2008 compared with about 39,000 in 2000 as they expanded their networks to accompany the boom.
President Mariano Rajoy has struggled to trim a 2011 budget deficit that was more than three times the EU limit, after the country’s deepening recession pushed the jobless rate over 25 percent.
To contact the reporter on this story: Dale Crofts in Dubai at dcrofts@bloomberg.net
To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

Read the article online here: Billionaire Ross Interested in Buying Spanish Bank Assets - Bloomberg

October 18, 2012

Violence Breaks Out at Greek Anti-Austerity Demo

Crunch time...nothing's changed.

> Greece is also seeking a two-year extension to its economic recovery program, due to end in 2014. Without the extension, it would need to take €18 billion worth of measures instead of the €13.5 it is currently negotiating.
>
> Athens hopes to get the next loan installment around mid-November. Prime Minister Antonis Samaras has said the country will run out of cash by the end of that month, meaning Greece would most likely have to default on its debt and potentially end its membership of the euro currency.


ATHENS, Greece (AP) -- Hundreds of youths pelted riot police with petrol bombs, bottles and chunks of marble Thursday as yet another Greek anti-austerity demonstration descended into violence.

Tens of thousands of people took to the street during the country's second general strike in a month as workers across the country walked off the job to protest new austerity measures the government is negotiating with Greece's international creditors.

The measures for 2013-14, worth €13.5 billion ($17.7 billion), aim to prevent the country from going bankrupt and potentially having to leave the 17-nation eurozone.

Riot police responded with volleys of tear gas and stun grenades as protesters ran from the area of clashes in the capital's Syntagma Square outside Parliament, splitting the demonstration in two.

Hundreds of police were deployed in the Greek capital ahead of the demonstration, as such protests often turn violent.

However, a protest march by about 17,000 people in the northern city of Thessaloniki ended peacefully.

Thursday's strike was timed to coincide with a European Union summit in Brussels later in the day, at which Greece's economic fate will likely feature large.

The strike grounded flights, shut down public services, closed schools, hospitals and shops and hampered public transport in the capital. Taxi drivers joined in for nine hours, while a three-hour work stoppage by air traffic controllers led to flight cancellations. Islands were left cut off as ferries stayed in ports.

Athens has seen hundreds of anti-austerity protests over the past three years, since Greece revealed it had been misreporting its public finance figures. With confidence ravaged and austerity demanded, the country has sunk into a deep economic recession that has many of the same hallmarks of the Great Depression of the 1930s.

"We are sinking in a swamp of recession and it's getting worse," said Dimitris Asimakopoulos, head of the GSEVEE small business and industry association. "180,000 businesses are on the brink and 70,000 of them are expected to close in the next few months."

Higher taxes expected to be levied in the new austerity program will destroy many of the struggling businesses that have managed to weather three years of the crisis so far, he said.

"In 2011, only 20 percent of businesses were profitable. So these new tax measures present small businesses with a choice: Dodge taxes or close your shop."

The country is surviving with the help of two massive international bailouts worth a total €240 billion ($315 billion). To secure them, it has committed to drastic spending cuts, tax hikes and reforms, all with the aim of getting the state coffers back under some sort of control.

But while significantly reducing the country's annual borrowing, the measures have made the recession worse. By the end of next year, the Greek economy is expected to be around a quarter of the size it was in 2008. And with one in four workers out of a job, Greece has, along with Spain, the highest unemployment rate in the 27-nation European Union.

The country's four-month-old coalition government is negotiating a new austerity package with debt inspectors from the EU, International Monetary Fund and European Central Bank. The idea is to save €11 billion ($14.4 billion) in spending — largely on pensions and health care — and raise an extra €2.5 billion ($3.3 billion) through taxes.

After more than a month and a half of arguing, a deal seems close. On Wednesday, representatives from the EU, International Monetary Fund and European Central Bank, said there was agreement on "most of the core measures needed to restore the momentum of reform" and that the rest of the issues should be resolved in coming days.

Greece is also seeking a two-year extension to its economic recovery program, due to end in 2014. Without the extension, it would need to take €18 billion worth of measures instead of the €13.5 it is currently negotiating.

Athens hopes to get the next loan installment around mid-November. Prime Minister Antonis Samaras has said the country will run out of cash by the end of that month, meaning Greece would most likely have to default on its debt and potentially end its membership of the euro currency.

___

Elena Becatoros and Nicholas Paphitis in Athens contributed.

Read the article here: http://finance.yahoo.com/news/violence-breaks-greek-anti-austerity-104017177.html?l=1

October 15, 2012

The Future of America Is Japan: Runaway #Deficits, Runaway #Debts | ZeroHedge

If-when- interest rates rise in all these seriously indebted countries, things are really going to get ugly!  This from Zerohedge.com:
 
The Future of America Is Japan: Runaway Deficits, Runaway Debts | ZeroHedge
 
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
If you want a look at the fiscal future of the U.S., look west to Japan, a nation that sits precariously on a fiscal cliff a thousand feet high.

If you want to know how the Keynesian Cargo Cult's grand experiment in borrowing money to fund bloated fiefdoms, rapacious cartels and bridges to nowhere ends, just look west (from California) to Japan. The Japanese State, partly because they seem to believe in the Cargo Cult, and partly to avoid exposing the insolvency of their crony-capitalist financial sector, has been borrowing and spending money on a vast scale for two decades.
The Keynesian Cargo Cult's primary article of faith is that borrowing and blowing huge sums of money on anything and everything will magically restore "aggregate demand," i.e. the animal spirits that drive people to borrow and blow money on consumption. This is of course pure insanity, as people cannot borrow if their balance sheet has been destroyed, their real incomes are declining and they have lost trust in institutions that fear transparency and the truth like the Devil fears garlic.
Recall that the Federal Reserve's Survey of Consumer Finances for 2007-2010 found that the median net worth of households fell a staggering 39%, from $126,400 to $77,300, and average household income fell 11% from $88,300 to $78,500.
But rather than face the fraud and corruption at the heart of American (and Japanese) finance and governance, the Keynesians just want to leave the predatory, parasitic crony-capitalist Status Quo intact and create an illusory world of bogus "demand" and grotesque malinvestment funded by ever-increasing debt. In effect, the entire Keynesian Project seeks to reinflate asset and government revenue bubbles--the very causes of the global financial meltdown.
Let's see how the Keynesian protection of a corrupt, parastic Status Quo and pursuit of monumental malinvestment has worked for Japan. Here is the Ministry of Finance's Highlights of the Budget for FY2012 (via Andrew P.). Consider the ramifications of these numbers:
REVENUES: 90,334 (billion yen)
Tax revenues: 42,346
Other revenues: 3,744

Government Bond Issues (borrowing): 44,244
EXPENDITURES: 90,334
National Debt Service (interest): 21,944
Social Security: 26,390
Other: 42,000
So interest on the debt and Social Security are 114% of tax revenues. Put another way, tax revenues don't even cover interest on the runaway debt and Social Security costs.
An amazing 49% of the governments budget is borrowed money. Even with near-zero yields on Japanese government bonds (less than 1%), 52% of tax revenues are spent on national debt interest.
Recall that the interest rate Japan's government is paying on its stupendous debt is about 1%. Were that to double to a mere 2%, all of the new debt would go just to pay the interest on existing debt.
This is truly the Red Queen's Race. (Losing the Red Queen's Race - February 17, 2010) And it's been going on a long, long time. Japan's budget/borrowing imbalance was already severe a decade ago when I wrote this: Japan's Runaway Debt Train (2001).
Since 2005, annual borrowing has increased 10,000 billion yen (BY) while expenditures rose by 8,000 BY. Tax revenues have been stagnant at 44,000 BY while the interest expense has risen 19% and Social Security costs have increased by 29%.


You see what's happening: tax revenues are unchanged from seven years ago while interest and Social Security costs increase dramatically as the debt inexorably expands and more retirees qualify for Social Security.
Now take a look at the 2012 United States federal budget. Net interest on the $16 trillion national debt is "only" $242 billion, while Social Security costs totaled $778 billion. So far, debt and Social Security ($1 trillion) are "only" 40% of total tax revenues, but like Japan, rapidly rising debt will increase interest while a rapidly increasing population of retirees qualifying for Social Security will drive those costs dramatically higher in the years ahead.
Given $2.47 trillion in total tax revenues, $3.8 trillion in expenditures and a deficit of $1.3 trillion, 34% of the Federal budget is borrowed money. We are borrowing 52% of total tax revenues.
Does anyone seriously think this is the "road to recovery"? If you want a look at the fiscal future of the U.S., look west to Japan, a nation that sits precariously on a fiscal cliff a thousand feet high.

Guest Post: The Future of America Is Japan: Runaway Deficits, Runaway Debts | ZeroHedge

Projections of #US. Public #Debt Continue to Accelerate | Mercatus

In 2007, the CBO projected that public debt would equal up to half of total U.S. economic output by 2019. In reality, public debt-to-GDP passed this milestone in 2009—ten years ahead of the CBO’s 2007 projection

Projections of U.S. Public Debt Continue to Accelerate

Veronique de Rugy | Oct 08, 2012
This chart compares Congressional Budget Office (CBO) long-term projections of the debt held by the public as a percentage of GDP, or the debt-to-GDP ratio. Public debt comprises over two-thirds of gross national debt, and is owed to individuals, businesses, and foreign and state/local governments.

In the five years between the long-term projections calculated in 2012 and 2007, public debt milestones have moved up by nearly a decade on several occasions. In 2007, the CBO projected that public debt would equal up to half of total U.S. economic output by 2019. In reality, public debt-to-GDP passed this milestone in 2009—ten years ahead of the CBO’s 2007 projection. Importantly, the long-term projections used in this chart come from the CBO’s alternative scenario, which incorporates policy changes that were likely at the time. Hence, this is a more realistic projection than the CBO’s baseline scenario. 
Using the same methodology, CBO currently projects that debt will reach 80 percent of GDP by 2014, which is five years ahead of the 2009 projection, and thirteen years ahead of the 2007 projection.
This means that the U.S. is slipping down an unsustainable fiscal path at a much faster rate than before. This unforeseen acceleration in the public debt is important because high levels of debt can have a negative impact on the economy. Economists Carmen Reinhart and Ken Rogoff have shown that when a country’s level of debt reaches 90 percent of GDP, its economy could start shrinking by 1 percentage point every year. The U.S reached this milestone four years ago. One percentage point may not seem like a lot, but as Mercatus Senior Research Fellow Matthew Mitchell has shown, if the U.S. had reached this point in 1975, our standard of living could be 30 percent lower than it is today.

Data notes: The figures in this chart represent CBO alternative scenario projections that are meant to reflect likely changes and extensions of policies at the time of projection. The chart shows public debt, which is a portion of gross national debt. The Reinhart and Rogoff piece alludes specifically to gross national debt exceeding 90 percent of GDP.



Projections of U.S. Public Debt Continue to Accelerate | Mercatus

The MasterMetals Blog

October 11, 2012

Wall Street’s Forgotten Victims Have Some Advice - Bloomberg

Some advice from the 12 year old kids of the hedge fund managers in Greenwich, CT via Michael Lewis 

Wall Street’s Forgotten Victims Have Some Advice

I didn’t go looking for the kid. He found me. Of course, it stood to reason, with what’s been happening on Wall Street, that the children of Greenwich, Connecticut, must be taking a serious financial hit.
The end of cash bonuses, the ramping up of financial regulation, the shrinking of the Goldman Sachs analyst pool, Chelsea Clinton’s confessing that she quit her Wall Street job to find meaning in life: Wherever you turn, you find signs that an era in which a lot of children were paid to keep quiet is grinding to an end.
Enlarge imageMichel Lewis                                                                                              
Maybe the game is over; maybe it isn’t. But one thing is certain: If you are 12 years old, and your dad works on Wall Street, it’s a lot less likely Beyonce will be singing at your 13th birthday party.
At any rate the 12-year-old child who texted me out of the blue simply wanted to pass along a few tips. I’m not sure if he was doing it out of the goodness of his heart, or testing the market for a book deal. But he says that he knows a lot of other kids just like him, who have at least one parent who used to make a lot of money trading bonds on Wall Street, and now, instead, were being handed a lot of illiquid bank stock of dubious value.
For kids traumatized by the Wall Street downturn, he had the following advice:
-- For starters, you need to make a point of actually meeting your dad -- or your mom, but most likely it is your dad who is the problem.
He’s the one who controls the money flows but up till now he’s been a total ghost. Out the door at 5:30 in the morning, home at 11 at night. And no matter how tired he is on weekends, your mother always makes him take her out to parties, so when you do catch a glimpse of him he’s hung over and distant. You will need to take the initiative here. Set your alarm early, or, even better, stay up late. Park yourself at the front door and when your dad walks through it, stick out your hand and introduce yourself. He needs to know who he’s dealing with.
-- Accept that you are the real victim in all this.
The moaning and groaning your dad has been doing about his bonuses won’t actually change his lifestyle. He isn’t the owner of the first lost piece of the family collateralized-debt obligation: You are. Everything from summer sailing camp in the Bahamas to the smoking-hot Scandinavian nanny is probably now on a list of possible cutbacks. As totally unfair as these cuts are (you aren’t the one who lost all the money), you shouldn’t fight them. You don’t want to come across as “spoiled.” If you complain too loudly, your dad might use it as an excuse to rationalize his failure. He will start saying things to your mom like, “It may actually do him some good not to have everything he wants.” The smart first reaction is to accept that you will be making some pretty horrible sacrifices. Pretend you don’t feel a thing. Even though, inside, it’s killing you.
-- Study the way your dad’s mind works.
If you are at least 12, it’s easy to tell yourself he’s kind of dumb. I mean, even back when he was making a lot of money he didn’t notice very much about life around the house. But -- trust me -- he is really smart, especially about money. It’s just that he isn’t like other dads. He thinks emotions are stupid, for example, because emotions cost him money when he’s trading. He spends his day trying not to feel anything, so he sort of gets used to it.
Up until now he could afford to do this. Whenever he didn’t feel something he was supposed to feel, he just bought his way out of trouble. That’s why you scored the sailing camp in the Bahamas in the first place. Now it’s different. He still doesn’t feel what he is supposed to feel, but he can’t afford to buy his way out of trouble. You can exploit this. But first you need to turn up the heat on him, by creating lots of situations where he is supposed to feel something. The easiest emotion to make him feel he should be feeling is guilt. To that end...
-- Make lots and lots of new demands on his time.
Kids who don’t play the tuba or something should consider joining a travelling sports team or acting in a school play or, really, anything that requires your dad to be there to watch you do it. In theory, your dad should have more time for this kind of stuff. He isn’t making as much per hour, so his hours should be cheaper. But he doesn’t think that way. He’s trying to “get back to even.” He’s still trying to make as much as he did three years ago, which means working even more. This is tricky because you don’t want to discourage him from doing it. At the same time, his longer hours are just a huge opportunity for you. Because no matter what instrument or sport you decide to play, there is just no way he’s going to show up to watch you play it.
Like I said, he won’t tell you that he feels bad he missed your performance as the mule in “Fiddler on the Roof.” He might not know it himself. But when you see that look on his face -- it’s like he just remembered he left his credit card at the restaurant -- that’s when you strike. Make the ask. Which brings me to...
-- Always ask big.
Your dad may be smart about money but he has no idea about size. When he makes money, he doesn’t make thousands, he makes millions. When he loses it, he doesn’t lose millions, he loses billions. His scale is totally off; keep it that way. For example, you just finished your first traveling lacrosse game that your dad didn’t see, and you want a couple of little things (a new flat-screen TV for your suite, or an ATV) and one big thing -- say, to go one-on-one against LeBron James on your private court. Obviously, ask for LeBron first. If you feel you have to ask for the small stuff, too, find some way to bundle it into a single big package -- say, after he’s just forgotten your birthday.
These are hard times for Wall Street kids. It might never again pay you what you need to be paid to do the job. Down the road, if this bonus drought is more than just a temporary blip, you might need to consider quitting. Breaking up with your dad isn’t as hard as it seems. You can’t just do it yourself but your mom can -- and it isn’t like she doesn’t also have a lot of needs that suddenly aren’t being met. Encourage her to get to know some private-equity guys. If you are really ambitious, introduce her to one of those Facebook (FB) dudes who have so much money they have already retired. Your mom can figure it out. After all, you shouldn’t have to do all the work.
(Michael Lewis, most recently author of the best-selling “Boomerang: Travels in the New Third World” is a columnist for Bloomberg News. The opinions expressed are his own.)
Read the article online here: Wall Street’s Forgotten Victims Have Some Advice - Bloomberg


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