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Decline of Western Civilization; I Wanna Be A Hedge Fund Manager

Location: Blogs Bob O'Brien's Sanity Check Blog    
Posted by:   bobo 10/30/2006 9:37 AM

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Sign the Market Reform Petition now. Click here to view it.

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The WSJ had a pretty good article on the US markets' loss of competitiveness, citing the fact that we are losing IPOs at an alarming rate. I would link it, but you need a subscription. So for the cheap seats, I'll summarize: Nobody wants to do IPOs in the US anymore, and many are questioning the wisdom of being listed here. Woe is us.

Of course, the WSJ arrives at the erroneous conclusion that it is all because of TOO MUCH REGULATION!!!!

You know, on account of how it is stifling the market.

Not, mind you, because nobody in their right mind wants to take a company public in an environment where the rule of law has broken down, and even the NYSE has been on the SHO list forever.

Nope. Ignore the massive delivery failures, hundreds of millions of 'em, and instead insist that it is because of all the burdensome regulation.

For instance, consider how uncompetitive we are in our regulation of hedge funds. Er....uh....Oh, that's right, we don't regulate them at all. There's nothing to cite.

Huh.

But Wall Street has long been of the mind that rules governing its behavior are bad, and freedom to do whatever it wants is good.

The problem is that the world is voting with its feet. The business is going elsewhere. Companies are taking their opportunities, and moving abroad.

It's just a matter of time until the dollars follow. Nobody wants to play in a rigged casino - that's the problem, in a nutshell. It's not that all those restrictions are cutting into anything - consider the record profits Wall Street has "earned" year after year. It's that the planet is getting tired of making 500 guys on Wall Street bazillionaires at the expense of everyone else. Pretty simple.

Of course Wall Street, which owns much of the media one way or another, would never dare breath a word of that. It has to be something else - like the regulations that create at least a pretense of lawfulness to the operation of the market.

What a complete crock.

-------------------------

I wanna be a hedge fund when I come back as something besides a bunny.

Sam Kinison had a great line about dog psychologists, and how he would love to get in on some of that easy money.

I feel the same way about hedge funds. Specifically, about short-oriented hedge funds.

Why do I say that? Aren't they supposed to be victims of persecution, underdogs, freedom fighters vigilantly targeting evil and tyranny?

Well, maybe. But here's what I know. You can make a boatload of bucks, become famous, dine at the best restaurants, be quoted as a luminary, and completely fail at your core competency.

That's why I always snicker when I hear references to hedge funds as "The smart money" taking a position against whoever. Smart? I've met planks with better investment acumen than some of the biggest.

Example. Jim Chanos. Expert. Pundit. Wall Street Icon. Rich, famous, celebrated, quoted.

And a black hole for any profit for his investors, unless they got REALLY lucky in their timing.

Here's the return of his fund, versus the S&P 500, since he created his fund in 1985, through the end of 2005. And remember, this is compounded return, best case, and does NOT include the fees or bonuses for all his performance. Someone could probably calculate it, but it's gotta be a significantly negative number for any meaningful period.

The numbers speak for themselves.

Since 1985, Chanos' Ursus Partners has delivered a whopping 2.1% return.

The S&P 500 has delivered 12.7% return for the same period, including dividend reinvestment.

That 2.1% doesn't include the annual management fee. It doesn't include the 20% or greater slice of any "profit" it generates in a good year.

That's just the actual ROI, pre-load.

To put that into perspective, the inflation rate has been at least double that during the same period. So just the loss of value due to inflation has been significant.

And yet this is one of the icons of short selling hedge funds. A noted authority, whose words can move markets, and who the NY press holds in the highest possible regard. He's doubtless a very smart guy, with a team of very smart guys, but he really, really sucks at his gig, if even being in the same county as the S&P return, over the life of his fund, is a measurement.

I've gone 3-4 times the money on good years with my own funds. On bad years, don't ask. But the point is, on a good year, I could have taken massive amounts of my investors' money and pocketed it for a job well done, never to have to return it, or apologize, if I lost it the next year.

That's my kind of gig. Bring it on. Where do I sign up for the easy frigging money? Give me a hung, I'll make it into 5, take a hung or two and pocket it, and then cry you a river when I piss it away the next few years. All the time touting my past performance to bring in new bucks to replace the ones I've lost, and restart the clock.

2.1% before fees?

Hell, I'll put it into T-Bonds and double that.

I'll let everyone know when I have my BVI fund set up, right next door to Compass or Helmsman. I won't ask where the money came from, or if I do, I'll believe whatever you tell me. Point is to get the money into play.

Yikes.

So, what is really going on? Why are some of these funds seeing so much cash running through them, in spite of that sort of performance?

A very good question.
Copyright ©2006 Bob O'Brien
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Comments (58)
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Paladin on 10/30/2006 10:48 AM
Chanos. What a whiner. He's the guy who picked up his marbles and decided to stay home when told that Byrne would be speaking at the Value Investing Conference at which he, Chanos, was also a speaker. Only when PB was "uninvited" did he decide to bless everyone by attending.

***********************
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By mhelburn on 10/30/2006 10:54 AM
Dirty money often shrinks when laundered.

If the esteemed plank had a leg to stand on, he would have invited the chance to confront Byrne.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By plunge on 10/31/2006 9:56 AM
Some of the biggest fortunes were made when the privately owned federal reserve orchestrated the great depression and the counterfeiters were able to cover at pennies on the dollar when food became more important than shares.

Are they planning to do it again?

We can stop them, but we have to get the word out.
Re: I Wanna Be A Hedge Fund Manager, but not necessarily a CEO By rvac106 on 10/31/2006 10:16 AM
from the Austin American Statesman, 10/31/06

Tuesday, October 31, 2006
Over the past five years, hundreds of thousands of shareholders have been ripped off by executives who wore suits, lived in luxurious homes and, sometimes, were celebrated in the media. Billions of dollars were taken or squandered by these business leaders, who were among the highest-ranking officers of their companies, such as Enron, Adelphia, WorldCom, Tyco and others.
The only satisfaction for some shareholders was a partial recovery of their money and seeing some of these executives tried, convicted and marched off to prison for sometimes lengthy sentences.
But now some of the nation's most influential business figures, apparently with the cooperation of the Bush administration, are moving to put an end to such outrages. No — not the direct looting of companies or the manipulation of stock values and lying about it to shareholders, but the efforts to bring dishonest executives and their enablers to account.
As reported last week in The New York Times, two industry groups are preparing to propose changes in federal regulations and laws that, at bottom, are intended to make it more difficult for ripped-off shareholders and government prosecutors to go after white collar thieves. Until recently, one of the groups was led by Robert K. Steel, who was sworn in this month as the U.S. undersecretary of the Treasury for domestic finance.
The other group is known as the Paulson Committee, after it received encouragement from U.S. Secretary of the Treasury Henry Paulson. Until this spring, he was chairman and chief executive officer of the Goldman Sachs Group, one of the nation's most important investment bankers. The Paulson Committee includes former Secretary of Commerce Donald Evans, who is from Texas and is a close friend and longtime supporter of President Bush.
Probably because they know how proposals to go lighter on renegade executives and corporations will be received by the public, the two business groups are waiting until after the elections to officially unveil their proposals.
One aspect of their proposals, the Times reported, would be to curtail the ability of state officials, such as New York Attorney General Elliot Spitzer, to prosecute cases involving executive manipulation of corporate finances for personal gain. For the first few years of Bush's presidency, Spitzer proved far more zealous in going after such cases than any federal agency, including the Securities and Exchange Commission.
The business groups also are thought to want higher barriers to shareholders filing class-action lawsuits against companies and their executives accused of having lied about or manipulated corporate finances.
Investors in company stocks are not entitled to a profit. In buying stock, they take a risk of losing some or all of their money if the business does poorly. Nor are shareholders entitled to compensation if management makes bad decisions by guessing wrong about what products or services customers want or how to most effectively operate the business. Bad, even incompetent, decisions can be made in good faith.
But corporate chieftains, who today are paid staggering amounts of money for their services, must be held to account when they lie about or manipulate their publicly traded company's finances, especially when doing so pours shareholders' wealth into their own pockets and those of favored friends. Those who want to relax the laws and regulations against corporate thievery should bear a very heavy burden of proof before Bush or the Congress makes any changes.

Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By cox on 10/31/2006 10:46 AM
Does anyone know anything about this?

Chris Cox brought it in and Shelby was one of only four republicans to vote against it.

http://en.wikipedia.org/wiki/Private_Securities_Litigation_Reform_Act
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By shelby on 10/31/2006 10:52 AM
http://www.thegipper.com/congress/senate_profile.php?v_id=ALSR
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By InTheKnow on 10/31/2006 12:43 PM
Rvac106:

Add some Brokerage Chieftains, Hedge Fund Honco's and the Top Guns at the SEC and throw in a few Commitee Chairman to your list and then we will have something!
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By selene on 10/31/2006 1:28 PM
http://www.bloomberg.com/apps/news?pid=20601087&sid=aJoinHyJ.iyQ&refer=home

This looks to me like a lot of smoke and mirrors. A way to act like they are doing something while not really doing anything at all. Find a fund that did some naked shorts, but only in a very selective situation. Katrina...

Selene
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Off Topic but FDA has as many miscreants as does t on 10/31/2006 3:17 PM
nig pharmas get all the inluence, little guys get a kick in the balls

AVNR got killed today after months of heavy naked shorting and regular shorting

p values were on the order of 0.001 or better ( extremely high statistical significance pro the compound )

FDA signed up to the test methodologies and helped design them, today FDA decides they dont like the test results, UTTERLY INCREDIBLE - you want inside fixes and scandal look at FDA sa 100s of thousands die lingerign deaths while FDA daudles and caters to the big money

this country is going to hell in a handbasket, corruption is everywhere, who will clean it up
Off Topic but FDA has as many miscreants as does the SEC By i've been drinking - oops on 10/31/2006 3:18 PM
nig pharmas get all the inluence, little guys get a kick in the balls

AVNR got killed today after months of heavy naked shorting and regular shorting

p values were on the order of 0.001 or better ( extremely high statistical significance pro the compound )

FDA signed up to the test methodologies and helped design them, today FDA decides they dont like the test results, UTTERLY INCREDIBLE - you want inside fixes and scandal look at FDA sa 100s of thousands die lingerign deaths while FDA daudles and caters to the big money

this country is going to hell in a handbasket, corruption is everywhere, who will clean it up
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By selene on 10/31/2006 3:35 PM
I'm still in college, so this is still recent for me, but you know in High School when a teacher would tell the class that someone would have to work really hard to fail the class. That's it was actually more work to fail than to pass...

Well, it's kind of like that for Chanos. He goes through the greatest bull market in history and he produces a 2% average annual return. Whats the probability on that. Is Chanos like Buffett? Is he a six sigma event? I guess if someone is able to do the impossible then people really should pay attention to him. Opposite ends of the spectrum but both are six sigma: Buffett does 20% plus and Chanos does 2%.

I don't know what you guys think, and maybe this is off topic, but IV wont let me post and I just thought it too funny of an idea. Any statisticians out there? Maybe one could calculate the likelyhood in producing the return that "Two percent Jim" put up. (I know he is a short guy, but first and foremost he is supposed to be an investor).

Selene
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Selene on 10/31/2006 3:39 PM
I'm sorry, but I just can't get over this one. I'm actually ROTFLMFAO..... Chanos, what a fucking dildo. We could get some tard off the street and he would do better.

Selene
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By rtway1 on 10/31/2006 3:47 PM
I wish someone can explain to me the term " the stock market is a zero sum game "when you are buying something that is counterfeit. To me it is a zero game if you don't have a chair to sit in when the music stops or the market and hedge funds take a dive. Its only a matter of time before the ball of string starts to unravel.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By davidn on 10/31/2006 3:57 PM
It comes from games theory. It means for every winner, there is a loser.

They try to say that it isn't. For example, if I buy $1000 worth of a penny stock and it drives the stock price from $.001 to $.002 and doubles the market cap. from $1 million to $2 million, you could say that $1 million was created out of thin air and every shareholder became more wealthy without anyone losing. That isn't a zero sum game, but it is the wrong way to look at it.

If you only look at money flows and ignore dividends, then there is only so much cash going into the market and so much cash coming out.

The money that all the parasites are making in the system had to come from somewhere as the money going in from buying is exactly the same as the money coming out from selling.

For every billion dollars made by Wallstreet, a billion dollars had to be lost by the general public.

http://en.wikipedia.org/wiki/Game_theory

"In zero-sum games the total benefit to all players in the game, for every combination of strategies, always adds to zero (or more informally put, a player benefits only at the expense of others). Poker exemplifies a zero-sum game (ignoring the possibility of the house's cut), because one wins exactly the amount one's opponents lose. Other zero sum games include matching pennies and most classical board games including go and chess. Many games studied by game theorists (including the famous prisoner's dilemma) are non-zero-sum games, because some outcomes have net results greater or less than zero. Informally, in non-zero-sum games, a gain by one player does not necessarily correspond with a loss by another.

It is possible to transform any game into a (possibly asymmetric) zero-sum game by adding an additional dummy player (often called "the board"), whose losses compensate the players' net winnings."
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By davidn on 10/31/2006 3:58 PM
Selene, a bell curve with Buffet on one end and Chanos on the other would make a good funny bunny.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Mosses on 10/31/2006 4:17 PM
Bobo, are all of the hedge fundscrooked or just the ones that short stocks?
SEC goes after a Naked Shorter By just me on 10/31/2006 4:32 PM
http://www.bloomberg.com/apps/news?pid=20601103&sid=aJoinHyJ.iyQ
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By legal on 10/31/2006 4:46 PM
"Not all naked shorting is improper. There are exemptions, such as for brokers maintaining a market for a stock. Regulators pursuing violations may also be required to prove an element of fraud, such as a plan to manipulate prices."

Notice the lawyer says "improper" rather than "illegal". They know that the SEC doesn't make law. Naked shorting isn't legal just because they say it is.

How can it be legal to take someone's money and lie to them that they received something in return when instead you are using their money to push down the value of what you were supposed to have sold to them?

Some definitions:

Wire Fraud
A situation where a person concocts a scheme to defraud or obtain money based on false representation or promises. This criminal act is done using electronic communications or an interstate communications facility.

Investopedia Says: Like any type of fraud, wire fraud is a federal offense. A person can be found guilty for their misuse of a communication facility, regardless of whether their scheme actually defrauded anyone.

In the simplest terms, fraud occurs when someone knowingly lies to obtain benefit or advantage or to cause some benefit that is due to be denied. If there is no lie, there may be abuse but it is not fraud.

Intentional misrepresentation or concealment of information in order to deceive or mislead. It is illegal.

Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By clearthinker on 10/31/2006 6:26 PM
Remember the movie, "The Firm"? The lawyers were guilty of overbilling, and were busted for......................mail fraud. I think the mail fraud argument has legs here as well. If a broker sells you a stock and doesn't deliver the paper and sends you a statement that says you have received the goods you paid for, not alerting you to the "problem"...it's fraud.

Book 'em Dano....
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By sec on 10/31/2006 7:49 PM
As unelected bureaucrats, the SEC is to follow the Securities Act of 1933, not create new law.

The Securities Act is right on the SEC site and it talks about wire fraud.

http://www.sec.gov/divisions/corpfin/33act/sect17.htm

It shall be unlawful for any person in the offer or sale of any securities by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, directly or indirectly--

to employ any device, scheme, or artifice to defraud, or

to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By oldfeller on 10/31/2006 8:49 PM
Anyone catch Cramer`s show tonight? Talking about his days as a hedge fund manager. A sad story about how bears can be pigs too. Nearly brought a tear to my eye.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Bobo on 10/31/2006 10:27 PM
Mosses: You are wearing out your welcome. I never said short selling hedge funds are crooks. I said that those that naked short and engage in market manipulation are crooks.

My personal belief is that 95% or so of hedge funds are legit and honest.

The 5% that aren't are whoppers, though. Where does the trillion-dollar drug (all cash) economy go every year? How does it get moved? Hedge funds.

The 5% are seriously bad players.
*** Let the DTCC drop dead! *** By InTheKnow on 11/1/2006 4:37 AM
Hopefully the first of many:
http://www.bloomberg.com/apps/news?pid=20601103&sid=aodwXGqZSf24
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By bbhindyou on 11/1/2006 4:44 AM
sec you have to have someone who will enforce the mail fraud law.
We have many laws AGAINST these transactions we call naked short selling and failure to deliver but we have no one who will enforce the EXISTING LAWS.
The short positions have not and will not be bought in, the laws we have had since the 1930's will not be enforced and the mess will get worse and worse.
I've been doing some reading and watching a program on our broken government and I have come to the conclusion that our congress CAN'T deal with this issue because they need the money these crooks provide to stay in power.
Which tells you who is really in power dosn't it?
The facts seem to be that congress is so busy soliciting money they have no ability to look out for the american people.
There are some who are also too busy soliciting sex from the people they have power over like our best and brightest children sent to 'learn' how our goverment works by being pages.
Is it any wonder the people in power will sell us all down the river to keep their power over others?
It's like us asking them to bite the hand that feeds them, strokes them ,and tells them how good and smart they are.
The more I learn the worse this is.
It makes me sick.
If I had my druthers I would rather clean out a cesspool with a spoon than have to face the nasties found in our congress.
*** Where are they now? *** By Nah Nah Nah Nah Nahnah! on 11/1/2006 4:48 AM
Where are all the goddamn naysayers now? Lets's here it DTCC, Shelby Banking Chairman, Annette Nazaraeth, Motley Fool, CNBC fools and a host of all the other scumbags!
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By rezurch on 11/1/2006 5:41 AM
NAKED IN
THE HEDGE
FUND IN SHORT-SELL PROBE
By RODDY BOYD

November 1, 2006 -- The Securities and Exchange Commission is ready to bring charges claiming a major New York hedge fund and several of its principals violated key short-selling rules, The Post has learned.
Sandell Asset Management, a $7 billion hedge fund in the midst of another excellent year, was informed on Oct. 19 that the Wall Street watchdog "intends to recommend the commencement of proceedings" against it.
The charges stem from allegations of "naked short-selling," which violates Regulation SHO, the SEC's rule governing short sales.
In a legitimate short sale, the trader gets approval to borrow and then sell a stock with the agreement that he will repurchase it at a later date. In a naked short sale, a trader simply shorts the stock without having borrowed any shares, which can threaten an orderly market.
Sandell, in a letter to shareholders that was obtained by The Post, said its troubles resulted from its trading in the stock of Hibernia Corp. on Aug. 31 and Sept. 2 of last year. Hibernia, a Louisiana-based banking company, has since been acquired by Capital One.
The names of the Sandell fund's senior executives caught in the SEC's cross hairs were not disclosed, although several sources familiar with the situation told The Post that Thomas Sandell, the founder and general partner, was one of the targets.
A fund-of-funds manager who said he was familiar with the matter told The Post that Sandell's portfolio managers allegedly shorted the Hibernia stock after Hurricane Katrina.
Another rival manager said the fund planned to cover its short position using newly issued stock from Hibernia's merger with Capital One.
"We dispute several of the commission's assertions," the West 57th-based Sandell wrote to investors. "But we are continuing to work with the staff to resolve this matter."
A Sandell spokeswoman declined to comment.
The legal woes occur as Sandell's flagship Castlerigg portfolios are up between 14.24 percent and 16.58 percent so far this year.
In addition to having been a Bear Stearns big shot, the Swedish-born Sandell boasts on a Web site of having been "Sweden's No. 2 badminton player."

http://www.nypost.com/seven/11012006/business/naked_in_the_hedge_business_roddy_boyd.htm
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By selene on 11/1/2006 6:47 AM
Who was it that informed the post? Bloomberg.com???

My dad says not to trust this one... Smoke and mirrors...

Selene
sssu wants to do a movie about short sellers! By newspaper on 11/1/2006 7:49 AM
Silver Screen Studios to Request New CUSIP Number and Trading Symbol ( A SSSU will request a new trading symbol and a new CUSIP number as part of its restructuring and produce documentary film financed with film tax credits )

Documentary Film Financed via Tax Credits:

Our first film project to be financed by our Tax Credit Fund will be a documentary tentative titled: Short Sellers, Market Makers and Brokers. The documentary will explore the shadowy world of the small cap company, hedge funds, market makers and online brokers. The project will be produced in a joint venture with Code Red Entertainment, LLC who will provide the initial funding for the project as well as production services.

http://sites.stockpoint.com/wpost/newspaper.asp?Mode=QUOTE&Story=20061101/305b9028.xml&Symbol=SSSU&dispnav=business
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By ted on 11/1/2006 8:04 AM
Fascism is when the monied powers control the government.

A police state is when the police refuse to investigate the people in power.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By gregcable2002 on 11/1/2006 8:21 AM
You know were in trouble when state and federal judges make up new laws on a case by case basis,or ignore the law altogether and decide whats best for us on a case by case basis.Sorta like the IRS,they do whatever they want,there above any law.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By rezurch on 11/1/2006 9:32 AM
I find the timing of this SEC investigation into naked short selling very "interesting" given the announcement of the GAO investigation of the SEC's oversight...

too little too late...
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By bobo on 11/1/2006 9:41 AM
NEwspaper: Won't work. Changing a CUSIP will achieve nothing. These guys should talk to experts before doing stuff like this. Waste of time.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By aldigit01 on 11/2/2006 3:42 PM
Mail fraud. Interesting. Don't think it's SEC. DOJ more likely. Would think the guy who bought the float of Global Links would have a case. If he received a confirmation letter or a statement showing the "shares" but he has it in writing that they've never received delivery, could be a good case.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By aldigit01 on 11/2/2006 3:45 PM
Mail fraud. Interesting. Don't think it's SEC. DOJ more likely. Would think the guy who bought the float of Global Links would have a case. If he received a confirmation letter or a statement showing the "shares" but he has it in writing that they've never received delivery, could be a good case.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Mosses on 10/30/2006 11:19 AM
"Jim Chanos, who runs the hedge fund Ursus Partners, smelt a rat about a year before Enron’s collapse, nominating the company as a prime target at his ‘Bears in Hibernation’ conference in Miami in February 2001. Chanos had less access to Enron finances than the big banks but nevertheless observes: ‘It has been our expe-rience that gain-on-sale accounting creates an irresistible temptation on the part of managements heavily incentivized with options and heavy share ownership to create earnings out of thin air.’ Jonathan Laing, ‘Ursus Major’, Barron’s, 28 January 2002 http://www.newleftreview.net/?getpdf=NLR24802."
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By x. trapnell on 10/30/2006 11:32 AM
I have yet to see the WSJ explain why Hong Kong is so acceptable as an IPO venue if Wall Street is not, on the basis of supposed overregulation here. In HK, short open interest is reported twice daily, not once a month, issues below HK$1 billion can't be shorted, and naked shorting is not allowed. And yet the IPOs just keep coming. Curious, isn't it?
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By bobo on 10/30/2006 12:00 PM
Mosses:

2.1%.

Kinda hard to tart that pig up to be anything but 2.1%. Before fees.

Cramer now admits that he was shown the partnership agreements for Enron back in 1999 or 2000. You REALLY believe he was the only one in that crowd who was?
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By neither admitted nor denied here we go again on 10/30/2006 12:49 PM
http://www.cfo.com/article.cfm/8100750/c_8099675?f=home_todayinfinance

The Securities and Exchange Commission charged 13 individuals, including eight former finance executives, for the roles they played in a massive fraud at Delphi Corp. In addition, the regulator settled financial fraud charges against the auto parts giant covering the years 2000 through 2004. Under the deal, Delphi did not admit or deny the Commission's allegations.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By bobo on 10/30/2006 1:01 PM
Would someone please send in a FOIA to get the amount the SEC has fined Wall Street firms over the last couple of years, versus the amount they have actually collected?

I suspect this is the last straw - when we discover that most of the fines purportedly having the deterrent effect never actually get paid....
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Kobo Daishi on 10/30/2006 2:04 PM
Re regulation- I'm no expert on these things. But it seems to me that SOX (Sarbanes Oxley) has prohibitively increased the cost to be listed. Apparently for companies with a market cap below $100m the cost is just too high. In this area, less or better regulation seems to make sense.
Re Chanos record- I like Tilson's VII quite a lot. But I cannot understand why he thinks so much of Chanos with a record so dismal. And we're not talking about an outlying period. But bobo please confirm the exact period, so that no one can say, you just selected a certain period with bad results.
I cannot understand why anyone would invest in that fund. Is it because his fund's volatility is very low. Or is it due to modern finance portfolio theory's asset allocation which prescribes to have say 2-5% in a short hedge fund and 2-5 in energy and 3% in venture capital, etc..
And of course the Byrne invite/uninvite is amazing. How impolite.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Mosses on 10/30/2006 3:04 PM
Bobo,
I believe the GAO also publishes the figures on how much of the fines and penalties the SEC collects. If I remember right it was a very poor track record of collecting fines and penalties.

NASD has a poor record as well.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Mosses on 10/30/2006 3:08 PM
SEC Goes After Deadbeats; Considers New Fee Structure
By: Staff Writer

AccountingWeb.com. January 23, 2004
_________________________________________________________________________

EXCERPT: The Securities and Exchange Commission (SEC) has set up a new unit to collect millions of dollars in unpaid fines. A team of three lawyers has been hired to find hidden money and get court orders to enforce judgments. Until now, collections were handled by SEC enforcement lawyers, but the system fell short when they started working on new cases or left the agency, former SEC lawyers told Bloomberg News. "This really fills a need in the enforcement program to put teeth in the remedies that the division imposes," said former SEC trial attorney Stephen Crimmins, now a partner at Pepper Hamilton in Washington. "The SEC never really had the ability to either handle collections work on a professional basis or to outsource it." In fact, the SEC has collected only 40 percent of the fines it was owed from 1997 to 2002, according to a General Accounting Office (GAO) report issued last summer. While $480.4 million in fines were levied in SEC cases, the agency collected $190.1 million, the GAO said. "Spendthrift defendants, defendants who lack current or future prospects for earning money, and defendants who have declared bankruptcy or are incarcerated contribute to collection problems," the SEC told Congress last year. Budget constraints also hampered SEC's collection efforts, but the agency's budget was increased after the accounting scandals of the last few years. Meanwhile, the SEC is proposing a formal, standardized approach to determining and collecting the fees from the U.S. markets that help fund the agency. The current rules don't outline exactly how the fees should be calculated or who should do it, resulting in a scattered approach that differs from one market to another. The new fee structure would clearly define what trades are covered and how fees should be calculated. Monthly reports would be required from each market showing applicable trades reported to a designated clearing agency, those captured in a trade comparison system but not reported to a designated clearing agency, and trades that don't fall into either category, the Wall Street Journal reported. The SEC's approach would apply to 12 markets, many of which now use their own method for determining how much they or their members owe. If the proposal is approved, the changes will apply to all activity in fiscal 2004, which started Sept. 1, 2003.
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http://securities.stanford.edu/news-archive/2004/20040123_Headline10_Staff.htm
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Bobo on 10/30/2006 3:36 PM
Kobo:

The period is from the inception of the fund, to the end of 2005, which is the last date I have data for.

20 years, 2.1%, before paying any fees, or bonuses.

The real question is how badly negative ain investor would be if they started with him and stuck with it?

And then adjust that for inflation.

Yikes.

I'm sure there are 3 or 5 year periods you could arbitrarily select to make it all look good - But as I go through the data, it's hard. Pick a 5 year period - starting January, 2001, ending Dec, 2005 - and his fund's "index" value starts at 144.8 (as percentage of assets from day one 100%) and finishes at 150.9. How bad does that suck? 5 years of dead money, not counting the vampire bite of his fees. Or start 5 years prior to that, and you begin in 96 at 127.6, and wind up at 160.1. That's a bit better, but subtract the fees from the big up years and you would have done better staying in bed.

My point is simple. For all the BS and hype, wall street has only one objective - to make wall street a ton of money. The numbers are what the numbers are. I just looked at the 20-year life of the fund, and then just looked 5 years back, and then 10 years back. Maybe 18 years back he tripled his money when the market fell out of bed, or Drexel imploded - but the point is that if you had put your money into the fund and kept it there for 20 years you would have been worse than gang raped.

Those big 50% up years? Bye bye big performance bonus. I mean, if you really follow the swings, you can see where volaitiliy is the driver here - think about how much Rocker must have made after losing his investors almost half the fund in a couple years - new money came in, and presto, big up years, huge bonuses, and he retires - buh bye, money.

I'm just jealous. Like I said, I've gone 3 to 5 times the money a few years - maybe I should run money? I'll have my buds all trumpet the years where I buy NFI at 22 and it finishies the year $45 post split, plus a big dividend, and forget when it goes from $68 to $28 - I'm a frigging maestro, you see, and the millions I collected as my bonus the year before are mine, all mine to keep.

I want some of that money. Really. Sounds good to me. Where do I sign up?
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By msucog on 10/30/2006 3:55 PM
every fine has the phrase "while neither admitting nor denying wrongdoing" attached to it...banc of america has agreed to pay over $1 billion in the past few years for pretty damn severe corruption and collusion...why are they agreeing to pay these amounts? because they made at least twice that amount on the transactions and because they're able to keep doing it...

i don't think these crooks should be able to settle for shit...they should be raked across the coals and fined for 10x the amount they steal or help steal...that'd put a dent in the corruption....how about tacking on jailtime to the 10x fines...start freezing assets of these jerks on top of all that...take their fancy cars, homes, and property to pay back the investors...
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Ranger on 10/30/2006 6:12 PM
Now you are making sense Bunny. Go for the big bucks. The stock market is not going to survive the huge amount of money that has been taken out by short sellers. Did you pull up a list of 150 stocks and look at the increase in short interest. It becomes very clear when folks start to understand the amount of money that has been removed from the market via short sells. Billions of shares are sold short now that were not a few years ago. THis money is gone. It is deposited in somebody's account and being used to fund other stock buys and sell. It is being used to buy bonds and commodites. It cannot come back to the stock that was sold short if the system crashes. It will be written off as losses as the funds that hold the short positions declare bankruptcy and are deemed insolvant. This will result in the remaining shareholders getting wacked again as the markets go into free fall. The amount of money that has been removed via short selling, naked short selling is excessive to a point of failure. That is why there is so much resistence from the SEC and Wall Street to tell the truth. The money is gone and they are not going to get it back. Criminals never give the money period. Lawyers get it all. Wake up and learn how to short the market. Until everybody is doing the same thing and the system breaks down the only folks getting rich are the financial guru's/ Tale some time and find a pattern and trade on the short side with them until the system breaks down or stay out of the markets. America has to get it wrong over and over again before anything is going to be done. Too much money at stake to do the rght thing. The county was built on greed and grit. The masses will take the beating and more on, just like they did during the depression, the S & L bail out, all of it. The masses always lose out to the few. History repeats itself and yet there are always a few that get rich and stay that way. They teach it to thier children and the game goes on. Learn from it and prosper.

The article from Stein was great. He see's it and is smart enough to know it cannot be changed anytime soon. He is an investor, he puts his money into the market. he follows the same pattern as the rich. You cannot beat the system because it is set up to sell shares to long term investors and short term traders are going to take advantage of the flaw.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By financialsystem on 10/30/2006 6:51 PM
The stock market is a zero sum game.

When the bank brokerages make billions, it comes out of our pockets.

When the big brokerages are being squeezed, it comes back into our pockets.

The thieves like to say that it will collapse the economy or something if they are forced to cover, but the truth is that the money isn't going anywhere. It would get sucked back in from offshore hedge funds into the real economy, with real retailers that create real consumer demand.

I'm sick of this heads I win, tails you lose nonsense. It's the thieves' turn to lose and I'm willing to have the rules enforced even if it means I get rich and the brokerages go broke.

If the privately owned banks are over-leveraged because they lent to incompetent hedge fund managers, then they deserve to go bankrupt.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By onthetake on 10/30/2006 7:30 PM
Richard C Shelby has taken funds from people like Abramoff, but he's also had ethics complaints for taking bribes.

http://www.citizensforethics.org/filelibrary/ShelbyEthicsComplaint.pdf

He was accused of being a traitor:

"Shelby revealed classified information on June 19, 2002 to Carl Cameron, the chief political correspondent on Fox News. This information had been given to Shelby only minutes before at a closed intelligence committee meeting. This information consisted of two messages intercepted by the National Security Agency on September 10, 2001, but only translated after the attacks the next day — "the match is about to begin" and "tomorrow is zero hour."

Both the U.S. attorney's office and the FBI investigated the case, and a grand jury empaneled. In July 2004, the Department of Justice declined to file criminal charges against Shelby and transferred the case to the Senate Ethics Committee.

On August 11, 2004 media sources confirmed that Shelby had hired Washington-based attorney Gregory Craig, to represent him in investigations by the Ethics Committee. In November 2005, the Senate Ethics Committee dismissed its probe into the alleged leak of classified information regarding National Security Agency intercepts the day before the attacks, administering no punishment to Shelby."

We need to get rid of him.

Some fun:

http://www.cliffordcroft.com/politics/index.asp?senator=52&issue4=200
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By onthetake on 10/30/2006 7:32 PM
Shelby is the perfect example of why this isn't a political issue. He was Democrat, then switched to Republican. The criminals don't care about politics. They care about money.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By onthetake on 10/30/2006 7:49 PM
You ever wonder why no one wants to regulate these thieves?

http://www.businessweek.com/magazine/content/04_29/b3892129_mz020.htm
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Thousands of Shares - No Votes on 10/31/2006 5:03 AM
I see Boone Pickens son is going to jail for several years for faxing bogus stock reports. I went to the wiki (arghhh!) and picked this up about Boone.

<>

What is this about. Was it a way to allow the counterfeiters to vote my shares? What was the law before this was passed?
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Thousands of Shares - No Votes on 10/31/2006 5:04 AM
<<<>>>
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By Try Again on 10/31/2006 5:05 AM
"He was also a major force in the creation of the United Shareholders Association (USA), which from 1986 to 1993 attempted to influence the governance of several large companies. After nearly two years of periodic hearing and debate, in July 1998 the Securities and Exchange Commission voted 4-1 to approve a one-share, one-vote rule, a primary USA objective."
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By voting on 10/31/2006 6:42 AM
TryAgain, using language precisely, we do get one share / one vote. People with certificates (shareholders) get a vote for each share they hold.

Claimsholders, on the other hand, get a fractional vote, approximately calculated by taking the number of shares owned by Cede & Co. and dividing by the number of claims owned by claimsholders.

Shareholders get dividends whereas claimsholders get either dividends or pil's on a weighted lottery that favors big clients.

In the case of theft or loss, shareholders can have their shares easily replaced by signing a power of attorney.

Claimsholders can lose everything if their brokerage goes under. The SIPC "insurance" plan is a bit of a smokescreen as it only has $1 billion in assets to cover fails that are a minimum of $6 billion, according to the SEC.
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By voting on 10/31/2006 6:52 AM
http://www.sipc.org/pdf/SIPC_fitch.pdf

Listen to the insurance fund slam the SEC and regulators. They can see that THEY ARE NOT DOING THEIR JOB!!!

"The SEC has actively participated in several undertakings to address risk management practices5 and the effectiveness of the Net Capital Rule. However, these initiatives concluded either in rules applicable to only a small category of dealers or in recommendations, rather than mandatory rules. Hence, financial requirements and disclosure rules for a majority of securities firms have remained unchanged over the past few years.

During an extended period of strong economic growth, regulators, market participants and politicians who supervise the Commission’s activities, may have overlooked the significance of a firm regulatory framework. A recent article in the New York Times details the neglect the SEC has suffered over the past several years. The workload of Commission employees has increased excessively and has resulted in noticeable delays of regulatory decisions and proposed rule changes."

Can you imagine anyone other than Wallstreet lending $200 million to a firm with $5 million in assets in a long daisy chain of x-clearing lending where a share is lent from one firm to another in a chain of a dozen firms? The criminals know that when the shite hits the fan that customers will take the fall and they will be long gone with their profits.

"MJK Clearing’s external auditors (Ernst & Young) issued a statement4 in May 2001 that specifically raised the issue of increasing risks associated with securities lending operations in a harsh economic climate."

"MJK Clearing extended cash loans in excess of $200MM to Native Nations, a securities firm with equity capital of approximately $5MM. In September 2001, this single exposure accounted for over 23% of MJK Clearing’s total assets."
Re: Decline of Western Civilization; I Wanna Be A Hedge Fund Manager By !!!! IMPORTANT !!!! on 10/31/2006 6:54 AM
ht