Friday, December 12, 2008

Wait, there is more........

It is almost unfathomable the tenor of the news barrage of late. In fact, the news out of either the markets or the government is starting to sound almost tabloid-like: so bizarre that it borders on unbelievable. Unfortunately, the stories have true meat to them rather than being founded on the miasma of innuendo and insinuation of tabloids.

The Maddoff story is very unsettling and is yet another in a series of stories of how Wall Street players have violated the trust of those who handed over their money. We have investment bankers asking for rules changes to increase their levering; create toxic products that they sell to investors looking for yield--and then bet against them for profit; have noxious terms in auction rate securities terms that penalize issuers; fail to allow investors to withdraw money even though the lockout period has passed, AND, to add insult to injury, continue to charge them a fee; write credit default swaps without havin even a slice of the capital needed to pay on such swaps in the event of default. I'm sure there are more, and perhaps more caffeine will bring some to mind. But isn't that enough already?

Any ONE of those things is story enough to rock one's confidence---a confluence of those stories almost numbs one to any further surprises. Like the infomercials, we have a "But wait there is more...." Enough already we say....but that doesn't help. Now we are told that one of the stalwarts of the industry, Maddoff--innovator, entrepreneur--is really only a trickster par excellence. Form Maddoff's website:

I suppose his name on the door will be supplanted by a number on his prison jumpsuit. You can be transported to the website by clicking on the above graphic. If you want to see Madoff's investments as of 09.30.08 you can find them here.

If hedge funds thought they had any opportunity to argue against regulation, then that has been lost. Personally, I feel that any in a fiduciary capacity should be subject to some oversight. There out to be adequate controls, REAL transactions and some accountability for funds. That's not to mean that the HF manager doesn't make bad investments. But folks ought to know how much leverage is used, and ought to be able to embrace the comfortable thought that while their investment might evaporate from haphazard investment choices and overleverage, their money is never used to fund a Ponzi scheme--large or small.

Perhaps the lesson to be learned is that the market is really nothing more than a gigantic Ponzi scheme.


StrasserTalk said...


I find this cumulative mess we are in so disconcerting, and even more disturbing is the disillusionment I feel, losing my faith in the 'system', and hearing/listening to those who merely cast it aside as a nonevent.

What has happened to many who remark that 'everybody does it' so it must be okay and that not much seems to matter anymore... that with a brush of the hand, we quickly dismiss that about which is so important?

Just thinking out loud and knowing you understand. ;)


Leisa said...

TL I had lunch with a friend today, and I remarked that I feel like I've been asleep all of these years. I said that I thought that the little guy gets screwed. He reminded me that the little guy has always gotten screwed.

Disgust, disillusionment--these are words that I've not used so often in such a small time frame. Unfortunately I understand all too well.

russell1200 said...

I am a little surprised at your surprise. You are the one that was posting your local foreclosure levels a while back.

That was certainly before the main waver front of bad mortgage news.

And you posted of on about business cycles, so you had to have some awareness of how bad real estate driven economic collapses could.

And I can only assume you are aware of how poorly Japans economy has done after the collapse of their financial bubble in the 1990s.

So I understand the cheerleaders talking their book on Wall Street being surprised, but not you.

Leisa said...

Russell--I'm not surprised or disgusted by the economic events--your are correct, I anticipated them by doing my own research/leg work before too many were singing the chorus. My disgust and disillusionment is from the behavior of people on Wall Street---the graft and greed--and their talking their book when they knew damn well reality. Sold to you mentality.

Anonymous said...

Hi Leisa -
Welp, the financial horror show continues: the Fed tells Bloomburg to stuff their Freedom of Information Act request: "The Federal Reserve refused a request by Bloomberg News to disclose the recipients of more than $2 trillion of emergency loans from U.S. taxpayers and the assets the central bank is accepting as collateral"

So, in perspective, if an institution was to loan out 2T of SOMEONE ELSE's money, and then refuse to identify who the recipients are, how would the original party (YOU, the tax payer!) even know if the loan got paid back? So, isn't it really a GRANT, especially since the Fed can "print it" up anyway! Where is the transparency, fiduciary responsibility? The Fed's / Treasury's haughtiness is absolutely amazing, and contributes to / re-inforces Wall Street's hubris!