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"Government cannot prevent nature from taking its
course."
David Rosenberg, chief North American economist at
Merrill
Lynch
"Hedge funds are now targeting each other.
Morgan Stanley and
Goldman Sachs, who made
obscene profits by shorting stocks in the past,
are vociferously against the practice now that their stocks are the ones being
destroyed." - Bruce Goodman
"Oil prices are largely not determined by supply
and demand but the trading desks of large Wall Street firms." - Michael
Masters, hedge fund manager
A
hedge fund is a private
investment fund.
Hedge
funds are not subject to
any direct regulation by the SEC,
the National Association of Securities Dealers (NASD), now the
Financial Industry Regulatory Authority (FINRA), or any other regulating
commission.
Hedge funds may hold long or short assets, enter into futures, swaps,
short selling schemes,
structured investment vehicles and
derivative contracts.
Structured Investment Vehicle
Some hedge funds focus
on other financial instruments including commodity futures,
options, and emerging
market debt.
A security may be an electronic entry in a software system that
is fungible - you can trade it for
an electronic entry in a different
software system.
As hedge funds typically lever debt to invest, the
positions they can take in the financial markets are larger than their assets
under management.
Only 17% of hedge fund managers see an economic
downturn as a bad news.
1998 During
the first phase of deregulation the
financial industry had a near-meltdown triggered by a collapse of
Long-Term Capital Management.
Although the shareholders
lost their assets, the creditors are paid.
The loss of $4 billion
in five weeks was touted as the 'tech
bubble.'
The paper wealth of lower echelon corporate management,
members of the middle
class, in the form of 'under water'
stock options,
evaporated.
'Under water' stock options,
granted at a share price higher than the current market share return the wealth
to controlling corporate interests.
"A consortium of banks rescued
Long-Term Capital Management, but it took 15 months, September 1998 to January
2000, to negotiate the way out of trades tied to more than $1 trillion in
bets." - Richard Teitelbaum, Hugh Son
2000
Tiger Management fails after raising $6
billion.
2003 Aman Capital is
set up by top derivatives traders.
Leveraged
trades in credit derivatives resulted in an estimated loss of hundreds of
millions of dollars.
Dissolved June 2005.
2004 Edward Lampert 'earns' $1.02
billion.
2005 Bailey Coates
Cromwell Fund leveraged trades chop 20% off a $1.3 billion portfolio in a
matter of months.
Dissolved June 20, 2005.
Marin Capital
attracts $1.7 billion in capital and puts it to 'work' using
credit arbitrage and convertible arbitrage
making a large bet on General
Motors.
General Motors' bonds downgraded to junk, fund
crushed.
Dissolved on June 16, 2005.
James Harris Simons 'earns' $1.6
billion.
T. Boone Pickens
'earns' $1.5 billion.
Ken
Griffin 'earns' $1.5 billion.
2006 Ospraie
Management LLC closed a $250 million hedge fund specializing in commodity
trading.
The Ospraie Point Fund lost 29% in five months. Losses
from bad bets in commodities that fell sharply.
Dissolved June 08,
2006.
Edward Lampert
'earns' $1.3 billion.
James
Harris Simons 'earns' $1.7 billion.
Amaranth Advisors, a hedge
fund manager, loses $6 billion in wrong-way bets on natural gas derivatives in
September.
Amaranth Advisors net asset value declined by 65% to
70%.
Amaranth Advisors controlled 40% or more of natural gas
contracts in 2006 and in one month controlled 70%.
2007 Senate investigators
conclude that Amaranth Advisors trading actions drove up the price of
natural gas for the entire natural gas market.
Amaranth Advisors
agreed to pay $717,000 to settle SEC
charges of violating securities rules.
Bear Stearns hedge fund
Enhanced Leverage Fund and High-Grade Fund together borrows $20
billion to invest in sub-prime mortgage
backed bonds.
"Our
liquidity and balance sheet are strong." - Alan Schwartz, CEO of Bear
Stearns 36 hours before seeking emergency funding
Investors are
told in July 2007 that their investment of $1.5 billion is gone.
In a
survey conducted by Rothstein Kass 61% of hedge fund managers stated that a
recission in America was very likely in 2008.
66% of hedge fund managers said
a recission would bring
'opportunities'.
George Soros 'earns'
$1 billion.
Stephen A. Cohen
'earns' $900 million.
Bruce
Kovner 'earns' $715 million.
Paul Tudor Jones II'earns' $690
million.
Tim Barakett 'earns' $675 million.
David Tepper 'earns' $670
million.
Carl Icahn 'earns'
$600 million.
Hedge fund manager
John Paulson makes $3 billion shorting financials in anticipation of the
American housing market collapse.
John Paulson is believed to have made
$428 million from September to February by short selling
Lloyds Banking Group Plc
and HBOS Plc.
"Bernie was known for
generous philanthropy
to Jewish causes.
Madoff
was no Robin Hood, his philanthropic and
charity contributions facilitated
access to the wealthy who served on the
boards of the
recipient institutions proving he was
a super-rich 'intimate' of the
same elite class.
The
shock following Madoff's
confession he was 'running a Ponzi scheme' drew as much anger for the money
lost and the fall from the moneyed class as for
the embarrassment of
knowing that the world's biggest exploiters and
smartest swindlers on Wall Street, were completely 'taken.'
Madoff's fraudulent behavior was not the result of
personal moral failure.
It
is the product of a systemic imperial
economic culture.
The paper
economy, 'sophisticated financial
instruments' are all 'Ponzi
schemes,' as they are not based on producing and selling goods and
services.
They are financial bets on future financial paper growth
based on securing future buyers to pay off earlier cash ins." - James
Petras
earned income
Hedge fund managers hold their assets one year and
one day magically converting short term assets into long term assets.
"Since 1960 each of the seven previous recoveries ended
with a greater percentage of women at work than when it began.
Working
women now earn a third of America's total household income, and by and large,
only those homes with a working wife have made real gains in their standard of
living over the last eight years.
Yet, over that same period, the
percentage of women employed outside the home has fallen to where it was 12
years ago.
Meanwhile, the median hourly pay of women 25 to 48 years of
age has fallen from $15.04 in 2004 to $14.84 last year.
This corrosive
pattern holds true, according to the federal statistics, for all American
women, regardless of education, race, ethnicity or marital or
familial status." - Tim Rutten
07/08
"Working mothers
work because their families need their paychecks.
Therefore, by
definition, families in which the wife is not
required to work are families feeling a little less crushed by the new
economy."- Renee Leask
"The real argument isn't that the top 1% pay
40% of federal income taxes.
Wage earners can be taxed up to 35%.
Capital-gains earners generally can be taxed as high as 15%.
Individuals whose wealth works by accruing wealth from investments are
rewarded by the government for being
wealthy enough not to have to work.
The rest are penalized for
showing up to work." - Brain T. Finney
Intercontinental Exchange (ICE)
"Goldman Sachs was one
of the founding partners of online commodities and
futures market Intercontinental
Exchange (ICE).
ICE has been a primary focus of recent congressional
investigations.
It was named in both the Senate Permanent
Subcommittee on Investigations, June 27, 2006 and the House Committee on
Energy & Commerce hearing.
Those investigations looked into the
unregulated trading in
energy
futures and concluded energy price climb to stratospheric heights has been
driven by the billions of dollars' worth of oil and natural gas futures
contracts being placed on the ICE, which is not regulated by the Commodities
Futures Trading Commission." - Ed Wallace
Michael
Robert Milken:
The "Junk Bond King", expanded the use of
high yield debt in corporate finance increasing mergers and acquisitions, which
in turn fueled the 1980s boom in leveraged buyouts,
hostile
takeovers, and corporate raids which were responsible for moving untold
wealth out of middle American into the hands of men like
Charles
Hurwitz.
Milken was responsible for a
large swath of Northern
California clearcut pushing King Salmon to the brink of extinction through
habitat destruction.
1989 Milken indicted on
98 counts of racketeering and securities fraud
Milken plead guilty to
six felony counts of securities fraud and
conspiracy, paid $600 million in
fines was sentenced to ten years in prison but only spent 22 months behind
bars.
1998
Milken Settles S.E.C. Complaint for $47 Million
Junk bond king Michael Milken looms large in L.A. finance
industry
1975 Ivan F.
Boesky & Company is founded with $700,000 (equivalent to $3.3 million in
2018) worth of startup money from his wife's family.
1986 Ivan Frederick Boesky, an arbitrageur, who has amassed a
fortune of more than US$200 million by betting on corporate takeovers and the
$136 million in proceeds from the sale of The Beverly Hills Hotel, is on
the cover of Time
magazine.
1987 A group of partners sue Boesky
over what they claim are misleading partnership documents.
The Securities and Exchange Commission
investigates him for making investments based on information received from
corporate officers.
Stock acquisitions were sometimes brazen, with
massive purchases occurring only a few days before a corporation announced a
takeover.
Although insider trading of this kind was illegal, laws
prohibiting it were rarely enforced until Boesky was prosecuted.
Boesky
received a prison sentence of 3 1/2 years and was fined US$100 million.
1991 In a divorce settlement his wife agrees to
pay him $23 million and $180,000 a year for life.
Ray Lee Hunt:
September 8, 2007 Hunt signs a petroleum deal with the
Kurdistan Regional Government of Iraq.
Ray Lee Hunt spent most of the
Bush administration serving on the President's Foreign Intelligence Advisory
Board.
The Iraqi petroleum minister denounced the deal as illegal,
though there was no specific law against it, claiming it undermined the
country's negotiations to share profit between the
Kurds,
Sunni and
Shi'a.
Richard Edward Rainwater:
Investment manager for the four Bass brothers from 1970 to
1986.
Bass Brothers:
Born into
an extremely wealthy family with an uncle, Sid Richardson worth $810 million,
Robert, Lee, Ed, and Sid Bass all attended Yale University.
Ed Bass is
a classmate and personal
friend of George
W. Bush, and the brothers, especially Lee Bass, helped
George W. Bush
financially both before and throughout his political career.
Robert Rowling:
George Walker Bush
campaign Pioneer
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