Where is the Outrage?

I am really trying hard not to be angry but I can’t help it. It seems that every time I turn on the news, pick up a newspaper or listen to the radio, all I hear about is the government giving out money. Yet for some reason, I never get any.

I am really sick of hearing about the giveaway and, in fact, I am outraged by it. But what causes me more grief is the fact that nobody seems to care. Everyone seems to believe that government in its infinite wisdom can simply dole out dollar after dollar – or should I say taxpayer dollar after taxpayer dollar -- to one bank or financial institution after another with little if any regard about actually making things better. It’s as if the top bosses of all of the financial services companies – read banks and brokerages -- got together a couple of years ago and said, “Hey, we know how to line our pockets and those of our most-favored employees! We can create, sell and dump worthless financial paper on unsophisticated investors and let the government bail us out when the chickens come home to roost.” Does that sound familiar?

I’m not one for conspiracy theories but I may be by the time all this stuff comes to an end. These bailouts are simply wrong, in my opinion, and frankly I don’t understand why nobody is saying so. Am I the only one who thinks that if companies fail, management should be out of a job and not be rewarded with tax dollars?

Furthermore, the recent news at some of the nation’s largest banks seems to indicate that the bailouts are not working. The old adage about throwing good money after bad is being proven on a daily basis. Please don’t read this and think that I want all the banks and brokerage firms to fail. That isn’t what I am saying at all. I realize the impact that the collapse of some of these businesses could have throughout the world, and I am not that evil.

I am, however, against the idea of continuing to throw money at badly managed businesses. Government bailouts are not going to solve the problems of weak, corrupt and self-serving management teams.

Strong management that is given incentives to run good, tight, successful, money-making operations is what is going to turn this economy around. The White House, Capitol Hill, the Treasury and the Federal Reserve all know that this is the answer. It is time for them to start implementing it. If President Obama really wants to make an impact on this economy, he needs to start by getting rid of the TARP program and working to find better solutions than simply throwing money around. He promised change – hopefully he can deliver.

However, to avoid being called a blowhard like most of the print media poets and talking heads on the cable news channels, I am going to provide President Obama, the soon-to-be Treasury Secretary and anyone else in Washington who might have power to get something done some advice on how to restore confidence to the banking system and to restore order to the equity markets. My suggestions will cost next to nothing and will achieve two very important goals: restore confidence to the banking system and bring order to the equity markets:

1. Increase FDIC insurance from $250,000.00 to $500,000.00
2. Put back the Up-Tick Rule

My suggestions will cost next to nothing to implement and will achieve two very important goals quickly and set us on a course to reverse our current financial situation. Stability will come to the banks as consumers will have a sense of security over their hard earned post tax dollars and the banks deposit base will increase. The Up-Tick Rule will cause the equity markets to be less volatile which in turn will remove the wild gyrations that have occurred over the last six months.

It is our job as citizens to not only demand that our President and our leaders take action but, remember, they’re spending our money, so they should take the right action.

Get outraged. We all work to hard to see our dollars being flushed away in order to bail out corporate mistakes. Get outraged – it is our responsibility.

THINGS THAT DRIVE ME CRAZY!

Last week nothing seemed to drive me crazy and, as I wrote at the end of last week’s post, I didn’t expect that to last very long. Sure enough, I was right. I was having a conversation with someone who fancies himself a financial Wunderkind. This is a guy who used to tell his friends, family and anyone who would listen that he was a hedge fund manager – back when it was en vogue to do so. Now, though, he’s jumped on the anti-hedge fund bandwagon with both feet. Last week he told me that the reason hedge fund managers make money when nobody else does is because of inside information. Need I say more?

Bernie is still pulling our chain

Do I sound angry? Do I seem mad? Are my words sometimes too tough to handle?

Everyone who comments on the blog says that I’m an angry young man.

Well, I don’t mean to be. I’m just a guy trying to tell you like it is. I apologize for the tone. I apologize for being stern, but tough times call for tough love so deal with it and move on.

That being said, I am mad about one thing: Madoff

Let me tell you why. First a question: Is there anyone out there -- besides me and a buddy who runs a $100 million fund of funds -- who thinks this whole scenario is being manipulated by a master?

First it was the sons, then it was the jewelry, last week it was the checks, this week the bail hearings. Come on. He’s playing with us and with the powers-that-be. Everything he is doing, has done and will do is some sort of manipulation, scam or smokescreen. He conned people for more than twenty years, so he can’t be trusted now nor can those around him.

I for one don’t believe for one minute that his sons weren’t involved. I for one do not believe he mailed the jewelry without knowing he was going to get caught. I for one do not believe he left a bunch of checks worth somewhere in the neighborhood of $170 million just lying around in a desk. Come on people, we’re smarter then that.

Again, read my words: Everything he is doing is, in my opinion, part of a master manipulation, a smokescreen, a diversion; something to throw people off, get them confused and divert attention from figuring out what really happened or is happening with him, the money he scammed or with anything else.

This is a master manipulator who continues to manipulate and probably will do so forever. The problem is that the media seem to be falling for it. Maybe it isn’t so hard after all to understand how he was able to operate for so long without getting caught…

Separately, I’m happy to report that nothing else drove me crazy this week, so there’s nothing to report in that area...

This probably won’t happen again.

A Brand New Day?

Do you feel refreshed? Are you excited for the New Year? Do you feel like it's a brand new day? Well, guess what – it’s not “Morning again in America.”

Don’t be fooled. Just because the calendar has changed, things are still screwed up. But enough of what you already know; I have three things to say – my thoughts about what lies ahead for this New Year!

So what's the plan? What's the idea? What are you going to do this year that makes last year be gone and this year go forward? Here's what I think:

1. It's time to think about opportunities in all sorts of markets.

2. It’s time to think about getting out of old products and into new products.

3. It's time to start paying attention to what's going on in the world, not just the six feet around you.

You know, everyone's talking about due diligence and transparency. Congress is currently holding hearings on hedge fund regulation, transparency and all that sort of nonsense to “get to the bottom” of what went wrong. I define it as nonsense because it is nonsense. It is nonsense because no matter how many rules, regulations or other barriers are put in place by the regulators, fraud and losses will still occur. The fact is, criminals are able to adapt and are able find ways to rip us off no matter what is front of them.

The fact that everyone demands transparency is silly, because at the end of the day, people don't know what to do with the information once they get it. If you don’t believe me, ask one of the 8,000 or so victims of Mr. Madoff. The joke is that no matter what requirements or regulations Congress puts in place, they will only make the hedge fund industry stronger. This industry is not dead. It is alive and well. Mark my words. As long as there is a market there will be hedge funds.

That being said, if Congress and the powers-that-be really want to do something to bring about real change to the hedge fund industry, what they need to do is to require standardized reporting, whether it be monthly, quarterly, daily, weekly – I don't know the answer. But if Congress wants to really affect the way hedge funds are used, viewed or controlled, what it needs to do is to require that all funds, regardless of size or strategy, report both returns and assets under management on a regular basis. This will be the foundation for bringing normalcy, consistency and transparency to hedge funds once and for all.

On that note, I have one more thing to add this week. I am starting a new section to the blog – “Things That Drive Me Crazy!” Each week (well, some weeks hopefully I won’t have anything to write about), I’m going to document one thing that has driven me crazy – either good or bad. Here’s the first:

Café Centro in the Met Life building at Grand Central Terminal charges $3.75 for each refill of ice tea, but does not charge for refills for hot tea or hot coffee. This is nuts in, my opinion, and while the food was pretty good earlier this week at lunch – I cannot in good conscience recommend going there. They clearly don’t care about consumers and so are not worthy of your or my money. There are better choices in the area.