ERICOPOLY

A very annoying -10%.

Lots of hedge funds invest pension money and endowment money. Okay, you are right about that. However I wonder what the breakdown is for the hedge fund industry. For example: How much of hedge fund profits (what % of fee profit) comes off the assets held by the bottom 50%? I think the bottom 50% only have $1.5 trillion in combined net worth (at least according to The Daily Show). I have a strong suspicion that for the most part the hedge funds are profiting off of the wealthy.

By definition, aren't hedge fund managers just siphoning money from other parts of the 1%? I mean, in order to legally invest in a hedge fund your assets and income need to be in the 1% category. So how can they be responsible for hurting any part of the 99%? It's just rearranging the deck chairs.

Yes, indeed: http://newsoholics.com/wp-content/uploads/2010/05/DANICA-MCKELLAR-MAXIM-2.jpg

Packer, Ask and you shall receive! Adbusters (the group who started OWS) is proposing a 1% tax on all financial transactions to stop the "$1.3 trillion in casino money sloshing around the economy". Presumably this would apply to ATM transactions as well as all bank deposits, currency transactions, purchases of goods, and any buying or selling of bonds/stocks. All in the name of social justice! Aside from ITEX shareholders, how many board members want to get behind this idea? ::) http://www.forbes.com/sites/kenrapoza/2011/10/27/occupy-wall-streets-robin-hood-tax-a-tough-sell-at-g20/ Righhhtt..... How is that going to do anything but encourage the use of options. What's a 1% tax on common stock going to cost me vs a 1% tax on the option?

Michael Moore: "Of course I'm not," Moore said when prodded by Morgan. "How can I be in the 1 percent?" http://www.nbcnewyork.com/news/local/Michael-Moore-I-am-the-1-Percent-132799998.html

I found this to be an interesting thing -- it actually breaks down the 1% to understand who is in it: http://sociology.ucsc.edu/whorulesamerica/power/investment_manager.html

I took a bunch of CS classes and it was the same. Take a look at this site: http://www.mathdoesntsuck.com/bio/ She sat right next to me most of the time in Fall '95 when I took Linear Algebra. Strange thing though: Microsoft managed to hire a lot of cute women. I'm not sure from where, but they are good at seeking them out.

I wonder how he is doing for the year now. He writes: As I write these lines, the fund has lost 18.60% for the month of October thus far, reducing gains to date to 31.40%. Then he writes: Over the past nine and three months, the fund’s volatility, measured as a 10-day moving average of daily percentage moves, has equaled 1.81x and 1.56x respectively of the S&P 500, arguably the best proxy for combined global asset markets. This means that a sudden and rapid adverse move of, say, 10% in the S&P 500 would be expected to translate into a loss of 15% to 18%, given the almost perfect correlation between assets noted earlier. This is, in fact, what roughly happened between September 30 and October 14, 2011. The S&P 500 gained 8.2% in 10 short trading days, and our fund lost 18.6%. But this holds true only in the short term.

I saw James Woods speak once, and he was joking that he went into drama because that's where the hot chicks were (he was at MIT). You go to one of those tech trade shows in Vegas and there's hot babes everywhere pushing the latest in engineering. However you get into a university engineering classroom and very soon you recognize that something is missing. Somewhere there is a disconnect -- the techniques we use to sell engineering to adults are very different from the techniques that we use to sell engineering to 18 yr olds.

In 1997 I was mopping up the last of my general education classes in my final year at UCLA. I remember being in a "discussion group" for an English class and we went around in a circle discussing what we planned to do with our degrees. Most of the people in the circle were English majors or some other kind of liberal arts major, and it was just depressing. They basically had no hope, and expressed little hope that a masters degree would change much for them. I was finishing up an undergraduate math degree and I had a job lined up at Microsoft, after having two interviews a week for good jobs every week that year. I feel like if you filmed one of those discussions and showed it to people once a year in high school, perhaps it would make a difference. Do they really understand what they are signing up for? Maybe it's like kids wanting to play in the NBA -- you can see the few people who make it, and that alone gives them hope. But then most who try their hardest don't make it as a pro. I think there is intellectual enrichment from a liberal arts degree, but they also need to make a living. You can always go back and read those books and get more liberal education later after you've got the food lined up on the table.

I watched a TV program in May that argued the same thing. Essentially, there currently isn't the labor to support it -- this is highly skilled manufacturing. It requires a lot of training and education (math for example) -- this is not push-button type jobs. The employers followed in the program could not easily find labor to fill their job openings.

I guess I'll try to find something positive to say about kicking it down the road two more years: 1) banks will have time to gather a lot more capital yet they will hold the same amount of Greek debt. Sort of like the argument around BofA -- as long as the losses don't come in all at once it is manageable. Swallow your steak in one bite and you choke -- cut it up and chew it slowly and you are fine. 2) there will be less CDS exposure in two years due to expiring contracts (not just on Greece but on all the PIGS) Unless some idiot bank keeps rolling it over, but surely they can be told not to if they want to live. So there might be some advantages of scale to letting it go on a while longer. I'm only listing advantages though (pretty sure there is no shortage of people discussing the disadvantages). I think they figure they can't put Greece in a better position than the others because it would create a lot of jealousy. Unless they want to take haircuts on them all at once, which they probably don't believe the banks can manage.

I guess I don't see all the pessimism. They've managed a 50% default without any CDS payouts.

This makes me feel a lot better as to whether or not we're becoming another Japan. We're perhaps a tiny scale model of Japan. Our bubble was nowhere near as big -- scale the ensuing malaise accordingly?

I've heard people talk about the Nikkei's 80% decline, but to me the 70% real estate decline appears far more impressive. Is Volcker's number accurate at 70%?

I didn't realize that Japan's real estate declined in price by 70%. It makes our real estate decline seem pretty tame, even though we've already exceeded the price decline of US real estate during the Great Depression. That 70% number is what I heard from Paul Volcker a couple of nights ago when I was watching Charlie Rose. Not sure if that was a re-run from an earlier taping.

Interesting accounting rule: 1. Accounting rules that allow Australian banks to revalue their loan books so as to reduce the capital set aside and take on fresh mortgages when the value of existing collateral goes up – a self reinforcing feedback loop as home prices bubble upwards! The higher home values go, the more credit can be created out of thin air to bid up, yes, you guessed it, the rising home values. http://baobab2050.org/2011/02/12/australian-banks-on-unstoppable-path-to-insolvency-bailouts/

The system was certainly unstable at the time. Personally I believe it's way less unstable now. Really I think only regulation can prevent those kinds of risks. AIG was allowed to write loads of CDS without reserving for potential losses. That's something that can be regulated, just like the rest of the insurance that they write. Down payments for houses can be regulated -- a law stating that 20% must be saved for down payment would eliminate any future housing bubble. The housing bubble is really what caused this whole mess -- too much dicey collateral. I don't think letting the whole thing collapse would eliminate future systemic risk. The way corporations reward executives, they get their pay and they're out. The corporation holds the liabilities, the executives remain wealthy even after the collapse. The shareholders of Citigroup learned a lesson, the stock is down like 95% from it's prior peak. But what did that do for future risks? Did they demand changes of the sort that you'd expect from total wipe out, or is 95% wipe out nothing at all like 100% wipe out? Presently, huge changes have occurred at Citigroup -- they're getting back to basic banking, and with less leverage. They did this as a result of government pressure and perhaps common sense to some degree -- or maybe just regulation. But whatever, they're doing it and it happened without total wipe out to shareholders. Some would say the bondholders didn't lose anything, and they'd be right, but the shareholders and government (or just governement perhaps) have changed things at Citigroup anyhow. Or maybe things haven't changed enough -- I don't know. They still probably do some things that people object to, but it's not like nothing at all has changed.

So you're personally worth over a billion (which I highly doubt), you're still acting like an ass. I'm not a professional investor, just a regular guy that goes to work every day and is very happy with his financial situation and managing it himself. A year or two will tell who's right? I didn't realize you were arguing for short term trades, my timespan is a bit longer than that. Maybe you are right, but I don't like to time the market. I'm sorry your mommy doesn't love you. It doesn't mean you're insignificant, so no need to project. I think I've found a potential tester for the 2 and 20 male enhancement pump that I was thinking of marketing. Promises to make a retail investor feel adequate.

I think this sort of explains why Buffett's businesses can be doing well despite all the bad news out there: http://www.lyricstime.com/la-tour-people-are-still-having-sex-lyrics.html Have you noticed, that people are still having sex. all the denouncement had absolutely no effect. parents and counsellors constantly scorn them. but people are still having sex and nothing seems to stop them. Do you realise, that people are still having sex, they’ve been told not to, perhaps they are perplexed. when you see them holding hands they’re making future plans to engage in the activity, do you understand? People are still having sex, lust keeps on lurking. nothing makes them stop, this aids thing’s not working.

True about Fannie and Freddie. Regarding collapse though. They let the banks collapse during the Great Depression but so far I like our outcome better.

YES!!!! Honest question: And after that, what would have happened..? Exactly what, nobody knows. Lots of economic pain for sure. But it would have been temporary, and we could be back on track by now. We'd still have too many houses. People wouldn't have the down payment for houses. What would be different aside from who owns the banks? I'm not sure about that. I think one result would have been that the housing price collapse would have happened all at once instead of this slow decline that keeps going on (and that I don't think is nearly finished even though we're building a house right now). If prices were lower 3 years ago, more people may have been able and willing to buy then. Now you have a situation where I think many people are more afraid to buy now than they were in 2008. The banks that failed would have been replaced by new ones, or existing ones growing, essentially being rewarded for not over-leveraging themselves. Those banks would help jump start economic activity. Basically I think we've created a situation where there's not a lot of economic activity, and many people see no end in sight. If we had let things collapse on their own accord, the worst may have been even worse, but it would be seen as behind us and things would be moving forward. Does your new diet include beer, or have you given that up? Would love to have this conversation over a cold one the next time you are up this way. Getting a beer sounds good. Will be nice to see your brother again too. The total collapse I think would have driven housing to the bottom very quickly like you say, in terms of transaction prices. However the idea that the economy would come roaring back is something I wonder about. I mean to say, when the stock market crashes what does that do to stimulate the economy? It cleanses us of some margin borrowing daredevils, but does it boost the underlying business activity? Why would housing prices be different? Construction wouldn't boom if prices were lower -- those people would still be unemployed because we don't need more houses. The existing housing stock would merely be even cheaper. That might encourage even more people to walk away -- but that's still on the taxpayer's tab (Fannie and Freddie, FDIC).

YES!!!! Honest question: And after that, what would have happened..? Exactly what, nobody knows. Lots of economic pain for sure. But it would have been temporary, and we could be back on track by now. We'd still have too many houses. People wouldn't have the down payment for houses. What would be different aside from who owns the banks?

Regarding moral hazard: Why did the bank stocks decline this summer? I thought we understood that there is zero risk of them being allowed to fail. :o