FPM Moot-Points:

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Tuesday 23 December 2014

A Tale of Two Tweets

I spotted these two Tweets from my Twitter followings, a week prior to Christmas week, coincidentally back-to-back and regarding important economic issues. See Twitter screen-dump below.

One of the Tweets is from the offices of one of my dear friends and the other is from the offices of my dubious ruler. I know which of them I wholeheartedly trust and admittedly fear more! Therefore, the reputation of the messenger is as significant and relevant as the message itself.

I think the discerning public should be aware of the importance of those economic-related Tweets. Here we’re not so much interested in the debate or pro’s /cons of ‘TTIP’ or for that matter about the ‘debt fraud’. Instead FPM are reading between the lines as to whom and which message and messenger is credible as a source of information. We know that Governments use propaganda to propagate its policy goals, as do companies but here we aim to interpret or frame the issues faithfully.

Through Dame Vivienne Westwood’s communications office and her campaigning / blog vehicle “Climate Revolution”, she is humanely warning us of fallacies and manipulation in the UK Government’s economic policies. This is done in this instance by the office disseminating a critical piece of journalism by The Guardian newspaper writer Seumas Milne. Now compare Mr Cameron, the UK Prime minister’s Tweet, which is also disseminating seemingly important information. Whereas The Guardian writer and Climate Revolution have a degree of independence of views by association; the ‘dummy guide’ to promoting TTIP produced by the Confederation of British Industry (CBI) is devoid of independence, as it is self-regulated by its industrial members and quasi-Government funded. 

FPM aims to strip out the financial / economic propaganda news to it bare rudimentary agenda. This we do by referencing highly informed undiluted new alternative media sources, such as NakedCapitalism.Com and ZeroHedge.com, and numerous others together with independent bloggers. They all contribute their added value knowledge in the phenomenon through the currently free-to-all World-Wide-Web aka. “www.”. By implication we have lost faith in the truth and integrity of mainstream media - MSM.

A Sham Too Far: Of TTIP

Briefly, the Transatlantic Trade and Investment Partnership (TTIP) is yet another administrative bureaucratic sham that the USA is spearheading towards globalisation and imposing its single superpower status (also known as US hegemony) on the world. You can read more on this global agenda via Naom Chomsky’s “Hegemony or Survival: America's Quest for Global Dominance” in this article here.

TTIP is clearly a sham as economic fundamentals (e.g. burgeoning national debts; China slowing as driver of global growth; austerity revolts etc) and geopolitical matters (e.g. Russia and Ukraine; E.U. breakup; Middle East wars, Immigration tensions) dictates urgency to shore-up a future of “business as usual” with rigorous new business rules in place. Otherwise nations are expected to implode under their debt and austerity burdens. Not least, the so called “PIGS” countries. 

FPM is currently actively monitoring an incineration event / catalyst in the “cradle of Western civilisation”. Greece is continuing amid turbulence, not only the ever erupting populous risings over the effective takeover of their country by the “Troika” and imposition of intolerable impossible economic terms of the ECB, IMF and EU bailout. Lest it be forgotten that the origins of Greece’s problems were caused by Goldman Sachs helping to hide its debts to gain membership into the EU club. Despite the EU bureaucrat rhetoric, yes, like a country club, a membership can be withdrawn or terminated by either party. Come on Greece (or Barcelona) set in motion de-globalisation and independence, what the “Bravefart Scots” chickened-out from recently in September!

What is wrong with a united world and a federated planet? As depicted in sci-fi “Star Trek” series for instance, one may plausibly ask? Greater union of nations under the current brand of neoliberal democracies ultimately and primarily will continue to serve the interests of the wealthy classes, who by definition own most of the resources and assets of our capitalistic society. At the exploited expense of the majority of the population, and not to mention the disharmony inflicted on our planet’s ecology through climate change. As if to provide empirical evidence of this FPM assertion we have only to observe the wealth inequalities over last 35 years and, through history. Great social wealth inequalities through lack of justice, corruption, dictatorships or other imbalances have tended to result in revolution (viz. litany of past revolts by the populous). The most profound and recent thorough research exposing this stark disparity in the wealth of the nation and its population is by Thomas Piketty (pronounced Tome-AH PEEK-a-tee) entitled “Capital in the Twenty-First Century

The stark wealth inequality findings are so relevant that an excerpt of the book’s thrust is presented below, Read full book review here from The Guardian newspaper:

“…Piketty’s main argument is this: that invested capital – in the stock market, in real estate – will grow faster than income. The implications of that are deep: to have invested capital, you must have money already. If you rely on income, as most people do, you will likely never catch up to the wealth of people who are already rich. The 1% and the 99% enshrined by Occupy are not an anomaly of our time, Piketty’s research suggests. It’s a structural feature of capitalism. Piketty’s work – which has been in progress for over a decade – is a natural pairing with the Occupy movement, which also questions the premises of capitalism…”

Source: The Guardian, Heidi Moore, 21st September 2014

Mr Piketty’s 700-page tome is not only the best selling book of 2014 and FPM’s Winter Seasonal gift recommendation, but academically supports the 3-prong creative-destruction financial enterprise mission of FPM and imbalances in financial services and in capitalism at large.

Back to the thrust of our argument, other than the reputation of the messenger: that TTIP and Globalisation consolidates the power and wealth among the existing plutocrats. The allure to low and middle income earners, the largest members of a nation, of joining that wealthy elite upholds the edifice of plutocracy intact, much in the same way as guard-dogs or heavy security protects the houses of the high net worth individuals. Or put another way, much like how better treated house servants / slaves were more loyal to their masters than their “field servants” (those who tilled the lands) during slavery and agriculture of the past.  FPM’s Evidence here articulated in Q&A format:

Q. If United Kingdom is the sixth wealthiest country in the world why are there food banks for poverty stricken millions and austerity for many millions more?

A. The answer is simple. Wealth of the nation is disproportionately held by few billionaires and some millionaires due to politically inefficient income and tax distribution.

This wealth is also in the form of capital assets i.e. mere accounting notation based on notional value of assets such as property prices.  The proletariat or the majority of the population without income-earning assets are then left to subsist on a hand-to-mouth existence , which is bank debt and salary/wage income.

That is, the proletariat are asked to live on the wealth of the nation that has not been siphoned-off or otherwise accumulated by the top-heavy asset owners. In his epochal book “1984”, George Orwell described “most people” as those who are not Party Members, as “Proles” i.e. outside of the system.
"Prole" is short for Proletariat. In Nineteen Eighty-Four, the proles are the section of society that are unaware of the dystopian elements of their world. They are distracted by simple, unimportant matters such as the lottery, and are more concerned with emotions as opposed to politics. They make up 85% of the population within Nineteen Eighty-Four, and could potentially overthrow Big Brother. Winston believes this will happen one day, when they wake up to their situation and take action.

Under the false premise of benefiting small and medium enterprises (SMEs), TTIP will through thin-end-of-the-wedge result in handing over greater power to the ruling classes of wealth owners. They in essence naturally want to preserve their status quo by stipulating future rules for businesses and corporations which make them more powerful than Governments and its people, in instances. To read about this piece of the TTIP on “Investor State Dispute Settlement - ISDS” see here. An important part of TTIP negotiations, where so far both Germany and France have objected to any legal challenge to sovereign legislation.  Thrust of TTIP would exacerbate the wealth inequalities we have now, and at the same time bind people and nations into unbreakable servitude to corporations through their dependence on incomes and debt obligations. As if we are not already.

At FPM we have alluded to the end-cycle of free market capitalism, after a 35-year period of industrial deregulation, started during the rule of Thatcher-Reagan Era of the 1980’s. Please notice the UK-USA axis of the cordial in the then “transatlantic partnership” with pretext about “Special Relationship”; which initiated deregulated financial / capital markets in 1987, euphemistically termed “Big Bang” and other so-called industrial liberalisation policies in the foresworn lie of consumer benefits, including opening the skies and allowing airline carriers to compete for routes, and so on and so on. This parochial or blinkered business decision alone has a) increased immigration tensions and in relation b) ramped up carbon-emission footprints of air passengers. FPM in May this year, responsibly highlighted such global corporative excesses and irresponsibility leading to inequalities of “unbound capitalism” into the new millennium. The regulatory or legislative framework permitting such legal follies are enshrined through stealth laws, such as are passed without proper public consultation, harangued by public relations communication and other “jobsworth” proponents.

The secretive TTIP negotiations would aim to bring into the capitalists’ debauched party, formerly socialist and communist countries of the enlarged and growing European Union - EU. FPM feel that globalisation of this proportions would effectively make countries increasingly interconnected in their risks and somewhat homogeneous in national culture and identity. Similar to the way we have McDonalds restaurants all over the globe currently; while lacking individuality in high streets and in towns.  

The recent financial crisis is the best and vivid example of these impending global connectivity risks. Which TTIP legislatively will bind us irrecoverably into Mutually Assured Destruction  - M.A.D system. The housing and bubble financial crisis started in the USA and spread globally via the international financial markets. A global economic crisis which we are still feeling the fall-out from, with ever more national debts accumulated in some countries to prop-up a notionally blown-up capital-value bubble. Capitalism is still on its knees.  This wrought financial crash and its orchestrated bail-out represents the greatest transfer of wealth from the public sector to the private sector, i.e. taxpayers wealth to asset-wealthy individuals and their multinational businesses. A.I.G, General Motors and other large corporations should have foundered in the same way Lehman Brothers blew-up; as unbalanced assets and liabilities of their accounts book made them insolvent from their financial divisions’ folly in capital market shenanigans with “toxic assets”. 

Yet “private profit and social loss” was allowed to systemically prevail as justified with tags such as “Too Big Too Fail - TBTF”. Such malfeasance would then be the permanent hallmark of globalisation with USA at the helm. There is another way! The evidence for this is the long-process of economic stagnation until wealth is redistributed to the satisfaction of greater majority of the population. Is the mass of unemployment made of people who cannot find work, or those who have become disillusioned with paying taxes? Government control of wealth distribution on behalf its people, who were expecting a fair and just socio-economic political system, have monumentally been let down. The humdrum politicians’ masters have always been the corrupting powerful lobbyist through mass media manipulation and funded by… yep you guessed it, the plutocrats. This is an inflextion 

Endorsing TTIP would be like the angel “Gabriel” showing the future of things to come in a world without James Stewart, as portrayed in the movie “What a Wonderful Life”. That future was bleak and it would be so for the citizens of America and Europe if bi-lateral TTIP agreements are made by such giant blocks of countries in the interest of business. We are heading by degrees to “1984” with Big Brother being American hegemony.

However, we should not hope to leave such happy-endings or dystopias only in the realm of films and books but actively intervene in the external reality and oppose the resolve of “jobsworth” bureaucrats and vested orchestrators in the TTIP negotiations. Please signal YOUR opposition to TTIP and over-reach of USA hegemony to your MP by spending a few minutes on the internet. I simply put “Avaaz TTIP Protest” into an internet search engine and “the world's largest and most effective online campaigning community for change” Avaaz.com allowed me to sign a petition here, in resistance to TTIP. Simple, active and effective and meaningful! Another action would be to notice FPM’s financial savvy experience to oppose the UK’s prime minister’s view by Tweet. On the other hand FPM have not countered our friend’s Tweet about the “debt fraud”. Needless to say most of the financial community is aware, or at least should be aware of the sham of debt and austerity, and NEVER believe a politician’s official mythology.

Tuesday 18 November 2014

What the SAC Is Going On? - Update

Stop The Press! On the 12th November a 3-judges appeal hearing to extend Mathew Martoma’s bail release, pending an appeal for his near-record 9-years’ prison and US$7 mn confiscation, as a criminal law conviction for insider trading, was cursorily declined and belatedly he is set to start incarceration (see our earlier full research to this update)Watch This Space!

The contradictions in American judicial proceedings in the SAC-saga agitate FPM principal’s Industry Intelligence with numberless pangs! A multi-years court proceedings which reaffirms the farcical theatrical nature of American Justice – Read on. WARNING / ACHTUNG: A brand of justice and democracy not to be imitated. To free ourselves of these difficulties, we expound our anger at the injustice, as FPM enterprising public information and  active resistance.

At the above mentioned the appeal hearing, U.S. Judges persistently enquired of the State prosecutors (from U.S. Department of Justice - DoJ) as to why a deposition that Steven A Cohen “SAC” submitted at an S.E.C. inquiry in May 2012, was not permitted in Mr Martoma’s January 2014 defence trial, even though the same insider-traded stocks (Elan Corp. and Wyeth Ltd), were at legal issue. The prosecuting lawyers seem to become vague and stated: “Strategic decision…so as not to confuse the jury”. State prosecutor’s, if anyone need reminding, are paid for with public taxpayer money and supposedly representing the public interest, here demonstrate how the law can be technically perverted, i.e. used to convict one and exonerate another from the same legal issue.

To re-cap key elements of the legal case demonstrating this systemic corruption in capitalism the issue at stake in FPM’a ‘plain English’ attempt (read also Muppet Mainstream Media diversion too): Mr Martoma’s defence in effect stated in their main appeal:

What’s the evidence that gets me harsh 9 years prison and a confiscation conviction while head-honcho multi-billionaire at the centre of the web-of-securities fraud Mr Cohen walks ‘scot free’ into the sunset at age 58 with US$10 bn after 20+ years insinuation in corporate criminality?

The documented video deposition in question was that of the head-honcho Mr Cohen which indicated that he relied on Wayne Holman’s consultancy expertise (a healthcare portfolio manager, former SAC employee and friend who left in 2006 to form Ridgeback Capital Management) to profitably netting $275 mn from exiting a US$700 mn loss-making trading position. It was loss-making ‘long’ position based on the imminent drug trials announcement that was to be negative (i.e. SAC portfolio positions in experimental Alzheimer’s drug makers Elan Corp and Wyeth Ltd). Mr Martoma’s main appeal which is still pending will we expect seek reduced sentencing. Mr Martoma’s failure to extend bail from this appeal while his main appeal is pending maybe a court ‘side-show’ manoeuvre to assert insider trading enforcement. Whereas, FPM principals have repeatedly highlighted the “Punch and Judy” theatrical nature of American Juctice in ‘NSWF:Reputation. ALL of the eight convicted individuals in this SAC-saga are still out on bail, as was Mr Martoma until this 3-judges appeal hearing. Doh! 

FPM also note that we are updating the “FPM Reputation BlackList” to reflect that few if any from SAC-saga and litany of litigations has yet seen the inside of a prison despite eight convictions! Internally, FPM discussing if Ridgeback Capital Management founder Wayne Holman makes it on the reputation list.

Please feel free to correct us Mr Preet Bharara? Mr Bharara was the DoJ presiding State attorney in the insider trading sting (codenamed “xxxxx”), launched demonstratively and conveniently as an enforcement witch-hunt for the depression-like financial crisis. Another betting FPM principal also wagers that Mr Bharara, widely touted for the top job in U.S. Justice, was not nominated for the sham oversight of proceedings in the SAC-saga. Preet is the failed front-runner for Attorney General of USA to replace outgoing head Eric Holder. On 10th November Barack Obama nominated Attorney General as Loretta Lynch. This investigative critique explores another angle why Mr Bharara was snubbed. Mr Holder, the incumbent highest judicial authority in USA, under whose watch we witnessed the perfunctory litigation for larceny of net billions dollars from the public purse into private corporate profits for billionaire “establishment class” via Wall Street and Main Street corruption of capitalism, is walking on an FPM reputation tightrope. Under Mr Holder’s oversight, DoJ has expediently allowed ‘money to talk’ in the numerous high profile billion dollars litigations of corporate criminality (an exhaustive countdown list FPM have compiled in exchange for gratuity fee), and allowed executive white collar criminals to walk. Mr Holder: The organ grinder's money talks and monkeys get paid peanuts still – right?

FPM have profoundly described social status-quo as “plutocracy” or as we note unbound capitalism! FPM found an indepth investigative commentary on U.S. Justice but unrelated to our focus in financial and corporate matters: To Fight for Justice is to Fight the Law. If any genius out there believes in democracy please email us to shock us. As part of our active resistance against endemic corruption in capitalism, our story put yet another FPM big-picture way:


Stop the Press! On 17th November in a U.S. Manhattan court hearing Patricia Cohen, former wife of Steven A Cohen pursuing equitable divorce settlement since 1991, has managed to get Mr Cohen to be questioned in civil deposition hearing on 10th December. This is another side-show which the “Artful Dodger” will presumably settle out of court eventually. FPM congratulate Ms Cohen’s tenacious pursuit in her warranted bid. If American Justice showed as much tenacity as Patricia, the U.S. taxpayer could have reaped multiple billions for its public pursue, instead they are facing austerity!   

Tuesday 11 November 2014

What the "SAC" Is Going On?

For FPM's enterprise entitled “No Smoke Without Fire: of Reputation Risk” we were reminded yet again that criminality is a servant of corporate enterprise. FPM joined-up thinking draws parallels from the widespread vogue of United States of America government enforcement prosecutions against financial and corporate crimes in capitalism.

The case involving Switzerland-based global bank UBS AG (UBSN.VX) (UBS.N) and its wealth management division head Raoul Weil resulted in an acquittal verdict from a legal technicality about burden of proof. Detrimental global bank tax-avoidance roguery was at issue with yet another case of combined American government authorities, this time Department of Justice (DoJ) and the Internal Revenue Service (IRS), seemingly taking retributive action against intrinsic corruption in capital markets, or indeed against capitalism itself. The DoJ spent six years trying prosecute Mr Weil, including extraditing him from Italy last year. Also, this particular case highlights increasingly onerous burden of proof towards incriminating senior executives with financial clout, while lower ranking corporate figures plead guilty and co-operate as witnesses for lighter plea agreement sentencing.

FPM will further follow closely this and similar tax-fraud cases as part of widening the FPM's “NSWF:Reputation” template; which was initially honed on SAC Capital insider trading amid their litany of legal proceedings, as understated in the financial media yet aggregated by FPM to display the sheer "iceberg theory" extent of insider trading that remains concealed. And we only focused on one solitary hedge fund founded by Steven A Cohen with his initials SAC Capital ("SAC")..  

Remarkable that the FPM Reputation Blacklist or “Rogues Gallery” (shown above) is comprehensive with 20 plus insider-trading associated individuals. Compared to the pandering mainstream media (msm) accounts of only 8-10 criminally charged and convicted as one  time SAC employee. With intention to deceive public opinion and interest, downplaying illegality and criminality at SAC is an artifice of Mr Cohen's external public relations firm Sard Verbinnen & Co.  FPM list appropriately includes former or current SAC staff pleading guilty and co-operating with enforcement authorities, and those uncharged but implicated as co-conspirators in the “criminal club” cases. The mitigating factor is that staff turnover at SAC Capital, in line with other financial firms tend to be high, so association or links to a firm is exponential and inevitable, but their insider trading being synonymous with notorious ringmasters / hubs is unavoidable. For example, consider an FPM Reputation Blacklist for one time Goldman Sachs employees associated in insider trading and other securities fraud the list would be tediously exhaustive probably!
Bear in mind that DoJ and the SEC are boasting 85+ convictions or guilty pleas to-date since the crackdown began in October 2009. Also, as of October 23rd last month, SEC stated “…Galleon-related enforcement actions against 35 defendants.” And news typically report for a firm of “..Fourteen people pleaded guilty in the Galleon case, and at least nine others are charged”. Clearly, the numbers stack-up in validating FPM enumeration of SAC-connected criminality rather than msm financial press data.

Further, FPM list ONLY includes insider trading violations by one-time SAC Capital employees investigated, by the deliberately stymied and poorly resourced enforcement of the SEC. Remember that the SEC were set up as the police equivalent of the securities and investment industries. Their job is to enforce securities regulations and legislation – seemingly especially at lower ranking company men! To validate Steven A. Cohen as only ‘allegedly’ presiding over a “web-of-securities-fraud” and receiving an administrative “slap-on-the-wrist” by the securities regulator, despite the numerous foot-soldiers and lieutenants ensnared in multi-years insider-trading prosecutions, is utterly shambolic oversight and law court proceedings by the DoJ. We charge Eric Holder as the attorney general of USA. Our SAC-associated blacklist aimed at spreading historical knowledge or simply reputation is obviously even more exhaustive when including other types of securities fraud. An extended “Reputation Blacklist” of SAC-tainted individuals and firms, which FPM have compiled internally to assist external manager due diligence (available for a consultancy fee), for example includes publically disgraced Forrest Fontana in stock-shorting violation (more in “NSWF: Of Reputation”, a chargeable document).

Outstanding Issues Regarding Steven A. Cohen et al (“SAC”):

  1. A potential legal precedent from a landmark second circuit court appeal against Anthony Chiasson’s insider trading conviction may make insider trading prosecutions even more difficult to convict; and indirectly mocking and besmirching the legality of definition, interpretation and application of what constitutes insider trading after its 80 years of existence.
  2. The second circuit appeal court decision may be elitist by setting a new stringent burden of proof for “downstream tipee” cases; as affecting the legal conviction of Michael Steinberg and Mr Chiasson, as well as his co-defendant Todd Newman. FPM’s “elitist” accusation is based on higher-up corporate executives can deny knowledge of shenanigans lower down. That’s a corruption of capitalism  - “where does the buck stop?”. Our long-memory or historical knowledge suggests most SEC cases in the past were based on circumstantial evidence. Also, FPM are not certain if this technical appeal is not a court ruse for the convicted perpetrators to delay starting their jail sentences (Mr Steinberg was convicted in December 2013 and still out on bail are Mr Chiasson and co-defendant Mr Newman after conviction December 2012), or other time extension ploys, or indeed a technical fudge in applying Rule 10b-5 of the Securities Exchange Act of 1934 relating to insider trading.
  3. Pending this second circuit court appeal decision the SEC is currently reviewing the industry ban imposed on Mr Steinberg and suspending other insider-trading administrative enforcement actions, including Mr Cohen’s. The DoJ “asked to stay the SEC's failure-to-supervise proceeding against the head of SAC Capital, Steven A. Cohen, 'until at least the Second Circuit issues a decision in the Newman/Chiasson Appeal.”.
  4. Incredibly, The Artful Dodger (another FPM nickname in “NSWF: Reputation”), Mr Cohen has not only evaded court prosecution but seems to be slipping out of SEC administrative admonishment: a) for failing to supervise convicted Mathew Martoma and Mr Steinberg and b) to ultimately ban him from the investment industry have been postponed in April and again in August this year. FPM wonders if this is a mock persecution to appease the public’s outraged indignation of a scandalous securities fraud ringmaster avoiding not just criminal justice, but also escaping exemplary industry defamation – by banishment from operating in it.
  5. Fresh new cases of insider trading allegations involving research / consultant group or “expert network” Height Securities, and its prior communication with senior politician on a government policy decision and announcement in April 2013; affecting the share price of health insurance companies. Yep, you guessed it, SAC Capital included in a list of hedge funds receiving “heads-up” information.
  6. Of the Government convictions and pleas gained in the insider trading cases FPM monitoring how many convicted cases will be given class-action litigation status by courts. This could open a flood of litigation benefitting class-action firms and harmed investment management firms and ultimately their investors in the litigated securities.
  7. Stop The Press! Preet Bharara, lead attorney at the important South District Court of New York and protagonist in NSWF was a front-runner to be elected for the top job of Attorney General at the DoJ. On 10 October yesterday, President Obama choice for the most powerful legal position of USA was given to another to replace running-for-the-hills incumbent of the post Eric Holder. Though we may never know the actual reasons for the choice of top judicial job, one reporter has intrepidly already suggested that his aggressive pursuit of corruption is not good politics for career progression: “…he has been relentless in his prosecution of Wall Street tycoons, domestic/ international terrorists, corrupt public officials, and even foreign diplomats as in the case of Devyani Khobragade”; remember Eliot Spitzer’s corruption crusade and  subsequent downward spiralling career. FPM relationships resources suggest that headline top-jobs are not for those of Indian-American origin, as it may unsettlingly remind the American people of their non-nativity in North America, especially to follow on from the first Afro-American Attorney General, and no need to mention the first Afro-American president.
  8. As FPM have intimated before, that there is still a sting in the tail for this SAC-saga, and that rests on the shoulder Mathew Martoma and family. Or less possibly, Mr Cohen’s inner circle of Mr Steinberg, Richard Grodin and David Ganek may flip to give State evidence. Mr Martoma squealing to authorities for the chance to avoid 10 years jail and confiscation of his millionaire trappings may yet force him turn evidence to incriminate SAC. We think Mr Martoma or undeniably any others with evidence against Mr Cohen can be hero of humanity but they need divine courage to upset the applecart.
  9. The case of Patricia Cohen against Mr Cohen for fraud and breach of fiduciary claims is still pending; she stated in lawsuit filed in 2009 “he [Mr Cohen] had received inside information in advance of the purchase of RCA Corp. by General Electric Co.”. The case is scheduled for a hearing on Nov. 13, 2014. Watch this space! The case is Cohen v. Cohen, U.S. District Court for the Southern District of New York, No. 09-10230.  
The appalling journey of a 10 years’ probe into insider trading without catching few ringleaders is strong evidence that enterprise of a billionaire over-rides legal justice concerns in the modus operandi of capitalism. More alarmingly, as “FPM Reputation Blacklist” amendment proves, the public interest is only given propaganda lip-service by contrived and trite public relations communications and msm financial press. Such systemic imbalances and corruption leads to social disaffection and discord, perhaps explaining the strong raison d’etre of freedom and popular revolt movements gaining momentum globally, even heralding “Destroy Capitalism!” FPM’s shout is less radical but with similar aims: “Destroy Corruption of Capitalism”.

At the climax of US district court attorney Preet Bharara’s insider trading enforcement, if the “Unconscionable Mr Cohen” himself IS NOT criminally charged, while the firm bearing his name pleads guilty to criminality and settles for multi-billion dollars (US$1.8 bn plus legal expenses), then the attorney’s biggest scapegoats are Raj Rajaratnam of the Galleon Group and Messrs. Martoma and Steinberg of  SAC Capital. Now compare the 1980s insider trading triple scalp of Ivan Boesky, Michael Milken and Dennis Levine. Whatever the merits and demerits of the American Politico-judiciary system, and clever technical litigation by Mr Cohen’s defence, it is clear that political expedience and multi-billion dollars remuneration for the capitalists’ infrastructure of DoJ and SEC, won the day. Pity the Poor Man’s Pocket Aye! Mr Bah

For Mr Bharara efforts at recouping money largely for the USA Government and an incommensurately smaller portion to reimburse other disadvantaged investors and ultimately pensioners and other long-term savers, validates incestuous politics and capitalism. “Democracy” or the rule of society by the people is ultimately defunct and only a pseudo notion. Where are the developments in laws enforcement in the securities industry to expand enforcement in the wider public interest? In 1972 John Wells a New York lawyer, led a panel on enforcement issues, which resulted in the Wells Notice many corporate America and portfolio manufacturers know only too well. FPM has an “enterprising execution” from its 3-pronged process).

Whereas “Plutocracy”, an organisation of society by wealth, is clearly alive and kicking. Witness Mr Rajaratnam penalty fine of under US$100 mn and jail sentence exceeding 10 years, a near record prison term for insider trading; versus Mr Cohen’s record US$1.8 bn global plea agreement / “payoff” and NO jail time and perhaps a slap on the wrist and told not to do it again. Proof that criminality is a servant of plutocrats. In astonishment, FPM echo “What the SAC is going?

Tuesday 28 October 2014

“A Penny For the Guy?”

FPM have strongly advocated the rolling back of the private sector excesses and greater Government planned, controlled and implemented initiatives to rejuvenate a corrupt and festering economic wound. This is indeed sea-change in Government policy we are calling for globally. A reversing of the so called “market liberalisation” trend started during Ronald Reagan and Margaret Thatcher’s administration on either side of the Atlantic Ocean during the heady 1980’s, is our call.  Instead of the appropriate Keynesian countercyclical fiscal policies; policies developed at the height of the Great Depression in his “The General Theory of Employment, Interest and Money” and published in 1936, we have continuity of monetarist policies, introduced by economist Milton Friedman, yet wholly inappropriate for the circumstance and seemingly abstract to political legislature.

Structural deficits are not advocated by Keynesian economists, only that “deficit spending is desirable and necessary as part of countercyclical fiscal policy”. Maynard Keynes

So we are in a economic milieu where global Government ‘structural deficits’ are actually expanding through monetary expansion (QE / money-printing etc), as extolled by Friedman (see below excerpt from Wikipedia); in vain attempt to kick-start economies from the need to stabilise it after the financial crisis tremors of 2007/08, seems in the main to be showing Wall Street bubbles and disturbingly more ‘creaming-off’ of the wealth of the nations by corporate elite CEOs and directors pretending to work in the name of shareholder and pension benefits.

During the 1960s, Friedman promoted an alternative macroeconomic policy known as "monetarism". He theorized there existed a "natural" rate of unemployment and argued that governments could only increase employment above this rate, e.g., by increasing aggregate demand, only for as long as inflation was accelerating. He argued that the Phillips curve was, in the long run, vertical at the "natural rate" and predicted what would come to be known as stagflation. Though opposed to the existence of the Federal Reserve System, Friedman argued that, given that it does exist, a steady, small expansion of the money supply was the only wise policy. Friedman was an economic adviser to Republican U.S. President Ronald Reagan.              

In a situation of national debt default or other financial or military crisis it would seem an instinct to huddle together for security. That is an early evolutionary social communal ideology for self-preservation. Citation of North Atlantic Treaty Organisation (N.A.T.O.) formation after WWII as vivid example (elaborated below). So it follows that desperate unions and strange bed-fellows are made in stringent times. This is seemingly what's happening in the world order play-book of today: with Russia and Europe vying for that strategically important East-West frontier country Ukraine; Hong Kong Pro Democracy protesters independently resisting China's overlord efforts; Anti-American Arab countries in turmoil between pro-West democracy or theological retrenchment; BRIC Bank set-up to negate bias IMF and World Bank support of established EU and USA economies, and so on. 

Just in case we're talking through our 'hat and hot air', witness the recent "should I go or should I stay" clash between Scottish unionists and separatists, after a 300-years-old marriage. In the Scottish Independent Referendum of 18 September 2014, the pro-union voters tactically won by 55% to 45% majority. An election won by fear because the sizeable conservative elder voters were scared into believing that the 'apple-cart' being disturbed heralds 'worse-before-better' syndrome. Long-term ideals being sacrificed for short-term benefits would not be an accusation but personal reality.  

Towards forming a pivotal and strategic alliance, whether one believes in the “New World Order” with ambitions of elite families controlling One World Government, EU is increasingly under the influence of USA policy diktat. One world government, initially via the spread of ‘Commercial Globalisation’, is seemingly intent in that direction. From missionary-driven European colonialism of pre-World War II through to multinational corporations imposing American economic imperialism; such institutional regimes with exploitation as an aim initially corrupt and ultimately destroy social freedoms, independence of local decisions and control and also individuality of thought and action. FPM principals are collectively and vehemently against Orwellian order of society (of the all-controlling "Big Brother" state), which we are ALL as yet unremittingly or unwittingly embroiled in by degrees already. The great hope and event is that all great movements are eventually checked by unheralded forces which are almost divine in emergence. Bearing such forces, we cite Mahatma Gandhi resisting the military might and nous of British Colonial Imperialism. Another example of an earlier era of unheralded yet almost divine forces resisting a seemingly incorrigible exploitation of slave trade was William Wilberforce and friends. The abolishment of the slavery in the British Empire resulted in the Slavery Abolition Act of 1833. And so on and so on is history littered with such heroes of humanity.

FPM included the above paragraph of social-political economic commentary on our funds and investments forum originated enterprise, because of related phenomenon called Trans-Atlantic Trade and Investment Partnership (or TTIP) coming into our cross-fire sight. This means the global hegemony of today United States of America, whom are descendants of a former Europeans colonists and other diaspora of refugees, want to ally with their old world roots towards greater formidable business partnerships (from our survey, even effect to supersede powers of national Governments!). Clearly a path expected to lead to globalist ambitions. 

Of course, aside of Britain’s ‘special relationship’ with America, ‘Trans-Atlantic’ indicates closer economic ties between European Union and USA. At a time when the EU itself is having a crisis of existentialism, the megalomaniac globalist drivers are desperate or opportunistic to forge a thin-end-of-wedge shot-gun wedding! As was circumstances and timing of the creation of NATO, which was a military alliance of nations in 1949. Our ‘wet behind the ears’, yet people-elected from selected politicians (viz. Hong Kong Pro Democracy Protests), who visibly, necessarily and intrinsically are not wise like gerontocracy, are being apparently pulled on puppet strings. Corrupt politicians is not new but broken political machine where its members are self-vested puppets manipulated by powerful behind the scenes corporations and lobbyist using bogus statistics from unscientific polls conducted by public relations exercise, is in fact plutocracy i.e. rule of the wealth. Democracy, i.e. rule by the people, equals public relations propaganda.

Just in case FPM are accused of excessive fantasy and bemused ranting about real world events which get relegated to realms of conspiracy (as if bad things don’t actually happen clandestinely!), we cite below an easy to understand example from the venerated Private Eye - No.1377 late October 2014 edition:

Synopsis of Penny for the Guy (From Private Eye - No1377)

As activists in FPM 3-fold enterprise manifestation of 1) critical public relations of reputations, 2) promoting alternative M&A deals and 3) delivering mutual-alternative investment convergence, we are actively peaceful protest marching against unbound capitalism. If adherents of capitalism don't march then we must all be billionaires and super-wealthy!

Indeed we are meeting at 6pm at Trafalgar Square on 5th November, 2014 to join Climate Revolution as part of the Amonymous organised annual event since 2011.

Notably in the English cultural calendar, 5th  of November is the day celebrating Guy Fawkes and his group’s failed Gunpowder Plot of 5th November 1605 to blow-up Houses of Parliament. "A Penny For the Guy?" is the begging bowl chant of children with a Guy Fawkes dummy, collecting money or fund raising to celebrate by burning the Guy Fawkes effigy on a bonfire and while letting off fireworks.

Friday 10 October 2014

Fund Management Performance (20 Years)

This research note is a preliminary study of listed asset management companies (Amcos). The ultimate aim is a process of selection for “FPM Amco Long/Short Recommendations”. An opportunity to get direct equity exposure to asset management companies (Amcos) during this general market correction in many global equity capital markets, particularly with S+P 500 at 6-month lows is the market timing under consideration. Also, we discuss the costs and benefits of investing in select FPM Amco stocks.

We believe record levels for equity benchmarks such as the S+P 500 closing above 2000 for the first time ever in August, augurs continued economic stability which was initiated by concerted global government stimulus. FPM analysis indicate ‘animal spirits’ will only be slowly painstakingly and enduringly restored. Whether that is a lull in perception about stagnant tepid global economies or an opportunity to exploit the trading volatility, we advise the real-money investors in deciding overall allocation strategies.
FPM’s repeated macro economic view is that we are in a “pause for breath” amid fundamental structural changes in social-ecological political and other spheres (listed in “FPM Risk Assessment Matrix” and also in our “Accumulating Risk Trends – ARTs”); and ultimately in financial landscape, not just regionally but also globally.

”FPM certainly believes in this probability of ‘multiple-dip recession’ cycle started in 2007-08.” From  FPM Jan’13: Investment Sector Outlook for 2013: “Credit is a Lover on the Re-bound?”

The State-driven economic policy and resultant macro fundamentals which have flummoxed many institutional investors (no less the famed and topical Bill Gross of Pimco Advisors!) in their prediction and interpretation ever since the “game-changer financial crisis”. Indicatively we may expect to know what the next seven years are likely to herald from the “easing off” of credit-injection reflation policy; excepting the chaos scenario outcome from extended and unprecedented national debt and global debt accumulation! This is the key to macro economic scenario analysis today. In regards financial capital, as FPM have propounded since July 2009, that we are in an era of equity markets characterised by side-ways trending benchmarks with bouts of volatility and a tentative secular uptrend. Given geopolitical risk considerations, policy manipulated markets, and other downside risks (See FPM Risk Assessment Matrix), FPM believe there is not enough market impetus or volume to send us off a precipice to a lower low in the capital markets benchmark, anytime soon, despite increased uncertainty in high volatility periods.

Before we pick the Amcos for the FPM Amco Portfolio we believe the general partner exposure is as valid as an investment in their underlying limited partner (LP) funds. Selecting appropriate sectors to allocate capital for speculative or investment purposes is shown in empirical research to be paramount to portfolio performance. So we have produced a select ETF constituent proxy of various asset class performances.

Amcos As Investment Fund Proxies

For all the greater transparency mandated by SEC regulation (such as expanded Form ADV and the exhaustive Form PF); yet NAV i.e. price history, particularly of alternative investment funds (AIFs) such as hedge funds and private equity funds, remain opaque. As might be expected for essentially still an over-the-counter OTC product structure, as compared with the long established staple of 401(k) pensions plans, the humble mutual fund. Aside of AIFs’ price-discovery issues, mutual fund prices do have greater price visibility and accessed via their ticker / monikers from public websites such as Yahoo Finance and Nasdaq.

For FPM’s 3-fold enterprise manifestation[1] agenda, we decided to take a proxy for the gamut of investment funds through their listed management companies – for which there is access to financial accounts and statements, as well as database of price history for research analysis.  While AMCOs maybe categorised as either predominantly applying “passive” or “active” management for the sake of broad distinguished identity. FPM enunciates the “convergence’ force as powerful. Then into further meaningful assessment of whether the management company is considered primarily as “traditional long-only”, “alternative investments” and / or “index trackers”  

1) Long Term (Established Amco) - Hold / Buy

For this ‘top-down’ recommendation analysis of the listed AMCOs for buy-and-hold portfolios we selected those with pre-2000 vintage (i.e. those managers publically trading before and after Asian Financial Crisis of 1997-98 and TMT-Bubble of 2000).

Fund Management Performance (20 Years or Inception History)
Compound Return %
Annual Return %

Eaton Vance Corp. (EV) (Oct 1994)
Aberdeen Asset Management PLC (ADN.L) (Oct 1994)
T. Rowe Price Group, Inc. (TROW) (Oct 1994)
Franklin Resources, Inc. (BEN) (Oct 1994)
Legg Mason, Inc. (LM) (Oct 1994)

2) Long Term (Established Amco) – Watch List

AllianceBernstein Holding L.P. (AB) (Oct 1994)
Invesco Ltd. (IVZ) (Aug 1995)
BlackRock Inc. (BLK)
See Full Research
See Full Research

3) Specialist Strategies (Noveau Aimco) – Hold / Buy

Fund Management Performance (20 Years or Inception)
Compound Return %
Annual Return %

Virtus Investment Partners, Inc. (VRTS) (Jan 2009)
Affiliated Managers Group, Inc. (AMG) (Nov 1997)
Gamco Investors Inc (GBL) (Feb 1999)

4) Established and Noveau Amco - Watch / Sell

For the ‘all-in’ SELL list we selected only those poor performing managers with over 5-years’ listed-price record. Again here we stress that this preliminary work is only intended as a top-down recommendation. Noticeably and unspectacularly the resulting list includes those managers specialised as alternative investment management companies - AIMCOs”. The reasonable explanation for most of these alternative managers’ underperformance perhaps stems from the partial public listing e.g. Blackstone Group have only a 10% public float. This is in “FPM Alt Kind - M&A” terms due to distribution rights priority of founding managing partners over shareholder distributions on operating profits.

Fund Management Performance (20 Years or Inception)
Compound Return %
Annual Return %
Fortress Investment Group LLC (FIG) (Feb 2007)
Man Group plc (EMG.L) (Oct 1994)
Och-Ziff Capital Management Group (OZM) (Nov 2007)
Calamos Asset Management (CLMS) (Oct 2004)
Blackstone Group, L.P. (The) (BX) (Jun 2007)

A prudent investor may suggest theses me-too newcomer ‘alternative’ listings are mainly a strategic phase acting mainly as an opportunity for the founders to cash-in a stake in their company via the initial public offering - IPO (and often a subsequent phase after a private stake sale for price discovery and market valuation purposes).

So the eventual or initial market price trading history having little reflection to overall book value or performance expectations of the firm. In fact, Blackstone Alternative Asset Management (BAAM), the division of the Blackstone Group (BX) which manufacture hedge fund investments confirm in their February 2014 presentation that “Valuations for hedge fund GPs do not reflect longterm value”. This can be interpreted in two-ways: 1) no long-term value in investing in a hedge fund Aimco or 2) Markets’s valuation of Aimcos doesn’t reflect future expectations.

For Further Qualitative And Bottom-up Analysis:

Conclusion of our quant based preliminary ‘top-down’ recommendation of a select asset management companies and their fortunes for an investor in them.

FPM brand of fund analysis shows that an investment in traditional long-only asset management companies (Eaton Vance Corp. et al.) outperform those of relatively newly listed ‘alternative vintage’ of Och-Ziff Capital Management Group (publically est. 2007) and their brethren over the long term. Listed alternative investment management companies (“Aimcos”) are the relatively poor performing subset in the asset management industry. Och Ziff (OZM) is down 29% in dividend and split adjusted price terms from its public inception. While Eaton Vance (EV) is annualising comparable returns of 19% over the past 20 years.

“Public Inception” of an Amco is of grave strategic concern when essentially boutique businesses seek that trepidation of growth-obsessed to institutionalise. These concerns in considered the FPM’s Product Convergence Story (a.k.a. “Product Convergence or Incestuous Orgy in Alternatives”). When the premise of something changes one should change their opinion about it in equal measure!

Since not all breeds are made equal, of the Aimcos we noticed from our preliminary ‘top down’ survey of their quantitative metrics, we researched anew Virtus Investment Partners, Inc. (VRTS). This new Amco, which only publically listed in January 2009, had unbelievable (‘Green for Go’ Highlighted) total returns with dividend re-investment of 2,695% or 78.5% annualised. This naturally seemed bizarre when compared to other definitive Aimcos in that table above returning 15.7% and 12.5%, such as Affiliated Managers Group - listed Nov 1997, and “Gabelli”.
FPM already had coverage knowledge of Affiliated Managers Group and Gamco Investors Inc (GBL) (Listed Feb 1999).

Virtus Investment Partners, yet without the veritable ‘VIP’ ticker! is new on FPM coverage radar as a vivid example of how relevant bottom-up understanding complements top-down quant estimation. Virtus was founded in 1988, perhaps a phoenix rising out of the Black Monday Market Crash of 1987, but like Affiliated Managers Group, they maybe considered ‘Amco’ management company not unlike a multi-manager but with general partner relationships i.e. a platform for other affiliated managers under an umbrella label. For our full research report we reveal if Virtus are a business development company (BDC) category; like the coverage we initiated on Ares Management L.P. (ARES) of Ares Capital Corporation (ARCC)…

In FPM humongous SELL Recommendation[2] of Aimcos headed “Specialist Strategies (Noveau Aimco) – Switch / Sell”, we targeted Blackstone Group due to FPM coverage of their reputation risk from investor association with ‘guilty verdict’ institutions such as insider-trading Steven A. Cohen’s firm S.A.C. Capital (since re-branding as a family office renamed Point72 Asset Management).
We were concerned that Blackstone, now an AIM category behemoth and industry bellwether, is not adhering to its founding reputation risk principles. A seemingly ardent principle to the partnership co-founder Stephen A. Schwarzman, from the days of his office-next-door association with Dennis Levine; a former Lehman Brother’s colleague who was central to the mid-1980’s insider trading crackdown. “Blackstone is sensitive to reputation”, was recited as a holy mantra to the author of this investigative research during a due diligence meeting in 2007 with the then head of asset allocation.” (Source: FPM’s No Smoke Without Fire! 22 April 2013)

Also, we were less than impressed with Blackstone’s total returns figures, up 55.9% since public inception in June 2007 or only 6.2% annually. Despite Blackstone’s division Hedge Fund Solutions or BAAM (mentioned above), reporting in their February presentation in Florida of 22% CAGR in economic income; we believe the predominantly private equity advisory business is reeling from low transactional flow, perhaps hampered by easy money preventing corporations from needing their buyout contravention…

[1] 3-fold manifestation: No Smoke Without Fire – Reputation Risk, M&A of the Alt Kind and Alternative-Mutual Convergence 
[2] An analysis based cautiously on preliminary top-down quant observation of a select Amcos