Plutocracy Plots With Trump

 
President of the USA Donald Trump: Examplification of Wealth in Politics (Source FPM, Twitter)

[This is an exqusite excerpt and edited narrative used by FundPortfolioManagement to understand explain and interpret the paramount risk of today #Geopolitics other than #climatechange - q.v. footnotes] 

Masterful and arrogant wealth, known as “Plutocracy”, created largely by Government protection of its profits, not content with its domination and influence within a single party of Republicans, had sought to corrupt them both. And to that end had insinuated itself into the primaries, in order that no candidates might be nominated whose views were not in accord with theirs. Such was the political socio-economic system of American democracy that manifested in turns the “Capital Crook” Clintons and “Black Lives Matter” Obama.

By the use of all the money that could be spent, by a complete and compact organization and by the most infamous sort of deception regarding their real opinions and intentions, Plutocracy had succeeded in electing its “Apprentice Trump” creature to the Presidency. There was no longer a need for the middle-men “politiciansRcriminals” at the White House. Plutocracy had a “corruption fund” of millions of dollars with which to mislead those that could be misled, and to debauch the weak and uncertain.

Plutocracy had a marvelous aptitude for political manipulation and organisation, and with President Trump’s malversation they forged a subtle chain with which to hold in subjection the natural impulses of the people. Sometimes the public had been mistaken as to the true character of their Presidential office. “Wealth” or “the interests” was openly for or against certain men and measures.
 
Trump’s first move was to confer with Plutocracy, the high priests of finance, and unfold his plan to them, explaining how essential was secrecy. Plutocracy’s influence throughout commercial America was absolute. Their wealth, their ability and even more the sum of the capital they could control through the banks, trust companies and industrial organisations, which they dominated, made their word as potent as that of a monarch.
 
Trump then transferred these corruption-fund amounts to the private bank of his son-in-law perhaps, who would then become final paymaster. The result was that the public had no chance of obtaining any knowledge of the corruption fund or how it was spent. The plan was simple, the result effective. He had no one to interfere with him. It was a one man power which in the hands of one possessing ability of the first class, is always potent for good or evil.
 
Not only did Trump win the Presidency, but he also planned to bring under his control both the Senate and the Supreme Court. He counted upon having a good majority of the Senate, because there were already fifty-one Republican Senators upon whom he could rely in any serious attack upon corporate wealth. As to the Supreme Court, of the nine justices there were three that were what he termed "safe and sane," and another two that could be counted upon in a serious crisis. Then there would be an easy working majority.
 
Trump’s plan contemplated nothing further than this. His intention was to block all legislation adverse to the interests. He would have no new laws to fear, and of the old, the Supreme Court would properly interpret them. The President was the centre, and from him radiated everything appertaining to measures affecting "the interests".

Footnotes:
Get Ready for the First Shocks of Trump’s Disaster Capitalism -Naomi Klein - January 24 2017

No Smoke Without Fire!

 

FPM's Bells and Whistles!

No Smoke Without Fire: Of Reputation Risk

Q. How can an investment firm be really worried about reputation risk and at the same time cavorting with a web of securities fraud affiliate?

A. Because ‘institutionalisation’ has created ‘big fish’ with manageable concern about the fall-out from ‘smaller fish’ troubles...

Fund Portfolio Management (“FPM”) have been observing the financial news about the vehemently committed affiliation of publicly listed Blackstone Group (“BlackStone”) and the web of securities fraud surrounding hedge fund heavyweight SAC Capital Advisors (“SAC”) and its billionaire eponymous founder Steven A. Cohen. Forbes recently ranked Mr Cohen as the 117th richest man in the world with net worth of some $9 bn.

Blackstone formed in 1985 specializing in private equity, with current asset under management (“AuM”) of $218 bn, as at end-March 2013. “Blackstone is sensitive to reputation”, was recited like a mantra to the author of this research during a due diligence meeting in 2007. With any sense of responsibility to its investors, the market reputation of SAC or related headline risks should have sent Blackstone scuttling for the exit doors and severing links long ago. At time of writing, with extended SAC redemption date approaching on June 3, Blackstone is astonishingly still invested with its client’s capital in SAC.

SAC Capital Advisors started out as opportunistic long / short equity and is now multi-strategy hedge fund formed in 1992 and with current AuM of approximately $15 bn. More than half of the assets belong to Mr Cohen and SAC employees. For investors who’ve had their head in the sand, SAC has been on the back-foot about insider trading other securities fraud cases for six years. The recent arrest of SAC’s most senior fund manager Michael Steinberg by FBI agents, has escalated the court proceedings with trial date set for November. To date nine current or former SAC employees have been charged by the US investments regulator the Securities and Exchange Commission (“SEC”), with convictions, jail sentences, fines, forfeitures and in one case the largest insider trading settlement of $602 mn. Mr Cohen has been portrayed as at the centre of this web of securities fraud but as yet only implicated and still uncharged.

As hedge funds are a people business, with ‘key man’ concerns, the character and moral compass of the principal at SAC is the categorical imperative to reputation. Even far back as 1986 Mr Cohen was investigated but not charged for insider trading. See the exclusive ‘Litany of Litigation’ compiled in the full research.  More than a quarter of a century later the US investment services regulator, the SEC and other government agencies are still targeting him in securities fraud. For this FPM alternative independent restricted research entitled ‘No Smoke without Fire’, we draw affirmative conclusions about Mr Cohen’s part in a long history in a web of securities fraud.

By Blackstone publicly allying itself to controversial capital-outsourcing vehicles such as SAC and other convicted insider-trading funds in the past, such as Diamondback Capital and Harbinger Capital – the inflicted reputation or headline risk could conceivably be more than a minor due diligence embarrassment. In fact FPM have recommended a downward stock price target for Blackstone (BX). Blackstone, via its Hedge Fund Solutions group / BAAM (founded 1990, AuM $48 bn as of 31 March 2013) is reportedly the largest or one of the largest ‘outside-money’ investor in SAC with $550 mn allocated.

Reputation damage, like forest wildfires, once started can quickly spread, given the right conditions.  Adverse reputation can indeed cause material damage to the hedge fund and its investors, litigated-stock investors (class action law suites from insider-traded stockholders) and the AI industry reputation again tarnished. In the end, FPM foresees SAC forced to close doors to external money. For SAC’s last mid-February redemption window, notices were submitted for $1.7 bn of asset withdrawals. FPM doubts SAC offset those ‘guilt by association’ redemptions through inward subscriptions, while ensnared in battle with federal regulators of the US.

In March, US District Judge Victor Marrero had ethically questioned the record $602 mn settlement being a satisfactory verdict in the long-running litigation of Matthew Martoma and CR Intrinsic of SAC by stating:

"There is something counterintuitive and incongruous in a party agreeing to settle a case for $600 million—that might cost $1 million to defend and litigate—if it truly did nothing wrong…" Judge Marrero, April 2013

Given that majority of securities fraud proceedings have not delivered a culpability or innocent verdict in ridiculously numerous lawsuit complaints related to financial services, Judge Marrero broadly raises question of standards in US legislature…

For the full 25-page research FPM covers a multiplicity of aspects: FPM articulates the long relationship between Blackstone and SAC in ‘reputation risk’ terms and securities fraud within a wider paradoxical context of institutionalization of alternative investments (“AI”). The implications drawn from our research are for immediate action concerning Blackstone and SAC, but also for consideration of long-term AI issues; not just issues of securities fraud and its regulation but asset class performance from convergence of alpha and long-only beta strategies. 

The full FPM research incorporating urgent action recommendations regarding Blackstone Group and SAC Capital Advisors is available on sponsor request.

“No Smoke Without Fire!” substantiates the likelihood of Steven Cohen evading the authorities in an orderly fashion and the negative implication on investor confidence 

To ignore FPM findings is to be dismissive of the numerous independent consultancy warnings about Madoff and his now infamous ponzi scheme.

FPM predicts an imminent hedge fund scandal and fallout from SAC Capital’s trading irregularities and 5-year regulatory investigations.

FPM’s research is an importunate reminder that Galleon Group founder’s 11-year incarceration for securities fraud is merely a ‘scapegoat’ and only the tip of the iceberg.

FPM seeks to liaise with Blackstone and SAC Capital as a matter of confidential courtesy before disseminating the timely research to investors and media.

 ‘You are failing to understand the facts of the case,’ the priest said. ‘The verdict does not come all at once, the proceedings gradually merge into the verdict.’

(“The Trial” Franz Kafka)

The Media's "Straw-Man Fallacies" about Madoff and Rajaratnam

The Straw Man Fallacies  is a list of falsehoods in logic and rhetoric.

It’s not a coincidence that during financial crises there is often continuous and focused attention in the popular and specialist financial media about white-collar corporate crimes. Press articles about the leaks, allegations, investigation, charges, court proceedings and even about lengthy jury deliberations. Such articles' overall purpose is to seed the suggestion that retribution against corporate misdoings is in process. The publications’ other subtext purpose might seemingly be that “crime does not pay!” etcetera. We are reminded that institutional media can often be less about informative, didiactic or anecdotal stories / news, and more about hidden agenda-driven entreaties. 

During the last downturn, dubbed “TMT-bubble” between 2000-2003, we heard much about Enron, Paarmalat and other frauds; yet the lessons were evidently not learnt.  In 2007-2009 the global capital markets nearly collapsed with imminent global systemic financial failure. An all important, global commercial paper market for short-term funding, used widely in the economy by corporations and financial services, literally ground to a sytemic halt. The real assets were different from the dotcom era bubble, this time it was housing and the financial sector bubbles. The similarity was the prevalence of the notorious structured products from securitization tied to housing and off-balance sheet liabilities. 

The media attention on one or handful of cases and /or figures being made a scapegoat serves only to propagate a distorted, exaggerated or misrepresented premise. Hitler’s contrivance was that, “All effective propaganda has to limit itself only to a very few points and to use them like slogans.” Relating my article’s headline point to one of the many Straw-man fallacies, the best fit was with the fallacy of “Biased Sample”. Also Known as, Loaded Sample, Biased Statistics, Prejudiced Statistics, Loaded Statistics, Biased Generalization, Biased Induction.

Clearly, the mass air-time and clolumn-space focusing on the long-running insider trading court case against Raj Rajaratnam, of Galleon hedge fund, and the notorious Bernard Madoff, using the Ponzi scheme fraud, is intended to convey justice prevailing. However it detracts attention from the persistent and on-going white collar mischief in financial markets (or for that matter any professions, for example, UK parliament member’s expense scandal unfolding in 2010). Also, such decoy-news takes focus away from regulatory battles taking place between hardliners and laissez-faire believers.   

Also, diverting attention “to a very few points” of reference like Madoff and Rajaratnam helps deflect stark negligence or sheer incompetence of those charged with looking after the fort i.e. executive management, quasi regulators and other authoritative oversight entities. Not quite the holistic picture is presented.

So why does the Financial Times newspaper visit Madoff in prison? Not that Gillian Tett the FT's well regarded journalist is undiscerning, but more that she is compartmentalised in her thinking and publications by an age-old institutional media machinery, designed to serve the community which it represents – in this case the financial services versus all others. Media savvy, in using investor relations, public relations, lobbyists etcetera, are the key function in diseminating straw man fallacies about a position. 

To give statistical evidence to my point  about “iceberg theory of financial crimes” and media’s role, I cite these: Since the beginning of 2007 there have been 70 fraudulent cases in hedge funds alone, including Madoff, as shown in HedgeTracker Hall of Fraud listing). That’s almost 20 cases of fraud a year in hedge funds (HedgeTracker data ends with last fraud listed in June 2010, with Luis Felipe Perez’s Lucky Star Diamonds, operating yet another Ponzi scheme).

Also, FT’s Alphaville column reported in “Insider trading investigations, continued” :

            “…We’re now approaching 40 people charged with insider trading in the sweep of Galleon, PGR and other employees, and it’s worth pausing to reflect that these have come about via an incredibly narrow field of investigation: mostly via one expert network’s activity across one sector (tech) with relatively paltry amounts of alleged illicit profits. It’s moving from the periphery to the core, but the scope remains small.”

Just to clarify, the Galleon case has swept-up 40 people related to one “expert network”, namely Primary Global Research LLC, an independent research firm that links experts with investors seeking information in primarily technology and health-care.

Any effort to identify in list-form the number of pending Securities and Exchange Commission investigations of insider trading focused on other hedge funds and other sectors... well its an impossible task! - as SEC cannot publish these investigation due to wrongly inflicting irreparable reputational damage on parties concerned, before the verdicts. However, OnWallStreet.Com they have given some indications in "FINRA Clamps Down On Insider Trading, Expands Communication". FINRA is the acronym for Financial Industry Regulatory Authority, and their work has “resulted in more than 250 referrals for possible insider trading cases sent to the SEC ” in 2010 alone.

The reader of this article is advised to make the clear distinction between the Madoff and the Rajaratnam cases. One is outright fraud and other challenges the market-integrity under securities trading rules. Two very different segments of corporate crimes. Both offences being in financial services should not subconsciously be interpreted as all wrong-doings are caught. 

Stop press, what’s this? Hot-off the press on 25^th May 2011 from SEC website: 

SEC Adopts Rules to Establish Whistleblower Program

These SEC rules regarding whistle blowers was marginally voted in by 3-2. The new regulations required under the Dodd-Frank Act are supposed to give bounties / incentives for employees to come forward with information that helps towards cutting out securities problems. At the same time, the rules are intended to enforce internal compliance efforts to be bolstered. So it seems the authoritative oversight entities are fighting back! However, the cynicism of this author doesn’t allow too much glee, as he knows “the devil is in the detail”. 

So for who does this blog article mean “economic work creation”? – obviously for the legal profession and compliance departments, but by implication also for hedge fund due diligence staff.

The due diligence work of multi-manager / fund of hedge funds operations becomes critically crucial in determining the “moral compass” of fund management operations. Those managers who operate in unspectacular but morally modest ways are beneficiaries of intended clean-up in securities operations. Some critics of hedge funds may suggest that the “edge” in hedge funds come from unfair means. Implying that increased regulation of formerly unregulated asset managers (“shadow banking!”) might take the wind out of hedge funds, and for that matter private equity sails. The author of this insight hesitates in his assertion, since industry regulation amendments tend to come and go. Once upon a time, the first Glass-Steagall Act of 1932 came on the back of the Great Depression, and moving fast-forward in time to the start of this Millennium we saw Sarbanes-Oxley, and now the Dodd-Frank Act. 

In light of the media's iceberg-theory  presentation of frauds, insider trading and regulatory changes, those making institutionalised direct allocation to hedge funds without sufficient infrastructure, or in-depth industry relationships or longevity of game better watch out. Investors with institutional due diligence on boutique asset management operations shouldn’t just conduct tick-box exercises, but relevantly, understand what I call “process-principles” i.e. understanding the micro an macro aspects of an operation’s processes and principles, so as to be able to identify inconsistencies and irregularities in systems. Indeed the institutionalisation of hedge funds has provided many positives, among them  is the greater transparency of managers, but this may equally let in complacency .i.e. tick-box due diligence.

In conclusion, “creative-destruction in economic cycles” moves in alternating waves and trends, Madoff and Rajaratnam are just two names, like a festive sacrifice to the powers. I believe in an impending tsunami of alternative investment personalities and entities in difficulties. Notice the current trend of numerous offshoots of proprietary desks, whether originated from global investment bank desks, like Goldman Sachs luminaries, or from Julian Robertson’s “Tiger Cubs”. 

The continuum of evolution and adaption by the alpha-seekers, fairly or dubiously, makes it implicit that principled understanding of micro cycles in the big picture enables them to stay ahead of the game, whether by deploying media fallacies or despite them.

27^th May 2011

AuM FPM

By K K Siva