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actual journalism and studies showing HOW money is stolen and BY WHOM is much preferable to blanket assumptions of criminality.
working assumption: the ENTIRE FINANCIAL SECTOR is fraudulent, thieving, criminal.
actual journalism and studies showing HOW money is stolen and BY WHOM is much preferable to blanket assumptions of criminality.
a peek into the shady -- and possibly very dangerous world -- of low grade corporate financing:
http://daviddayen.tumblr.com/post/13...ill-start-hereIn 2008 that excess risk rose up from subprime mortgages. Today, risk is pooling in a different area: corporate debt. From multinationals to small businesses, corporate debt has exploded over the past two years, alarming regulators and policymakers. “In many ways, this is a test of all the mechanisms that caused the financial crisis,” said one fearful Senate Democratic aide. “If there’s another crisis, this is where it might start.”
A clear example of this gold rush can be seen in Apple’s recent $17 billion corporate bond sale, the largest on record and the tech giant’s first since 1996. Apple, with $158 billion in cash reserves, has little need to borrow money. But thanks to several years of low Federal Reserve interest rates, it’s become so cheap for corporations to borrow that big firms who resist just leave money on the table. Tellingly, Apple plans to use the funds not to develop new products or finance new capital investments, but simply to boost returns to shareholders. So the increased borrowing risk doesn’t even improve the economy; it goes straight from the fruits of worker productivity into the accounts of the top one percent.
Much of this corporate debt is more dangerous than Apple’s, however. In fact, Wall Street describes it as “junk bonds,” which offer a higher return because of the higher risk of default. That’s attractive to investors, who have been “reaching for yield” above what safer investments will produce. Since March 2009, the junk bond market has doubled to $2 trillion, as worries about risk have flown out the window. Got an idea for a vegan restaurant on a cow farm or a lingerie shop in a nunnery? No problem, some investor will lend you lots of money.
In fact, loading up companies with massive debt is a business strategy for the kinds of companies that will be familiar to anyone who paid attention during the 2012 Presidential election to Mitt Romney’s exploits at Bain Capital. Private equity firms like Bain take over companies and borrow lots of money to make the acquisition, a process known as a leveraged buyout. The assets of the company become the collateral for the loans. This puts the company and all its workers at great risk, because if their operating revenue cannot pay off the high interest payments on the debt, their assets get sold in bankruptcy and everyone loses their jobs. Even in that situation, private equity firms can walk away with a profit, as they put up nothing to acquire the company, and they make their money through management fees. It’s an old story: the big money boys come to town, suck out the value from a company and then leave its dried husk by the side of the road.
Loans in private equity deals are often “covenant-lite” leveraged loans, a type of junk bond that offers fewer safeguards for investors. Given the desperation for higher yields, investors foolishly accept higher risk to get their hands on low-grade corporate debt. So under the terms of these loans, investors do not get informed when the underlying companies run into financial trouble, making it harder to avoid losses. Leveraged loans hit a new record last year, and covenant-lite loans exploded, comprising over half of all leveraged loans, according to the New York Federal Reserve. Demand was so high, in fact, that the spread between “high yield” corporate debt and risk-free securities like Treasury bonds fell to all-time lows, making it even crazier to purchase riskier debt for a small additional reward.
Smaller and smaller firms were the beneficiaries of these loans, like Learfield Communications, a media group with $40 million in annual revenues that received an incredible $330 million in covenant-lite loans last October. It’s correct to call this the “subprime of the corporate world.”
The repeated evidence of the years, of just the ones caught (not all of them have been caught) justifies my assumption. Give your money to the financial sector at risk to your money.
Last edited by boutons_deux; 12-14-2015 at 10:08 AM.
your mind always takes a shortcut to what it already knows. it's hard to imagine a more basic definition of idiocy.
you're welcome prove me wrong, but you can't. I get to the knowledge based on long observation, even your posts in this thread are NOTHING but more evidence supporting my positon on BigFinance.
you're welcome to prove your own over-broad, information-free generalizations, but you can't.you're welcome prove me wrong, but you can't.
you won't convince anyone by pointing at your own head, or by promiscuously dumping links. that's not how persuasion works.
sez the great link dumper hisself.
solution to embarrassing disclosures: limit disclosure
http://www.ibtimes.com/political-cap...arged-retireesEarlier this month, the nation’s largest public pension fund roiled the financial world: Officials overseeing $300 billion of California public employees’ retirement savings disclosed that the fund had paid $3.4 billion in fees to private equity firms over the last two decades. The news of the fees -- and a call by California Treasurer John Chiang for legislation requiring more ongoing disclosure -- seemed to herald a new trend toward greater transparency at a time when the Securities and Exchange Commission has warned that private equity investors may be getting hit hard by hidden fees.
That momentum toward transparency at the California Public Employees' Retirement System (CalPERS), however, appeared to abruptly halt last week when pension overseers quietly rejected a measure that would have required Wall Street firms to disclose all possible levies before they get their hands on the retirement savings of the system's 1.7 million members. Some CalPERS board members said they were concerned the measure might alienate private equity firms, thereby denying pensioners the benefits of those investments.
Let me get this straight...the private equity firms wouldn't take calpers money if they had to disclose their fees? And that's a problem?
for the funds, yes. They prefer their pilfering to be secret.
"I need a new yacht, so I'll hit up CalPERS for another $100M in secret fees"
there's a damn good reason there's a kerfuffle over disclosure. managing partners of hedge funds took CalPERS for over six percent of the principal in hidden fees.
it's allowed to read through the thread and catch up with the conversation. you should try it sometime.
Lol. Your assumption is the guys running calpers had no knowledge of the fees and there was no quid pro quo for overlooking them.
I've given you no reason to think I've assumed anything like that.
it's encouraging that you see the problem. a second ago you were acting like ripping off one of the biggest pension funds in the world for billions of dollars is no big deal.
Last edited by Winehole23; 12-28-2015 at 04:31 AM. Reason: the the
and so much the worse if the board colluded, no?
does that make it right for you?
well, does it?
It's what BODs do.
I get the opportunity can be hard to pass up, but there's a fiduciary responsibility to (someone) that's supposed to prevail.
http://www.etf.com/sections/index-in...ees?nopaging=1The headline of a December article in The New York Times declared: “Private Equity Fees Are Sky-High, Yes, but Look at Those Returns.” The author, Steven Davidoff Solomon, was making the case that while “critics love to complain about private equity and its exorbitant fees … as an asset class and with the right fund, private equity is nigh unbeatable” and “well worth the fees paid.”
He cites a recent disclosure by the California Public Employees’ Retirement System (CalPERS), the nation’s largest pension system, that despite paying billions in fees, its private equity investments had earned an annualized return of 12.3% per year over the 20 years ending June 2015.
Compared with the return of 8.9% provided by the S&P 500 Index, that may look like the fees were well spent. While that comparison is one private equity (PE) fund that sponsors would love you to make, unfortunately it’s also incredibly misleading.
Let’s see why comparing returns on PE to the S&P 500 Index isn’t appropriate.
Different Risks
For starters, they are very different investments in terms of risk. Companies in the S&P 500 are typically among the largest and strongest, while venture capital traditionally invests in smaller and early-stage companies with far less financial strength. Studies have estimated the betas for buyout funds at roughly 1.3, and for venture capital funds from about 1.6 to 2.5. Since the S&P 500 has a beta of 1, adjusting for the higher betas alone would have more than wiped out any evidence of outperformance.
In addition to the problem of adjusting for the higher betas (exposure to equity risk), investors in private equity forgo the benefits of daily liquidity provided by mutual funds. It’s been well do ented in the literature that investors demand a premium for investing in illiquid assets, especially ones that perform poorly in bad times (as PE does). There is no adjustment in the returns data for the risk of illiquidity.
Moreover, relative to investments in mutual funds, PE investors forgo the benefits of transparency and broad diversification (and for individuals, the ability to harvest losses for tax purposes).
Another risk issue is that the median return of private equity is much lower than the mean (or arithmetic average) return. The relatively high average return reflects the small possibility of a truly outstanding return combined with the much greater probability of a more modest or even negative return.
In effect, PE investments are similar to options (or lottery tickets). They provide a small chance for a huge payout, but a much larger chance for a below-average return. And it’s difficult, especially for individual investors, to sufficiently diversify this risk.
It’s important to note as well that the standard deviation of PE returns is in excess of 100%. Compare that with a standard deviation of approximately 20% for the S&P 500 and about 35% for small value stocks.
side letters with favored investors and hidden fees to fund managers rip off pensioners:
http://www.ibtimes.com/wall-street-f...-deals-2250476Giving special preferences to elite investors is a controversial practice barred in some parts of the financial world, such as mutual funds. In more lightly regulated alternative investments, though, the strictures are less clear.
“An investment manager [in alternatives] owes a fiduciary duty such that he or she treats investors in a similar manner,” said Ron Geffner, a former SEC regulator who is now a private attorney and the vice president of the Hedge Fund Association. “That said, many things may be negotiated in a side letter, giving managers the flexibility to negotiate certain terms with investors.”
According to financial experts who were asked about special investor rights in general (not specifically the Rhode Island deals), financial firms sometimes use side letters to court deep-pocketed investors with access to non-public information, lower fees or special rights to withdraw their money — potentially leaving other investors with losses. The letters are also used to comply with certain clients' special needs — say, a public ins ution's bylaws requiring it to collect customized data about its investments. Some financial firms say they do not have to notify investors of their side letters with others.
“There is a legitimate reason for some of these preferences,” said Harvard University’s Jay Youngdahl, an attorney who serves as a trustee for a steelworkers’ pension fund in Ohio. “But there’s also a not-so-legitimate reason for these preferences: If you are a Wall Street money manager, it allows you and your buddies to build a black box and loot retirees’ money.”
once we get a little peek under the hood, legislators slam it shut:
http://www.nytimes.com/2016/07/03/bu...rows.html?_r=1“The net effect is that a California public fund would receive much less than a full picture of the related-party transactions,” said Michael Flaherman, a former board member of the California Public Employees’ Retirement System and chairman of its investment committee, who is now a visiting scholar at the Goldman School of Public Policy at the University of California, Berkeley. “The missing part of the picture would be the portion of the fees that the private equity firms get to pocket in full.”
Not to be outdone, some lawmakers in the nation’s capital are trying to roll back newer regulations that have given the Securities and Exchange Commission a window onto private equity practices.
This fight against transparency, it’s worth noting, coincides with a series of S.E.C. enforcement actions against private equity firms. Stated simply, these cases prove that investors need more, not less, information about what their managers are up to.
“Just when they lift the hood on private equity and find some mechanical problems, they want to slam it shut again,” said Jennifer Taub, a professor at Vermont Law School. “Having a whole big pot of money in the shadows is not a good idea if you’re trying to prevent systemic risk.”
The attempts to keep private equity practices under wraps also coincide with a decline in the industry’s investment returns. An analysis published in late June by the Center for Economic and Policy Research notes that private equity’s performance in recent years is about even with that of the overall stock market. That means investors are not receiving appropriate rewards for the additional risks they take in these funds.
The research also identified another crucial shift: Past returns by a private equity manager are no longer as reliable a predictor of that manager’s future performance.
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