Tag Archives: government

Long Trend Of Jobs Data Shows Zombie Recovery for Professionals

Suspicions among white-collar professionals that the recovery is an illusion, or at least has left them behind, are validated by official government data buried in the monthly employment reports, based on household surveys, which few bother to actually read.

 

Even more worrisome is the continuation of a decade-long decline in the number of self-employed, a category which includes many of these same professionals.

 

While even the seasonally-adjusted employment data show an uptick in five of the six unemployment measures (Table A-15 of the January 2015 jobs report, available at http://www.bls.gov/news.release/empsit.t15.htm), the unadjusted numbers in the same table show a measurable increase in unemployment.

 

However, that is not news to the white-collar workforce which has not fully recovered and which may never recover. Remember that the official data, if anything, paints a rosier picture than reality, because it is based on methodologies which strain to overstate employment and understate unemployment.

 

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Wall Street Power – Facts v/s Fiction

Having been on Wall Street for around three decades now, I am often asked – mostly by foreign investors – , what’s so special about Wall Street that gets people’s attention the world over and what are the facts from the fiction when it comes to this “Mecca of Finance”.

 

Here are some of my personal thoughts.

 

I guess it all started when the Panic of 1907 occurred and the New York Stock Exchange fell 50% in a year peak to trough, JP Morgan bought stocks and called up a few other Wall Street titans to buy. This prevented a total collapse of the financial system and the US economy.  JP Morgan did this ostensibly to protect the country. But sometimes doing the right thing at the right time is a necessary expense to build your brand and to prove to the government and your critics that you yourself don’t need to be regulated – so you and your tight oligopoly can continue making obscene profits in normal times…. I believe this is around the time Wall Street was really shaped- followed by the creation of the Federal Reserve in 1913 and all other regulatory agencies over the next 20 years.

 

So what makes Wall Street so powerful and what are the facts from the fiction out there?

 

Let’s start by the most obvious.

 

1. Wall Street is important because that’s where the money is. When they asked John Dillinger, a famous bank robber, why he robbed banks, that was his answer.

 

2. The titans from Wall Street banks have been closely tied to Presidents, Treasury secretaries, finance ministers, CEOs and prime ministers for a long time. So, quite simply, the folks who run Wall Street care about power and they know how to get it. Money is the means Wall Street titans use to accumulate power and they love it. They love having it. Getting more of it. Befriending those who have it, and befriending those connected to the powerful.

 

3. Money is Wall Street’s currency to get power. When I fundraised for Romney, I spent a lot of time on Park Avenue. All the fundraisers were held there. Well 90%…. Then I got a glimpse of how things worked. These folks all gave a ton of money and did a ton of fundraising. Like, a boatload. So when you’re a leading candidate for President, you go to the wealthiest financier’s homes late at night for meetings, so you can ask them for advice they were going to give you anyway, while they make sure they have continued access to you so they can work those levers of power to their advantage – or at least not let the government get in their way.

 

4. Besides political fundraising, Wall Street does tons of highly relevant tasks and favors to big governments, big companies, big pensions and billionaires. If you’re one of those people, Wall Street can and will get you the money you need or want, for a fee. That’s if you need a lot of it and you can pay it back -even if you have to print it or confiscate it. Argentina, I’m looking at you.

 

5. Wall Street knows the folks with the real money who are seeking investments and hedges and speculative positions. Wall Street knows how to transfer all types of risks – currency, market, credit, interest rate, company, litigation and other risks – from those who want to get rid of it to those who are willing to be paid to take it.

 

6. Wall Street also knows market making and price discovery and efficiency. It will trade and trade and trade money and financial instruments and commodities and lots of other things in its various forms. So, Wall Street is important. And it uses its importance to be powerful.

 

7. To date, the Secretaries of Treasury have come from Goldman Sachs, Morgan Stanley, Merrill Lynch, etc…. When they leave the government, they go back to those elite banks. Summers, Geithner, Rubin, etc… all went to banks or private equity funds when they left government work at some point (Summers was at a fund after leaving Harvard).

 

8. Certainly everybody’s hands are a little bit dirty when it comes to the global financial crisis. A lot of dumb mistakes were made all around. Some of them were idiosyncratic in nature (you can pinpoint many questionable trades made by both investment banks and hedge funds), and some of the mistakes were systemic in nature (think Fannie and Freddie).  You can easily assign blame to any market participant you want to, but at the end of the day, if you construct a pie chart of all the blame-able people in 2008, my hunch is that hedge funds would make up a very small portion of that pie. The reason is that they do not control public policy and regulations (which play a huge role in bringing about the crisis), nor do hedge funds put on as much risk as other market participants do because they simply do not control that much capital. Fannie, Freddie, pension funds, insurance companies, foreign central banks, investment banks, etc., dwarf the hedge fund industry by many, many orders of magnitude. I think it’s fine go out of your way and blame the 20-something hedge fund trader at Magnetar or Paulson for constructing trades which have a vested interest in seeing the mortgage market fall apart, because there’s something probably morally questionable about that, but understand that they didn’t cause that market collapse because they can’t. And before you say anything: Yes, I am probably biased being a Wall Street financier myself but No, I did not work in the hedge fund industry during the relevant time period.

 

9. If you think the Hollywood movie “The Wolf of Wall Street” is of any characterization of the real Wall Street, you are delusional. Nothing to do with reality and I frankly expected much better from an overrated Scorsese or a supposedly brilliant De Caprio.  The movie is total fantasy addressed basically to an ignorant public and/or third rate stockbroker wannabees who know squat but think they know it all and are hustling like the movie producer and lead actor to dump their crap to the world… Sorry to spoil your enthusiasm.

 

10. On the same note, if you think that Wall Street abides by any of the propaganda as per below you are equally delusional. Time for a rude awakening.

 

  • We don’t care about social costs
  • We worship the invisible hand
  • We don’t care about the environment
  • We all go to business schools
  • We’re all elitist and are all rich
  • We’re all conservatives

I met Hank Paulson very briefly after he left Treasury. I name dropped a current deputy secretary of state I knew he would know from Goldman Sachs. He had a business going, helping big important governments around the world. This meeting led me to a number of similar meetings to the high and mighty which gave me a real glimpse trough luck and fate and hard work of how the financial elite work.

 

Bottom Line: Consider it like this.  Imagine if all supermarkets, grocers, and other sellers of food closed suddenly.  We need food to survive and function and would shrivel up and die without it.  Now imagine if the major retailers of consumer electronics closed.  The effect would be hugely significant throughout our society, but we would be able to continue on.

 

To major corporations, Wall Street is the “supermarkets, grocers, and food sellers.”  Wall Street provides them with the lifeblood, money, that they need to continue their operations.  Thus, Wall Street has power over them.

 

Now that you know who runs America and the world, I strongly suggest to anyone of you wanting to build a career in any industry to spend some time there – even a stint – . It is an experience second to none which will benefit you in the long run while truly learning how the “money world” works.

 

Share your thoughts….

This Isn’t Your Father’s Middle East Stupid Wake Up

I am a Lebanese-American, a conservative and a capitalist. I was born in Lebanon, and had one dream and one dream alone – to come to America, and make my fortune as a capitalist. I did just that.

I studied at The Wharton School, went to work at the most entrepreneurial firm on Wall Street, Drexel Burnham Lambert, became a global entrepreneur-financier, and made my mark dealing with some of the largest capital pools in the world, orchestrating large scale buyouts and recapitalizations.

Today, the Middle East is a very different place than the one I left 25 years ago. “This isn’t your father’s Middle East,” a good friend with whom I do business in the region loves to tell me.

And yet he is disappointed that most Americans seem stuck in the 1970s when it comes to how we think and describe the place – as if all Arabs are the same, none worthy of our trust or respect.

Read More: This Isn’t Your Father’s Middle East Stupid Wake Up

The Merit of Confrontation and Why De Blasio Is Already In Trouble

Much has been made of the worrisome rhetoric in the State of the City speech given on February 10th by New York City’s new mayor Bill deBlasio. Some in our audience, particularly anyone with a connection to New York City, have already expressed fears about what to expect next from the de Blasio administration.

Other commentators have been quick to deride de Blasio as a Marxist; indeed, de Blasio’s hapless Republican opponent used that label on him as early as September 2013.  However, concerns should extend far beyond the City and the Financial Policy Council believes the de Blasio speech is a harbinger for the world.

Read More: Why De Blasio Is Already In Trouble

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The current VC or Entrepreneurship worlds are In a Mess?

I have finally come to the realization; after 30 years on Wall Street and Silicon Valley, that our capital markets are simply obsolete and that it’s high time for a new technology that allocates money and other resources far more efficiently than both our actual technology and government.

The current VC/entrepreneurship worlds are in a mess, and to their credit, the players are doing some serious introspection. But mostly, it is still business as usual.

I have nothing against VCs and angels. Most are extremely smart people. But the world of problems and opportunities is now so complex and fragmented that any system that relies on “bottleneck star-spotting talent” is doomed to hit its limits in short order.

Read More: The current VC or Entrepreneurship worlds are In a Mess?

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When Banks Settle – Everyone Else Loses

The independent economic think tank Financial Policy Council (FPC) fears that the business and investing community (not to mention, bank depositors and shareholders) are potential big losers from the Justice Department’s much-trumpeted settlement of civil and criminal charges with J.P. Morgan Chase Bank, N.A. in connection with its activities involving Bernard L. Madoff’s legendary fraud.

We wish we did not have to emphasize the criminality of J.P. Morgan Chase — and we wish it had never occurred — except that the bank itself admitted to this fact.  Others can speculate on whether there was arm-twisting or the use of leverage, and even on whether or why other Too Big To Fail banks might be “untouchable.”

We restrain our focus on the hard fact: J.P. Morgan has admitted to criminal wrongdoing, and in so doing has agreed to a massive $1.7 billion penalty and to reform its anti-money laundering funds in order to get a two-year deferred prosecution agreement.  The particularized admissions are formidable, as contained in the criminal information filed in Manhattan Federal Court (Southern District of New York) by the United States Attorney’s Office.

Criminal wrongdoing needs to be emphasized here, because a criminal act involves criminal intent, that is, willfulness.  Here, the bank is charged with having “willfully fail[ed] to establish an adequate money-laundering program” and further having “willfully fail[ed] to report suspicious transactions.”

Read More: When Banks Settle

 

Crime Does Pay – The Danger of Too Big To Fail, Too Big To Jail

Americans who play by the rules just got coal in their stockings, courtesy of the United States Government.

The most damaging and dispiriting government action this month is not its treatment of the Fiscal Cliff, but its enforcement decision showing that the rule of law is deliberately uneven. That is the message conveyed by the Department of Justice with its announcement earlier this month that neither HSBC nor any executives at the international bank would be criminally prosecuted for activities involving the money laundering of funds for terrorists and drug cartels (among other bad actors) for which the company itself has agreed to an unprecedented $1.92 billion fine, out of concern that such criminal charges could “destabilize the global financial system.”(1)

The message of a two-tiered justice system is actually amplified by the slap-on-the-wrist criminal plea on December 19th by a subsidiary of the equally too-big-to-fail UBS to one felony count of wire fraud in an emerging interest-rate manipulation scandal, providing for about $1.5 billion in fines and accompanied by criminal indictments of two hapless traders whom the bank decided to throw under the bus in a show sacrifice.(2) One need not be a cynic to view the institutional criminal plea, and the financial settlement which amounts to little more than a rounding error, a cost of doing business, as a transparent attempt to uphold the image — if not the rule — of equality under the law, precisely when they are being broken with impunity and the unofficial imprimatur of the government.

Lands where justice can be bought, where the application of the law depends upon whom it is to be applied, are typically found in Third World countries ruled by despots and the law of the jungle, where might makes right. In such countries, any purported rule of law is best referred to as crony justice. (Note: One cannot define it as “crony justice,” since the definition of justice involves equal application of uniform rules, hence, a two-tiered system involving arbitrary applications or “special treatment” ceases to be justice and that term cannot properly be modified by the word “crony,” or any other adjective, for that matter.)

Continuous Reading: Crime Does Pay

The Challenges and Opportunities we see in China

The practice of doing business in China has come into question early this year. The disputes between Google Inc. and the Chinese government have been one factor; others have included the continued concerns raised in the West about China’s currency policy, and in China about Western financial policies. Moreover, questions about intellectual property protection in China have not gone away. At the same time, the consumer markets within the country are more vibrant as its pace of growth increases, and Chinese businesses are becoming innovative, fierce competitors within their country, and increasingly in the world outside. There has never been a time when getting China right is more important — or more difficult.

How do we view China in here at Blackhawk?

What is our investment policy vis a vis China given the increasing tensions that are raising concerns among some businesspeople out there and given our increasing exposure to China through our strategic investments in Linktone and China Security & Surveillance Technology?

It is clear today that no capitalistic entity on Planet Earth can afford to ignore China’s role in global political and business affairs.

Whatever friction there is between US companies and China, I think it is time for us all in the West to step back and try to understand what China means to their business. We also have to understand what China has been achieving over the last couple of decades, since it started its economic reforms. Ignoring China is not an option. The only way any company can take advantage of its massive opportunities is by placing its China activities in a global context — as part of an integrated web of capabilities, including manufacturing, marketing and sales, innovation, new business model incubation, and talent development.

Continuous Reading : The Challenges and Opportunities in China