Archive for September, 2011

Mutual Fund Failures: Groupon, Risk Management and the Ultimate Exploitation of Other Peoples Money

Posted in Uncategorized with tags , , , , , on September 29, 2011 by economicwarrior

We made a post earlier in the week about the impending implosion of the social media bubble, it appears that highly touted firms like Chicago’s Groupon is bleeding buckets of red ink…hundreds of millions…and it cannot record revenues correctly…ghosts of the internet bubble. But giants of the asset management industrial complex, Fidelity Investments, T. Rowe Price, Capital Group (American Funds) and Morgan Stanley as well as Russia’s DST Global are the major investors behind Groupon, and sunk around $950 million into the web-based discounter.

Mutual fund managers are not the first string risk managers they pitch in their advertisements. In my next book, The Pirates of Manhattan II; Highway to Serfdom www.thepiratesofmanhattan.com about the asset management industrial complex, we illuminate how BlackRock, Fidelity, Federated, Janus, T. Rowe Price were bailed out by the Fed when Lehman Brothers collapsed.

Grant’s Interest Rate Observer sent an analysis to this office and it struck the fear of God in me when I saw mutual fund giant’s average exposure to European banks in mutual fund money market accounts. With $435 billion in money market funds from Fidelity, Vanguard and BlackRock essentially earning zero percent interest, on average mutual fund exposure to European bank debt average 41%, with Vanguard having the lowest concentration of 23%.

Groupon and money market mutual fund exposure to European bank debt should be a wake up call to anyone…

I don’t think much of the diversification mantra promoted by Wall Street and the asset management industrial complex. Target-date mutual funds, the latest product du jour are diversification on steroids. Jim Leech, who runs the $105 billion Ontario Teacher’s Pension Plan said this recently. “In our view, investing is all about conviction…sometimes many funds underperform because they become too diversified.” Amen.

An analysis we did on the Fidelity Freedom 2020 target-date retirement fund found that it had over 3,000 individual stocks…mutual funds, like the rest of the asset management industrial complex is all about exploiting the use of other people’s money.

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Wall Street Greed, Jack Welch, $8,000 Tickets, And the Dysfunctional Media

Posted in Uncategorized with tags , , , on September 28, 2011 by economicwarrior

In going to the mailbox today, I was shocked by the grotesque invitation I received from HSMGlobal, http://www.hsmglobal.com, a New York City company that manages seminars. They invited me to a seminar in November 2011, at the nominal cost of $8000 dollars to see folks like Jim Collins, AG Lafley, Meg Whitman and Jack Welch speak.

The program was entitled “Elite Leadership Program” and with an $8,000 price tag, sure is. Not like the $71 thousand it costs just to show up at Davos Switzerland, but elitist nonetheless.

Jack Welch is not only a poster child for Wall Street and corporate greed, it was under his guidance that Welch made GE Capital a part of Wall Street as much as Credit Suisse or Goldman Sachs. Welch, who was worth around $900 million when skipped out of General Electric, reportedly gets a pension around $9 million a year. GE Capital, you will find in my next book, is Wall Street.

Meanwhile, our esteemed media fails to report about what young people have to protest down in lower Manhattan. Young people are pissed and rightly so. The empire is coming apart, and Wall Street, and companies like GE Capital are at the heart of it. Check out the site of what the young people are doing, http://www.occupywallst.org.

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Another Social Media Bubble with Tumblr, Chelsea Clinton & Freddie Mac

Posted in Uncategorized on September 27, 2011 by economicwarrior

In addition to the social media bubble with companies such as Groupon backed by asset management giants such as Fidelity, T. Rowe Price, American Funds (Capital Group) and Morgan Stanley, The Wall Street Journal reports that Tumblr, a company that combines social media and blogging, is valued by venture capital financiers to be worth $800 million.

This is significantly insane. The company, which was founded in 2007 by David Karp, a high-school dropout who was 20 years old when he founded the site, has non existent revenue but has managed to raise roughly $85 million in investment capital.The company, which has only 50 employees, is a a darling to Wall Street West, the venture capital industry. According to the Journal, Greylock Partners, Insight Venture Partners, Spark Capital, Union Square and Sequoia Capital.

Chelsea Clinton will become a director for Barry Diller’s media giant IAC/Interactive Corp coming to that media company with virtually no experience in the media industry. Ms. Clinton, in addition to being a corporate director, will be working on her doctorated degree from Oxford, NYU and The Clinton Foundation. Much more will be written about the Clinton’s interconnection to the media business and Wall Street in the new “The Pirates of Manhattan II: Highway to Serfdom.”
Chelsea Clinton previously worked for Avenue Capital. Bill Clinton was a Pirate of Manhattan with Ron Burkle’s Yucaipa funds. Hillary Clinton’s largest donators come from Wall Street. Chelsea Clinton is married to a former investment banker from Goldman Sachs and 3G Capital.

Not too much encouragement from a federal watchdog overlooking the death of Freddie Mac. A report released by the Federal Housing Finance Authority suggest that Freddie Mac was more interested in preserving its business relationships with Bank of America, citing the authority has not been aggressive enough in reviewing its loans it took on. Freddie Mac and Fannie Mae are another Wall Street tool, when those two agencies were two of the biggest investors in Peter Cooper Village-Stuyvesant Village, the record New York City real estate flop which even took the Church of England out for $70 million.

More about this in The Pirates Manhattan II.

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With Groupon, The Bubble Is Alive and Well in The Asset Management Industrial Complex

Posted in Uncategorized with tags on September 26, 2011 by economicwarrior

Groupon, a company that specializes in web based discounts in a nation addicted to shopping, with major investors from Fidelity, T. Rowe Price, Capital Group (American Funds) and Morgan Stanley, appears to be the latest casualty from the asset management industrial complex. The company, which has bled more ink than a busted Pitney Bowes postal machine, lost $390 million in 2010, and another $103 million in the first quarter of 2011.

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