Economic Warrior's Blog

(Hampton, NH) May 30, 2012. Laurence Barton, PhD CEO of The American College and Sharen L. King, MSM, Executive Director of The American College, the nation’s preeminent school in financial education for securities, banking and insurance professionals has appointed Barry James Dyke to serve on the advisory board on the New Northwestern Mutual Granum Center for Financial Security. www.theamericancollege.edu

TheAmericanCollegewas founded as The American College of Life Underwriters in 1927 by Solomon S. Huebner of theWhartonSchoolat theUniversityofPennsylvania. Huebner was a professional involved in the development of economic theory. His theory of human life value is used in the field of insurance. It was his vision for a college-level professional education program for insurance agents that led to the creation of The American College. Today the college offers professional training to all types of financial practitioners.

Larry Barton, PhD says this about Dyke’s appointment, “Barry Dyke’s research is outstanding. He is fearless about telling  consumers about how markets really work. Protecting consumers’ financial security was the main concern for Solomon S. Huebner, The American College throughout its history and is a passion for Barry Dyke who understands the hurricane speculation of Wall Street as well as anybody. He will be a welcome voice in helping Americans build better foundations for their savings and retirement plans—which is a cornerstone concern of The American College.”

On June 5, 2012, Dyke will be doing a book signing and talk at 7 PM at The RiverRun Bookstore, 142 Fleet St.Portsmouth, NH03801www.riverrunbookstore.com.

Barry James Dyke is author of The Pirates of Manhattan which warned about the financial crisis before it began in 2007. The book explains why banks have been unstable throughout history and why mutual funds—the core retirement products for Americans savings and retirement plans—generally do not work over extended periods of time. In 2012, the sequel, The Pirates of Manhattan II: Highway to Serfdom was released. The book is selling briskly in the U.S as well as Europe, England, Canada, South America and the Pacific Rim. Dyke consults with individuals and industry groups, and frequently speaks about the incestuous interconnected nature of Wall St—and  how consumers can prepare themselves better in the days ahead. He is a frequent guest on talk radio shows throughout the U.S.,  and has written for or been written about in Al Jazeera, The New York Times, Yahoo, CNN,  The San Francisco Chronicle, The International News Observer, Advisor Today, The Daily Reckoning, Business Week, Medical Economics, The Houston Chronicle, Press TV, The National Underwriter, The Huffington Post and others. For additional information about Barry Dyke, you can visit www.thepiratesofmanhattan.com or his award winning blog, www.economicwarrior.org . You may contact the author at castleassetmgmt@comcast.net or 603-929-7891. Castle Asset Management, LLC, 2 King’s Highway, P.O.B. 95,Hampton,NH03843-0095.

(Hampton, NH, May 22, 2012). Barry James Dyke, author of The Pirates of Manhattan II: Highway to Serfdom predicts that student loans, in excess of $1 trillion, will likely be one of the country’s next financial infernos. www.thepiratesofmanhattan.com.

Federal student loans interest rates will rise to 6.8% on July 1^st 2012 from their current 3.4% base if Congress does not act. Banking lobbies oppose any reduction in interest rates. If Congress does nothing, the average student $23 thousand subsidized loan costs will increase an additional $5,000 over a ten year period.

The author states, “Student loans are a treacherous minefield. Faculty and admission staffs urge students to purse their dreams rather than focus on the sticker price of college. Student loans are a form of indentured servitude as student loans cannot be discharged in bankruptcy. Student loans do not die with death. Collection agencies can call day and night to collect student loan debts. Garnishment to pay student loan debt is common. Students are not getting enough well-paying jobs to pay back these enormous loans, yet The Department of Education through the Department of Treasury can attach tax refunds to pay off student loans. What is more, our Congress drove the getaway car for academia and the banks in 2005 with the Bankruptcy Abuse and Consumer Protection Act of 2005—which turned student loans  into non-dischargeable debt.”

According to the Department of Education, two thirds of students who earn a bachelor degree use some type of loan to finance their education with an average loan of roughly $23 thousand. The New York Times recently reported that as much as 94% of students borrow to get a college degree.

The taxpayer underwrites roughly $105 billion a year in Title IV student loans a year, with $24 billion going to for profit schools owned by Wall Street asset managers. Student loans guaranteed by the taxpayer are a major source of revenue for the U.S. higher educational system and if default rates accelerate, it could bring about a Greece like debt problem to the nation’s colleges.

“Excessive borrowing for an education will be a dark cloud hanging over this generation for decades,” claims Dyke. ”Default rates on student loans for traditional undergraduate and graduate rates are currently as high as 15.8%, and as high as 48% for for-profit colleges. The New York Fed reports that nearly one in four student loan holders are falling behind on their student loan payments. Make no mistake, the exorbitant cost of college coupled with large student debt loads is another financial inferno in the making—with students and regular Americans holding the bag. In many ways the student loan problem is worse than the recent real estate bubble—at least with real estate there is some tangible collateral. Please tell me, how many families in America can readily afford $50 thousand plus a year to attend one of America’s schools of higher learning?” [For the list of the highest priced colleges in the U.S. see this link. http://www.campusgrotto.com/top-100-colleges-with-the-highest-total-cost-2011-2012.html]

Like mutual funds, credit cards, subprime mortgages, derivatives, 401(k)s and other complex financial products designed, packaged and sold on Wall Street, student loan complexity, economic hazards and the true cost of college is hidden from public view.

College pricing and funding a college education is complicated by a myriad of factors; constant tuition increases, a vast array of grants and numerous opaque formulas. Financial aid letters generated by colleges for families are often confusing and misleading.

The author laments, “Our institutions of higher learning are failure factories. Higher education continues to devour a larger portion of the overall portion gross domestic product (GDP) with little improved job prospects for graduates. High college tuitions funded with large loans do not consistently create jobs. American colleges graduate only about half of their students within six years at traditional schools. Start digging into for-profit college graduation rates, and success falls off a cliff. No one is held accountable. The biggest winners in this student loan mess are Wall Street and a bloated Vichy like educational system which is more concerned about academic tenure entitlement than in living in an extremely competitive global economy.” For further information, visit http://www.collegeresults.org/default.aspx

Though the federal government is now the major direct lender for student loans, for years student loans and for-profit schools have been signature Wall Street industries. Sallie Mae—[a former Government Sponsored Enterprise (GSE) like failed Fannie Mae], is the 800 pound gorilla in the student loan industry. Citigroup, Regions Bank, JPMorgan Chase, U.S. Bank, Goldman Sachs, Nelnet, Wells Fargo, Bank of American and others have all participated in the student loan business as well debt collection for student loans.  JPMorgan Chase’s private equity arm One Equity owns The NCO Group, one of the world s largest debt collectors which specializes in collecting debts such as student loans. Goldman Sachs is a major shareholder in Education Management Corporation (EMC) the country’s second largest for-profit educator. [EMC is currently being investigated by the Department of Justice and attorney generals in four states (California, Illinois, Florida & Indiana) over an $11 billion recruiting fraud which involves student loans].

Dyke concludes, “For years I believed the Federal Reserve System in the United States to be the greatest financial scam. My views are now changing.  I now believe our antiquated inefficient educational system, coupled with the student loan tsunami, is even a greater scam than the Fed. The American educational system is not so much an educational system, but an indoctrination system which supports failed systems like the Federal Reserve System—our private central bank which is at the heart of this country’s economic woes.”  The author documents the lobbying efforts which led up to the student loan crisis in The Pirates of Manhattan II: Highway to Serfdom with U.S. Senate voting records and other research. www.thepiratesofmanhattan.com  . You can reach the author at castleassetmgmt@comcast.net or via the telephone at 603-929-7891.

(Hampton, NH, May 10, 2012) Barry James Dyke, author of The Pirates of Manhattan and the sequel The Pirates of Manhattan II: Highway to Serfdom concludes that the 401(k) mutual fund retirement plan is a failed experiment, a recipe for disaster and a ‘pump and dump’ ground for Wall Street products.  www.thepiratesofmanhattan.com.

The author states, “When the 401(k) was introduced in the 1980s, it was only intended to be a side-dish of the retirement savings puzzle. Today the 401(k) is the main course retirement vehicle for 72 million Americans in 483,000 plans. Yet the 401(k), without any guaranteed returns is a recipe for disaster. According to the New York Times only 22 percent of the population over 55 has $250 thousand or more in their 401(k). Sixty percent have less than $100 thousand.  The 401(k) is a speculation bonfire—over 77% of the savings in these plans are invested in volatile equities and mutual funds—which dumps all of the investment risk on uninformed retirement savers (Source: ICI). Tying all of retirement income to the stock market is insane. It will likely lead to another economic bubble right out of scripture.”

“401(k)s are a labyrinth of fees and a hidden world of revenue sharing agreements—which the American public is clueless about. In 2011, an AARP study found that 71% of plan participants thought they paid no 401(k) fees. Of the people who are aware that they paid fees, only 39% were aware of how much. [A January 2011 GAO report documents the revenue sharing problems. http://www.gao.gov/products/GAO-11-119. Another  January 2011 GAO study on target-date funds, a fund-of-funds hybrid mutual fund, the most-favored retirement  account for 401(k)s has proven be a disaster as well http://www.gao.gov/new.items/d11118.pdf.]

“Mutual funds, which get their cash from regular Americans in their 401(k)s, are a major source of capital—the greater fool—for Wall Street’s questionable offerings. Tragically, mutual funds are an ideal dumping ground for hot-issue, sleight-of-hand, over-hyped initial public offerings (IPOs). With the national media chiming in with the Wall Street bandwagon [because of the advertising revenue it receives from banks], the upcoming Facebook IPO, like other recent social media IPOs, will be the most-hyped IPO ever. The Facebook IPO  will make Mark Zuckerberg, Sheryl Sandberg, institutions, venture capitalists and others billionaires, while the retail investor will be holding the bag if Facebook does live up to its hype.” Dyke concludes, “a few recent examples of the pump and dump greater fool theory help illustrate this problem.”

The Blackstone Group LP (NYSE: BX), the giant private equity firm whose owners include billionaires Steve Schwarzman and Peter Peterson was brought public in 2007 around $21.89 a share. Schwarzman’s payday in that IPO alone was $702 million. By May 1, 2012 Blackstone was trading at $12.93, a 40% plus loss for mutual fund shareholders. Major mutual fund owners include AIG, Waddell & Reed, Credit Suisse, Fidelity, Ariel, Janus and Alliance Bernstein.

The Fortress Group LLC (NYSE: FIG), the private equity/hedge fund  firm which paid former Presidential candidate John Edwards $479 thousand for consulting services, performed an IPO in 2007 at $27.63 a share. On May 8, 2012 Fortress was trading at $3.47 a share—an 87% loss. While the founders of Fortress Group are worth hundreds of millions, retail shareholders from Legg Mason, Fidelity, Fred Alger, Morgan Stanley, Credit Suisse, Goldman Sachs and others were taken to the wood shed.

Social media, Wall Street’s latest fad in the IPO world, appears like the 1999 high-tech bubble all over again. Zynga (NASDAQ: ZNGA) and Groupon (NASDAQ: GRPN), two 2012 social media IPOs are barely six months old and have lost 16% and 41% of their value respectively.

Marc Pincus, CEO of Zynga, however, cashed out for $109 million in a private deal before the company went public getting $14 a share. By May 8, 2012, Zynga was trading at $7.93—46% less than Pincus got. Major holders for Zynga? Mutual fund holders from Morgan Stanley, T. Rowe Price, Federated, Janus, Franklin Templeton, Pacific and Fidelity.Groupon founders Eric Lefkosky and Bradley Keywell sold $300 and $130 million in Groupon stock respectively, and Andrew Mason sold another $10 million. When Groupon went public, in November 2011, it came out at $17.50 a share, by May 8, 2012, it was down to $10.33, a 41% loss. Major holders of Groupon stock are American Funds, Fidelity, Legg Mason, Morgan Stanley, Pacific and Goldman Sachs.

General Motors (NYSE: GM), the automotive company rescued by the American taxpayer, was brought public in November 2010 around $34.20 a share. By May 8, 2012 GM is trading a $22.23 a share, a 35% loss. Major mutual fund  holders in GM?  American Funds,  T. Rowe Price, JPMorgan,Alliance Bernstein, Vanguard,Franklin, BlackRock and UBS. GM is run by Wall Streeters who claim they should be paid more. CEO Daniel K. Akerson was formerly with The Carlyle Group. Steven Girsky, Akerson’s chief lieutenant, was a Morgan Stanley automotive analyst. Daniel Amman, the current chief financial officer at GM, had been an investment banker at Morgan Stanley for fifteen years.

The author concludes, “Wall Street, corporate executives, private equity and the mutual fund industry—all who portray themselves to be the smartest guys in the room—are not always the smartest but are masters when it comes to using other peoples money and the government purse to enrich themselves. It is a biblical transfer of wealth.” Barry James Dyke recently released The Pirates of Manhattan II: Highway to Serfdom-The Hijacking of America’s Savings. The book documents how Wall Street and corporate insiders have accumulated vast fortunes while taking Main Street America to the cleaners through mutual funds in general and target-date mutual funds in particular. The book also documents how lobbying controls the government and how the media has a co-dependent relationship with Wall St.  Please visit www.thepiratesofmanhattan.com. You can reach him directly castleassetmgmt@comcast.net or telephone 603-929-7891.