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.