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"Earning a Living is the New Success"

7/29/14 35 percent in US facing debt collectors

Jul 29, 2014 Keiser Report: Casino Gulag

In this episode of the Keiser Report, Max Keiser and Stacy Herbert the nouns, like ‘poor,’ who want to be known as verbs, like ‘can’t make ends meet,’ and the thieving verbs (i.e., ‘defrauding investors,’ ‘manipulating markets’) who want to be called nouns, like ‘wealth creator.’ In the second half, Max interviews Liam Halligan about his recent Spectator cover story, “The Next Crash: We could be on the brink of another financial crisis.” They look at derivatives, leverage, GDP and more.

 

Jul 31, 2014​ Keiser Report: America's Kleptocro-Oligarchy The Stock Market Bubble

In this episode of the Keiser Report, Max Keiser and Stacy Herbert ask “is the Fed fuelling bubbles?” An opinion piece in USAToday says, ‘no, this time it’s different (due to zero percent interest rates).’ Another opinion piece from former academic turned fund manager, John Hussman, says there IS a bubble and it’s matched only in size by the 1929 bubble. In the second half, Max interviews Mitch Feierstein of PlanetPonzi.com about George Osborne’s ponzinomics and Janet Yellen’s bubbles. Mitch also has some charts! These charts show that equity markets in 2014 look a whole lot like the ‘recovery’ and then second crash during the previous Great Depression.​

OWN THE LANGUAGE
OWN THE CONVERSATION

Jun 28, 2014 Keiser Report: Russell Brand talks revolution and  Austerity Riots

In this episode of the Keiser Report, Max Keiser and Stacy Herbert are joined in the first half by Russell Brand to talk about the austerity headlines. They chat about the UK government's expanding debt and growing deficit, despite the alleged austerity and GDP expanding thanks to heroin addiction and prostitution. Russell learns about the water cannons bought for use against anti-austerity protests which the government itself will stoke. Finally, they talk about the people revolting as they must do when the social contract has been broken: and crypto currencies are one of the most visible revolts. In the second half, Max interviews Russell Brand further about his independent media outlet - The Trews; they discuss revolution and spiritual journeys.

Language Obfuscation: Money creation in the modern economy SEE PDF

 

BANKERS RIG THE MARKET MINI PUKES AND HOW WARS START

Keiser Report: Failing Systems; Can't Bust Banksters  Jail doesn't work. Mini Puke option manipulation continues. 

May 31, 2014 In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss all systems fail due to too big to jail as the governor of the Bank of England claims jailing banksters won't stop them from committing crimes in the future. Max also tells John Kerry to get his swift boat out. In the second half, Max interviews investment activist, Ronnie Moas, of StandpointResearch.com about the six companies in the S&P500 that he is blacklisting.

 

 

The Best Investment Advice You'll Never Get Mark Dowie | January 18, 2008

modernluxury.com

For 35 years, Bay Area finance revolutionaries have been pushing a personal investing strategy that brokers despise and hope you ignore.

As Google’s historic August 2004 IPO approached, the company’s senior vice president, Jonathan Rosenberg, realized he was about to spawn hundreds of impetuous young multimillionaires. They would, he feared, become the prey of Wall Street brokers, financial advisers, and wealth managers, all offering their own get-even-richer investment schemes. Scores of them from firms like J.P. Morgan Chase, UBS, Morgan Stanley, and Presidio Financial Partners were already circling company headquarters in Mountain View with hopes of presenting their wares to some soon-to-be-very-wealthy new clients.

Rosenberg didn’t turn the suitors away; he simply placed them in a holding pattern. Then, to protect Google’s staff, he proposed a series of in-house investment teach-ins, to be held before the investment counselors were given a green light to land. Company founders Sergey Brin and Larry Page and CEO Eric Schmidt were excited by the idea and gave it the go-ahead.

One by one, some of the most revered names in investment theory were brought in to school a class of brilliant engineers, programmers, and cybergeeks on the fine art of personal investing, something few of them had thought much about. First to arrive was Stanford University’s William (Bill) Sharpe, 1990 Nobel Laureate economist and professor emeritus of finance at the Graduate School of Business. Sharpe drew a large and enthusiastic audience, which he could have wowed with a PowerPoint presentation on his “gradient method for asset allocation optimization” or his “returns-based style analysis for evaluating the performance of investment funds.” But he spared the young geniuses all that complexity and offered a simple formula instead. “Don’t try to beat the market,” he said. Put your savings into some indexed mutual funds, which will make you just as much money (if not more) at much less cost by following the market’s natural ebb and flow, and get on with building Google. 

The following week it was Burton Malkiel, formerly dean of the Yale School of Management and now a professor of economics at Princeton and author of the classic A Random Walk Down Wall Street. The book, which you’d be unlikely to find on any broker’s bookshelf, suggests that a “blindfolded monkey” will, in the long run, have as much luck picking a winning investment portfolio as a professional money manager. Malkiel’s advice to the Google folks was in lockstep with Sharpe’s. Don’t try to beat the market, he said, and don’t believe anyone who tells you they can—not a stock broker, a friend with a hot stock tip, or a financial magazine article touting the latest mutual fund. Seasoned investment professionals have been hearing this anti-industry advice, and the praises of indexing, for years. But to a class of 20-something quants who’d grown up listening to stories of tech stocks going through the roof and were eager to test their own ability to outpace the averages, the discouraging message came as a surprise. Still, they listened and pondered as they waited for the following week’s lesson from John Bogle.

“Saint Jack” is the living scourge of Wall Street. Though a self-described archcapitalist and lifelong Republican, on the subject of brokers and financial advisers he sounds more like a seasoned Marxist. “The modern American financial system,” Bogle says in his book The Battle for the Soul of Capitalism, “is undermining our highest social ideals, damaging investors’ trust in the markets, and robbing them of trillions.” But most of his animus in Mountain View was reserved for mutual funds, his own field of business, which he described as an industry organized around “salesmanship rather than stewardship,” which “places the interests of managers ahead of the interests of shareholders,” and is “the consummate example of capitalism gone awry.”

Bogle’s closing advice was as simple and direct as that of his predecessors: those brokers and financial advisers hovering at the door are there for one reason and one reason only—to take your money through exorbitant fees and transaction costs, many of which will be hidden from your view. They are, as New York attorney general Eliot Spitzer described them, nothing more than “a giant fleecing machine.” Ignore them all and invest in an index fund. And it doesn’t have to be the Vanguard 500 Index, the indexed mutual fund that Bogle himself built into the largest in the world. Any passively managed index fund will do, because they’re all basically the same.

When the industry sharks were finally allowed to enter the inner sanctum of Google, they were barraged with questions about their commissions, fees, and hidden costs, and about indexing, the almost cost-free investment strategy the Google employees had been told delivers higher net returns than all other mutual fund strategies. The assembled Wall Streeters were surprised by their reception—and a bit discouraged. Brokers and financial planners don’t like indexed mutual funds for two basic reasons. For one thing, the funds are an affront to their ego because they discount their ability to assemble a winning portfolio, the very talent they’re trained and paid to offer. Also, index funds don’t make brokers and planners much money. If you have your money in an account that’s following the natural movements of the market—also called passive investing—you don’t need fancy managers to watch it for you and charge big bucks to do so.

Brin and Page were proud of the decision to prepare their staff for the Wall Street predation. And they were glad to have launched their company where and when they did. What took place in Mountain View that spring might have never happened had Google been born in Boston, Chicago, or New York, where much of the financial community remains at war with insurgency forces that first started gathering in San Francisco 35 years ago.

It all started in the early 1970s with a group of maverick investment professionals working at Wells Fargo bank. Using the vast new powers of quantitative analysis afforded by computer science, they gradually came to the conclusion that the traditional practices guiding institutional investing in America were, for the most part, not delivering on the promise of better-than-average returns. As a result, the fees that average Americans were paying brokers to engage in these practices were akin to highway robbery. Sure, some highly paid hotshot portfolio managers could occasionally put together a high-return fund. But generally speaking, trying to beat the market—also called active investing—was a fruitless venture.

The insurrection these mavericks would create eventually caught on and has spread beyond the Bay Area. But San Francisco remains ground zero of the democratizing challenge to America’s vast and lucrative investment industry. Under threat are the billions of dollars that mutual funds and brokers skim every year from often-unwary investors. And every person who has money to invest is affected, whether she’s patching together her own portfolio with a broker, saving for retirement or college, or just making small contributions each year to her 401K. If the movement succeeds, not only will more and more people have a lot more money in their pockets, but the personal investment industry will never look the same.

I was once a portfolio manager myself, and like the industry folks Google was protecting its employees from, I was certain I could outperform market averages and confident that I was worth the salary paid to do so. However, I left the investment business before this revolt began to brew. In the intervening years, I never stewarded my own investments as judiciously as I’d managed those of my former employers—Bank of America, Industrial Indemnity, and the Bechtel family. I was unhappy with the Wall Street firms I had been using, which had churned my account to make lots of money on the sales, and, despite instructions to the contrary, placed my money in their own funds and underwritings to make even more at my expense. So a couple of years ago, when it finally came time to get my own house in order, I knew I wanted help from an independent adviser, someone who was doing things differently from the big brokerage firms.

Eventually I found a small financial management firm in Sausalito called Aperio Group that, after only seven years in business, already had a stellar reputation. “Aperio” in Latin means “to make clear, to reveal the truth.” Indeed, truth-telling is key to Aperio’s mission, even if that means badmouthing its own industry in the process. One of the company’s founders, Patrick Geddes, aged 48, is a renegade from the top echelons of his field. For several years he served, first as director of quantitative research, then as CFO, at Morningstar, the nation’s leading company for researching and appraising mutual funds. But when he left, not only was he disenchanted with his own company’s corporate environment, he was also becoming uneasy with the moral underpinning of the entire industry. “Let’s be straight,” says Geddes in his soft-spoken but zealous way. “Being unethical is a good precondition for success in the financial business.”

His partner, a bright, high-energy Norwegian American named Paul Solli, 49, is another finance guy who didn’t have the gene for corporate culture. After graduating from Dartmouth’s business school, he tried investment banking but didn’t like it. He went out on his own, starting an investment advisory business, but says he flailed about, searching for a business model that would support his desire to “live deliberately” in the Thoreauvian manner.

Solli and Geddes consider themselves heirs to the Wells Fargo insurgency and, as such, part of a movement that includes academics, some institutional investors, a couple of large index fund companies, and a handful of small firms like their own that are dedicated to bringing the indexing philosophy to badly advised investors like myself. And unlike most mutual fund investment firms, which have $5 million and $10 million minimums, Aperio was willing to take on a messy six-figure portfolio.

Solli took one look at my unkempt collection of mut­ual funds and said, “You’re being robbed here.” He pointed to funds I had purchased from or through Putnam, Merrill Lynch, Dreyfus, and—yes—Charles Schwab (which referred me to Aperio) and asked, “Do you know that you’re paying these guys to do essentially nothing?” He carefully explained the many ingenious ways fund managers, brokers, and advisers had found to chip away at investors’ returns. Turns out that I, like more than 90 million other suckers who have put close to $9 trillion into mutual funds, was paying annual fees, commissions, and transaction costs well in excess of 2 percent a year on most of my mutual funds (see “What Are the Fees?” page 75). “Do you know what that adds up to?” Solli asked. “At the end of every 36 years, you will only have made half of what you could have, through no fault of your own. And these are fees you needn’t pay, and won’t, if you switch to index funds.”

All indexing calls for, Solli explains, is the selection of a particular stock market index—the Dow Jones Industrial Average, Standard and Poor’s (S&P) 500, the Russell 1000, or the broader Wilshire 5000—and the purchase of all its stocks and bonds in the exact proportions in which they exist in that index. In an actively managed fund, managers pick stocks they think will outperform a particular index. But the premise of indexing is that stock prices are generally an accurate reflection of a company’s worth at any given time, so there’s no point in trying to beat that price. The worth of a client’s investment goes up or down with the ebb and flow of the market, but the idea is that the market naturally tends to increase over time. Moreover, even if an index fund performed only as well as the expensively managed Merrill Lynch Large Cap mutual fund that was in my portfolio, I would earn more because of the lower fees. Stewarding this kind of investment does not require a staff of securities analysts working under a fund manager who makes $20 million a year. In fact, a desktop computer can do it while they sleep.

There are always exceptions, of course, Solli says, “a few funds that at any given moment outperform the indexes.” But over the years, he explains, their performances invariably decline, and their highly paid cover-boy managers slide into early obscurity, to be replaced by a new hotshot managing a different fund. If a mutual-fund investor is able to stay abreast of such changes, move their money around from fund to fund, and stay ahead of the averages (factoring in higher commissions and management fees) it will be by sheer luck, says Solli, who then offers me pretty much the same advice John Bogle and his colleagues offered Google. Sell the hyped but fee-laden funds in my portfolio and replace them with boring, low-cost funds like those offered by Bogle’s Vanguard.

It took Solli a couple more painful meetings and a few dozen trades to clean the parasites out of my account and reinvest the proceeds in index funds, the lifeblood of his business. Without exception, he moved me into funds that have outperformed the ones I was in, like the Vanguard REIT Index Fund, some Pimco bond and stock funds, and Artisan International. And he did it for an annual fee of .5 percent of money under management, saving me over a full percent in overall costs and a lot of taxes in the future. Then he did something I doubt any other financial manager would have done. He fired himself.

“You really don’t need me anymore,” he said, and closed my Aperio account that day, ending his fees, but not our relationship. I was curious. Who was this guy who was so open about the less-than-dignified ways of his own business? “You have to have lunch with my partner,” he said.

If Solli is an industry gadfly, Geddes, a modest, unassuming son of a United Church of Christ minister, is its chainsaw massacrer. “We work in the most overcompensated industry in the country,” Geddes admitted before the water was served, “and indexing threatens the revenue flow from managed funds to brokerage houses. That’s why you’ve been kept in the dark about it. This truly is the great secret shame of our business.

“The industry knows they are peddling bad products,” Geddes continued, “and a lot of people making the most money and getting the most prestige are doing so by gouging their customers.” And Geddes is quick to differentiate between “illegal theft”—the sort of industry scandals Spitzer has uncovered, such as illicit sales practices, undisclosed fees, kickbacks, and after-market trading—and “legal theft,” the stuff built into the cost of doing business that no attorney general can touch, but which in dollar amounts far exceeds investor losses to illegal activity.

Geddes wasn’t always full of such tough talk about the industry. Not that he had any qualms about speaking his mind; in fact, he was let go from Morningstar in 1996 for being openly critical of the company’s internal culture. “I still think of Morningstar as a potentially positive force in the industry,” he says. “But let’s just say they were weak at conflict management, especially at the senior levels.” It wasn’t until he took a freelance consulting job for Charles Schwab that he really saw the light about indexing.

“My job was to compile all the academic research on mutual funds, and that’s when it really became clear that active management doesn’t add any value,” he says. When he finished the project, Geddes started teaching a finance class through the University of California extension, where he started preaching his anti-industry gospel. “I had to be careful, because there were a lot of brokers in the class. I started noticing that some of them would get sort of irritated with me.”

Around this time is when he met Solli. Solli had a client, a doctor who was looking to learn about portfolio management and asked Solli what he thought of Geddes’s UC course. When Solli looked into it, he was bowled over. “Here was this guy who’d been CFO at Morningstar and had this incredible background, and I thought, what the hell is he doing at Berkeley teaching this course to guys like my client? This is too good to be true—I have to meet this guy.”

Slowly, inadvertently even, Aperio was born. But the fit was perfect. Geddes brought what he calls “the quant piece” to the table; Solli had the strategic vision. After a few months of brainstorming, they set out to see if a couple of guys who held themselves to high ethical standards could make it in the cutthroat financial industry.

And just how do these guys make money if they keep kicking out clients like me once they switch us into index funds, while alienating others with their irreverent critique of the entire mutual fund game? Geddes does take referrals from investment firms like Charles Schwab, which thrive on the sale of managed mutual funds. So why the rant? Isn’t he, too, in business to make a buck?

“Absolutely,” he admits. “I’m not Mother Teresa; I’m a capitalist who wants to succeed and make money. I just think the best way to do that is by building trust in a clientele by revealing to them honestly how this business works.”

Geddes also offers a customized version of indexing (on taxable returns) for wealthier clients, a service that requires an ongoing relationship and supplies Aperio a steadier source of income than my low-six-figure portfolio did. Aperio now has about $800 million under management. It’s a paltry sum compared with those of the big brokerage firms, which deal in the billions or even trillions, but Geddes is fine with that. “If I were making what I could be making in this business, I just wouldn’t like the person I’d have to be.” 

“San Francisco was the only place in the country where this could have happened,” says Bill Fouse, a jazz clarinetist in Marin County who was present when the first shots were fired in the investment rebellion. It was 1970, and revolution was in the air.

While hippies, dopesters, and antiwar radicals were filling the streets of America’s most tolerant city with rage, sweet smoke, and resistance, a quieter protest was brewing in the lofty, paneled offices of Wells Fargo. There, a young engineer named John Andrew “Mac” McQuown, Fouse (who like many musicians also happens to be a brilliant mathematician), and their self-described “skeptical, suspicious, careful, cautious, and slow-to-change” boss, James Vertin, were taking a hard look at the conventional wisdom that for a century had driven American portfolio management.

Bank trust departments across the country were staffed by portfolio managers who, as I did at the time, believed that they alone possessed the investment formula that would enrich and protect the security of their customers. “No one argued with that premise,” Fouse recalls.

But McQuown suspected they were pretty much all wrong. He had met Wells Fargo chairman Ransom Cook at an investment forum in San Jose, and at a later meeting at company headquarters, persuaded him that traditional portfolio management was merely an investment variation of the Great Man theory. “A great man picks stocks that go up. You keep him until his picks don’t work anymore and you search for another great man,” he told Cook. “The whole thing is a chance-driven process. It’s not systematic, and there’s lots we still don’t know about it and that needs study.” Cook offered McQuown a job at Wells and a generous budget to conduct research into the Great Man Theory and other schemes to beat the averages. McQuown accepted, and a few years later Fouse came on as well.

They couldn’t have been more different: Fouse, a diminutive, mild-mannered musician, and McQuown, a burly, boisterous Scot. The two were like oil and water—McQuown even tried to have Fouse fired at one point—but their boss, Vertin, was the one who really was in the hot seat.

“You have to understand, Vertin’s career was on the line,” Fouse recalls. “He was, after all, running a department full of portfolio managers and securities analysts whose mission was to outperform the market. Our thesis was that it couldn’t be done.” Proof of McQuown’s theory could lead to the end of an empire, in fact many empires. “The poor guy was under siege,” says Fouse. “It was a nerve-racking time.”

Vertin’s memory of those times is no less vivid. “Mac the knife was going to own this thing,” he once told a reporter. “I could just see the fin of the shark cutting through the water.” Eventually, the research McQuown and Fouse produced became so strong that Vertin could not ignore it. “In effect it said that almost everything that every trust department in America was doing was wrong,” says Fouse. “But Jim eventually accepted it, even knowing the consequences.”

In July 1971, the first index fund was created by McQuown and Fouse with a $6 million contribution from the Samsonite Luggage pension fund, which had been referred to Fouse by Bill Sharpe, who was already teaching at Stanford. It was Sharpe’s academic work in the 1960s that formed the theoretical underpinning of indexing and would later earn him the Nobel Prize. The small initial fund performed well, and institutional managers and their trustees took note.

By the end of the decade, Wells had completely renounced active management, had relieved most of its portfolio managers, and was offering only passive products to its trust department clients. And it had signed up the College Retirement Equities Fund (CREF), the largest pool of equity money in the world, and Harvard University, the largest educational endowment. By 1980 $10 billion had been invested nationwide in index funds; by 1990 that figure had risen to $270 billion, a third of which was held at Wells Fargo bank.

Eventually the department at Wells that handled index­ing merged with Nikko Securities and was later bought by Barclays Bank, which created the San Francisco subsidiary Barclays Global Investors. Its CEO, Patricia Dunn, the scandal-tinged former chairman of Hewlett-Packard who had worked for 20 years at Wells Fargo, had been heavily influenced by indexing. Running Barclays, she became the world’s largest manager of index funds.

Fouse, now retired in San Rafael, explains why all this could have happened only in San Francisco. “When we started our research, almost all the trust clients out here were individuals with small accounts. Anywhere else, particularly on the East Coast, trust departments handled very large institutions—pension funds, university endowments, that sort of thing. If Mellon, Chase, or Citibank had done this research and come to the same conclusion, they would have in effect been saying to their large, sophisticated, and very lucrative clientele: ‘We’ve been doing things wrong for a century or more.’ And thousands of very comfortable investment managers would have been out of work.”

But even in San Francisco, as in the country’s other financial centers, Fouse and McQuown’s findings were not a welcome development for brokers, portfolio managers, or anyone else who thrived on the industry’s high salaries and fees. As a result, the counterattack against indexing began to unfold. Fund managers denied that they had been gouging investors or that there was any conflict of interest in their profession. Workout gear appeared with the slogan “Beat the S&P 500,” and a Minneapolis-based firm, the Leuthold Group, distributed a large poster nationwide depicting the classic Uncle Sam character saying, “Index Funds Are UnAmerican,” implying that anyone who was not trying to beat the averages was nothing more than an unpatriotic wimp. (That poster still hangs on the office walls of many financial planners and fund managers.)

Savvy investment consumers, however, were apparently catching on. As they began to suspect that the famous fund managers they were reading about in Business Week and Money magazine were taking them for a ride, index funds grew in size and number. And actively managed funds shrank proportionately. Even some highly placed industry insiders started beating the drums for indexing. From her perch at Barclays, CEO Dunn gave a speech at a 2000 annual industry meeting in Chicago. As reported in Business Week at the time, she started out with some tongue-in-cheek comments about fund managers’ “rare gifts and genius,” and then shocked the crowd by going on to denounce the industry’s high fees. According to the article, she even included this zinger: “[Investment managers sell] for the price of a Picasso [what] routinely turns out to be paint-by-numbers sofa art.”

It’s not as if Merrill Lynch, Putnam, Dreyfus, et al, were being put out of business by this new consciousness, but like any industry threatened with bad ink, the financial community continued to strike back at every opportunity. In May 2003, Matthew Fink, president of the Investment Company Institute, a mutual funds trade association, told convening members that his industry was squeaky clean and has “succeeded because the interests of those who manage funds are well-aligned with the interests of those who invest in mutual funds.” At the same convention, Fink’s remarks were echoed by ICI vice chairman Paul Haaga Jr., who, in his keynote address, pronounced that “our strong tradition of integrity continues to unite us.” Indeed, integrity had been the theme of every ICI membership meeting in recent memory.

Haaga then attacked his industry’s critics, including former SEC chairmen, members of Congress, academics, journalists, even “a saint with his own statue” (John Bogle). “[They] have all weighed in about our perceived failing,” lamented Haaga. “It makes me wonder what life would be like if we’d actually done something wrong.”

He didn’t have long to wonder. Four months later, the nation’s first big mutual fund scandal broke when Eliot Spitzer brought civil actions against four major fund managers for allowing preferred investors to buy and sell shares on news or events that occurred after markets had closed. Spitzer compared the practice to “allowing betting on a horse race after the horses have crossed the finish line.” Multimillion dollar fines were issued against the firms, which were also required to compensate customers damaged by what were called market-timing practices.

The market-timing scandals alone are estimated to have cost fund investors about $4 billion, and other industry violations were uncovered after that. But now more experts are convinced that the amount pales in comparison to the tens of billions lost every year just to the fees and transaction costs by which mutual funds live and die. After the mutual fund scandals broke, Senator Peter Fitzgerald (R-Ill.) called a hearing before the Subcommittee on Financial Management, the Budget, and International Security, and said this in his opening statement: “The mutual fund industry is now the world’s largest skimming oper­ation—a $7 trillion trough from which fund managers, brokers, and other insiders are steadily siphoning off an excessive slice of the nation’s household, college, and retirement savings.”

No one running a university endowment, independent foundation, or pension fund could match his numbers during his tenure: over the last 21 years, chief investment officer David Swensen has averaged a 16 percent annual return on Yale University’s investment portfolio, which he built with everything from venture capital funds to timber. He’s been called one of the most talented investors in the world. But lately he’s becoming perhaps even more famous for his advice to individual investors, which he first offered in his 2005 book Unconventional Success. “Invest in nonprofit index funds,” he says unequivocally. “Your odds of beating the market in an actively managed fund are less than 1 in 100.”

And there’s more. A recent entry on the Motley Fool, the popular investment advice website, made the following blanket statement: “Buy an index fund. This is the most actionable, most mathematically supported, short-form investment advice ever.” As long as 10 years ago, in his annual letter to his shareholders, Warren Buffett advised both institutional and individual investors “that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.”

One would think, with that kind of advice floating about, that the whole country would by now be in index funds. But in the three decades since Wells Fargo kicked things off, only about 40 percent of institutional money and 15 percent of individuals’ money has been invested in index funds. So why is indexing catching on so slowly?

A big reason, according to Geddes, is that putting investors into index funds is simply not in the interest of the industry that sells securities. “They just won’t accept indexing’s minuscule fees,” he says. By now, most major brokerage firms offer index funds in addition to traditional mutual funds, but money managers typically don’t mention them at all. You usually have to ask about them yourself.

And it makes a certain kind of sense. If a naive investor calls a broker with $100,000 to invest, would the broker be likely to recommend the Vanguard 500 Index with its .19 percent annual fee, of which he receives nothing and collects but a small portion of his firm’s approximately $100 transaction fee? Or might he suggest the client buy Putnam’s Small Cap Growth Fund B Shares, which carry a 2.3 percent annual fee, 1 percent ($1,000) of which goes to him? And will he tell his client about the hidden transaction charges that further reduce the return on investment? It’s simply not to his advantage to do so.

It’s hard to find active fund managers who are willing to talk about these issues. I spoke to several, but no one was comfortable discussing the high cost of their practice, and few were willing to talk on the record. Ron Peyton, president and CEO of Callan Associates, a San Francisco–based institutional investment consulting firm, offered a list of advantages of active management, which essentially boiled down to the fact that it’s more fun. “They can raise and lower cash positions [read: buy and sell whatever stocks excite them at any given moment] and go into fixed-income or foreign securities [read: look for investments wherever they want].” I know from experience that he’s right, but it’s kind of beside the point.

The most forthright comments came from Baie Netzer, a research analyst in the Orinda office of Litman/Gregory Companies, a San Francisco–based investment management firm specializing in mutual funds. Netzer told me outright, “Eighty percent of active managers underperform the market. But we do believe that some managers add value, and those are the ones we look for.” Still, if you factor in fees and transaction costs, you have to wonder how much that remaining 20 percent would slip.

But even if the number of active managers who consistently beat the market is small, Stanford’s Bill Sharpe still sees a real need for their services. While he is a strong partisan of index funds, he is neither as surprised nor as concerned as Geddes that they don’t represent a higher proportion of overall investment. “If you’d told me 35 years ago that indexing would one day represent 40 and 15 percent of investments, I would have asked you what you were smoking,” says the personable Sharpe with his characteristic chuckle. If everyone invested in index funds, he points out, the market itself would die a natural death. “We need active managers,” he says. “It’s buyers and sellers who keep prices moving, which is what drives the market. Index funds simply reflect what the market is doing.” He believes we’d even start to see a decline in market efficiency if index funds rose to 50 percent of total investments.

Does this mean that, when we look at mutual funds, half our options would still be burdened with unconscionable fees and hidden costs? Hopefully not. With the call getting louder from financial experts and industry watchers to reform and regulate mutual funds, it’s hard to believe that the fee system can last much longer, particularly with strong Republican voices like Peter Fitzgerald’s in Congress.

But while Wall Street has considerable soul-searching to do, full blame for the gouging of naive investors does not lie with the investment management industry alone. There is an innate cultural imperative in this country to beat the odds, to do better than the Joneses. In some ways the Leuthold Group was right when it said that index funds are un-American. It’s simply difficult for most of us to accept average returns on our money, or on anything for that matter. The ultimate example of the nation’s attraction to the big score is, of course, right now under our noses. If on August 18, 2004, you had invested $100,000 in Google, that stock would now be worth $550,000. So while evidence mounts that it’s almost impossible to hit the jackpot with cost-burdened mutual funds—and that for every Google, there’s an Enron—we simply refuse to stop trying.

Perhaps Solli and Geddes had it right when they selected the name for their company. The real purpose of this whole revolution is “to make things clear, to reveal the truth.” As Solli puts it, “As long as people know what they’re dealing with, they can invest their money with full awareness. Whether it’s playing it safe with indexing or taking a flier on a hedge fund—at least they’re the ones in control.” 

What about hedge funds?

So, the bulk of your savings is safely tucked away in a sensible index fund or two. Why not set aside 5 or 10 percent and take a chance on the post-dot-com insider’s investment craze?

It’s certainly tempting. The most high-profile manager, Edward “Eddie” Lampert, has reportedly earned investors in his ESL Investments hedge fund an average return of 29 percent a year since 1988. After successfully buying Kmart with his investors’ money, Lampert turned the merged retailer around and in 2004 personally took home $1 billion.

Another of the world’s most successful funds is San Francisco’s Farallon Capital Management, which has amassed assets of $12.5 billion over two decades by delivering post-fee returns of 17 percent a year on its flagship fund, according to a 2005 article in Institutional Investor magazine. Forty-eight-year-old Tom Steyer’s investors include universities, pension funds, and individuals; at any one time, the magazine said, the managers there might be nursing 300 to 500 investments in everything from real estate—Farallon recently bought into the Mission Bay development—to international finance.

But the road from Wall Street is scattered with the bones of bitter hedge fund investors. Since 1995, more than 1,800 known hedge funds have folded completely. In the last few months alone, two large funds—MotherRock and Amaranth Advisors—have gone south.

The high failure rate should come as no surprise, given how hedge funds operate. There’s no working model, so they vary widely, but the basic idea is that they rely on risky, untraditional investment strategies—ranging from arbitrage to taking over floundering companies, as Lampert did—to make big money fast. The industry is largely unregulated, and most funds involve private partnerships that operate in strict confidence.

They’re also extremely expensive, which limits their user profile. Though fees average just 2 percent of the investment, the same as in a typical Silicon Valley venture fund, managers also withhold a sizable chunk (averaging 20 percent, but sometimes going as high as 50 percent) of whatever profit the funds produce. The typical minimum required to get into a fund is between $1 million and $5 million.

The SEC periodically considers applying minimal rules to hedge funds, such as prohibiting pension funds from investing in them. Last October, the call for reform came from Congress when Senator Charles Grassley, chairman of the Senate Finance Committee, asked administration officials and Congress members for their views on how to improve hedge fund transparency. But so far, the hedge fund lobby has managed to keep all regulators at bay. —Mark Dowie

What are the fees?

Every fee that a mutual fund charges should be outlined somewhere in its prospectus. But many people don’t even think to look for it, and you can’t necessarily trust your broker to bring it up. “The first step is simply getting people to pay attention to fees,” says Patrick Geddes, chief investment officer of Aperio Group, in Sausalito. Hang tough in asking your broker for the full breakdown of what those fees will cost you each year. If you need help, the National Association of Securities Dealers has a useful tool for computing fees, called the Mutual Fund Expense Analyzer, on its website (http://apps.nasd.com/investor_Information/ea/nasd/mfetf.aspx). You put in the name of the fund, the amount invested, the rate of return, and the length of time you’ve had the fund, and it tells you exactly how much you’ve been charged.

You can also compare past fees for different funds before you invest. For example, if you had put $100,000 into Putnam’s Small Cap Growth Fund Class B Shares and held it for the past five years, you would find that Putnam would have charged you $13,809 in fees during that time. Vanguard’s Total Stock Market Index Fund, on the other hand, would have charged only $1,165 for the exact same investment. —Byron Perry

Which index fund?

In some ways indexing is a no-brainer: invest your money and let it do its thing. Still, there are varieties. Aperio Group’s Patrick Geddes pushes two rules in choosing a fund: “The broader the better, and the cheaper the better.” When you invest in a broad domestic fund, you’re investing in the entire U.S. economy, or “owning capitalism,” as it were, Geddes says. The Vanguard Total Stock Market Index Fund, which represents about 99.5 percent of U.S. common stocks, is a great one to start with. If you choose a narrower fund, like a tech or energy index, you’re basically just speculating (though you’ll most likely still fare better than if you tried to pick the next Google). Narrow index funds also typically command higher fees. With indexing gaining in popularity, everyone’s trying to get into the game and sneak in unnecessarily high fees. Geddes says there’s no good reason to pay more than .19 percent. —Byron Perry

 

Learn How To Make Money

Explained simply: READ EVERYTHING ABOUT THE 2008 WALL STREET CRASH

 

ALERT: all markets today are subject to manipulation for private gain.

"ON A LONG ENOUGH TIMELINE, THE SURVIVAL RATE FOR EVERYONE DROPS TO ZERO"

1) Allen Greenspan convienently and simply admitted that he "failed to come to grips with the power of popular culture and greed in the delusions of crowds as part of the "economic" model".

1a) Just to put the US trade deficit with the People's Republic of China in perspective. America's Growing Trade Deficit Is Selling The Nation Out From Under Us. Here's A Way To Fix The Problem--And We Need To Do It Now. (FORTUNE Magazine) By Warren E. Buffett Carol J. Loomis November 10, 2003 The trade deficit with the PRC was about $227 billion in 2009, and Microsoft's market cap is about $225 billion. So every year, the USA is doing the equivalent of packing Microsoft into shipping containers—every rack of servers, every line of code, every partner contract, every patent—and loading the containers onto a ship bound for the PRC.

2) Goldman Sachs Dominated Fraud: computerized front running using high-frequency trading programs. Wall Street commentator Max Keiser who invented and patented the program calls it rigged market capitalism: all markets today are subject to manipulation for private gain. High Frequency Trading (HFT) or black box trading, automated program trading uses high-speed computers governed by complex algorithms (instructions to the computer) to analyze data and transact orders in massive quantities at very high speeds.

2013 How the Robots Lost: High-Frequency Trading's Rise and Fall

3) S.Korea suspends Deutsche Bank brokerage unit on stock manipulation February 24, 2011

Gorden Geeko:
I don't throw darts at a board.
I bet on sure things. Read Sun-tzu,
The Art of War.
Every battle is won before it is ever fought.

Saturday, July 25, 2009 HFT And Goldman Sachs Boiling Point: NYT And Max Keiser
I want to know. Where are the Nightly News Network Reporters? 3000 people work at CNBC. Why aren't they reporting this information to us! This is why we use the net, which is the dominant paradigm for real information.

Gordon Gekko: When I get a hold of the son of a bitch who leaked this, I'm gonna tear his eyeballs out and I'm gonna suck his fucking skull.

 

"Trustafarian" Jamie Johnson son of Johnson and Johnson exposes the 1% of private family money that controls the U.S. Economy

Gordon Gekko: If you're not inside, you're *outside*!

 

Gordon Gekko: You're walking around blind without a cane, pal. A fool and his money are lucky enough to get together in the first place.

 

 

If you are reading this on the Educational CyberPlayGround - You are not a player!
Is Wall Street Picking our Pockets?

HFT: Even the NY Stock Exchange itself is acknowledging the HFT media campaign

 

BANKING SECRETS
Tax havens

 

"Once you become part of senior management," he says, "and gain international experience, as I did, then you are part of the inner circle – and things become much clearer. You are part of the plot. You know what the real products and service are, and why they are so expensive. It should be no surprise that the main product is secrecy … Crimes are committed and lies spread in order to protect this secrecy." "My understanding is that my client's attempts to get the banks to act over various complaints he made came to nothing internally," says Elmer's lawyer, Jack Blum, one of America's leading experts in tracking offshore money. "Neither would the Swiss courts act on his complaints. That's why he went to WikiLeaks."
Swiss whistleblower Rudolf Elmer plans to hand over offshore banking secrets of the rich and famous to WikiLeaks. “Well-known pillars of society will hold investment portfolios and may include houses, trading companies, artwork, yachts, jewellery, horses, and so on.” Blow the whistle on what they see as unprofessional, immoral and even potentially criminal activity by powerful international financial institutions.
Along with the City of London and Wall Street, Switzerland is a fortress of banking and financial services, but famously secretive and expert in the concealment of wealth from all over the world for tax evasion and other extra-legal purposes. The list includes "high net worth individuals", multinational conglomerates and financial institutions – hedge funds". They are said to be "using secrecy as a screen to hide behind in order to avoid paying tax". They come from the US, Britain, Germany, Austria and Asia – "from all over".
Clients include "business people, politicians, people who have made their living in the arts and multinational conglomerates – from both sides of the Atlantic". "What I am objecting to is not one particular bank, but a system of structures," he told the Observer. "I have worked for major banks other than Julius Baer, and the one thing on which I am absolutely clear is that the banks know, and the big boys know, that money is being secreted away for tax-evasion purposes, and other things such as money-laundering – although these cases involve tax evasion." Elmer says his documents include all the back-up data held on Julius Baer's computer server in the Caymans at the time he was sacked, including accounts, correspondence, memos and resolutions dealing with 114 trusts, 80 companies, 60 funds and 1,330 individuals.
The data was later seen by the Guardian, which found "details of numerous trusts in which wealthy people have placed capital. This allows them lawfully to avoid paying tax on profits, because legally it belongs to the trust"; the data also "[appeared] to include several cases where wealthy individuals sought to use trust money as though it were their own".

The documents include details of numerous trusts in which wealthy people have placed capital. This allows them lawfully to avoid paying tax on profits, because legally it belongs to the trust. In the same way, the capital can pass to heirs free of inheritance tax. The trust itself pays no tax, as a Caymans resident. The trustees can distribute money to the trust's beneficiaries but it is essential the trustees exercise their own control over the trust's assets. If not, the assets become once more the property of the person who sets up the trust- and may be taxed.

INTERNATIONAL BANKERS
299 Park Avenue 17th Floor New York, NY 10171
Tel: (212) 421-1611 Fax: (212) 421-1119 Email: iib@iib.org

 

The Secret of Banking

Print your own money certificates

371 Swiss banks stand accused of collaborating with the Nazis during World War II.
This was suspected at the time by by U.S. Secretary of Treasury Henry Morgenthau, who began investigating this collaboration. He found the Swiss were not alone. His archives reveal that both British and American bankers continued to do business with Hitler, even as Germany was invading Europe and bombing London.
This investigative film shows in detail the roles played by the Anglo-German banking clique. Key members of the Bank of England together with their German counterparts established the BIS, the Bank for International Settlement, which laundered the plundered gold of Europe. On its board were key Nazis such as Walther Funk and Hjalamar Schact The president of BIS was an American, Thomas McKittrick, who readily socialized with leading Nazis. Not only the BIS, but other allied banks worked hand in hand with the Nazis. One of the biggest American banks kept a branch open in Occupied Paris and, with full knowledge of the managers in the U.S., froze the accounts of French Jews. Deprived of money to escape France, many ended up in death camps.
When Pres. Roosevelt died in April 1945, Morganthau lost his protector and his crusade against the banks came to an end. He was further weakened when men in his department were accused of being Communists during the McCarthy era. This incredible story contains interviews with surviving members of banking families and Morganthaus investigative team as well as newly found archive material.

 

 

“A gang armed with guns can easily steal thousands. A gang armed with pens can just as easily steal millions - and the prison terms are shorter.”

Lawyers and accountants make up a tenth of the 52,000 population of the Cayman Islands, which are English-speaking, politically stable, in the US time zone, and with zero taxes. This British Overseas Territory with palm trees and luxury hotels, measuring less than 100 square miles, is the fifth largest financial centre on the planet. Tax Justice Network campaigners estimate that tax havens collectively hold more than $11.5 trillion. Some comes from tax avoidance. Each year the US may lose a total of about $100bn in potential taxes, France about $50bn, Germany $30bn, the UK between $20bn and $80bn - and the developing world loses up to $800bn in stolen capital. But in the Caymans, a prison sentence awaits anyone who discloses bank information.

WHISTLEBLOWERS
This is the Cover Story for this January/February 2011 issue of the magazine, which goes out in hard copy to roughly 90,000 Chartered Financial Analysts across the globe.
The stories of whistleblowers rarely have a happy ending, primarily because the companies they report on do not implode but continue with their poor behavior and often prosper. Elmer's advice to anyone considering blowing the whistle is to plan ahead. “You have to have a very strategic approach,” he says. “You should not think about the moment of the whistleblowing but what happens to your family and friends and know that your lifestyle will change dramatically.” Moreover, he adds, “Financially, you have to be certain you can survive. In the United States, the False Claims Act, which was strengthened in 1986, covers cases in which bogus or inflated claims are filed for the payment of federal/government money (e.g., under a federal contract or federally funded program). The False Claims Act contains whistleblower provisions called “qui tam,” which allow citizens with evidence of such fraud to sue and recover the stolen money. As a reward for blowing the whistle, whistleblowers can recoup between 15 percent and 25 percent of monies recovered. But the False Claims Act doesn't cover tax fraud. A separate U.S. Internal Revenue Service whistleblower rule allows for those who expose tax evaders to be awarded a similar 15–25 percent of the amount recovered.
But there's a catch for would-be whistleblowers. Under the False Claims Act, although files are sealed in U.S. federal court for seven years, the whistleblower's identity eventually will be made public. Currently, the outcome for Dodd–Frank provisions remains to be determined. It's unclear whether the SEC will have any mechanism for disclosing the name(s) of whistleblowers or might be forced to provide such disclosures.

Kaupthing Icelandic Banking: This document contains a list of 28167 claims, totally 40 billion euro, lodged against the failed Icelandic bank Kaupthing Bank hf. The document is important because it reveals billions in cash, bonds and other property held with Kaupthing by wealthy investors and asset hiders from around the world, including Goldman Sachs, Deutsche Bank, Credit Suisse, Morgan Stanly, Exista, Barclays, Commerzbank AG and a vast number of others.

2008 Tax haven banks in Liechtenstein and Switzerland. Swiss bank UBS and its alleged efforts to help wealthy Americans hide their money from the IRS through shell companies in Liechtenstein. Liechtenstein's veil of secrecy was pierced five years ago when the disgruntled technician, Kieber, downloaded the names of foreign citizens connected to the secret accounts. Arrests of several prominent CEO's on charges that had evaded millions of dollars in taxes. Kieber's Washington lawyer, Jack Blum, says Kieber should be considered a whistleblower and a hero, not a thief, for revealing how the super rich hid billions of dollars using the Liechtenstein bank. A former UBS private banker, Bradley Birkenfeld, has agreed to a plea deal and is reported to be cooperating with US authorities in bring charges against American citizens on tax evasion charges. The Liechtenstein bank, LGT, is owned by the tiny country's ruling family led by Prince Hans-Adam II. http://abcnews.go.com/Blotter/story?id=5378080&page=1

2011 Banker Rudolf Elmer and whistle blower former employee of Swiss bank Julius Bär. "As a banker, I have the right to stand up if something is wrong [...] I am against the system. I know how the system works and I know the day-to-day business. I wanted to let society know how this system works because it's damaging society". He added that he had tried to approach universities with his data but that they had not responded. Likewise, attempts to attract the attention of the Swiss media had failed, with Elmer being dismissed as "a paranoid person, a mentally ill person". Elmer began to lose hope, "but then a friend of mine told me: 'There's WikiLeaks.' I looked at it and thought: 'That's the only hope I have to [let] society know what's going on.'"

1/19/2011 JPMorgan Chase and Morgan Stanley won approval from Chinese regulators to form joint ventures in the country, potentially giving them a bigger role in China's booming securities business. The two firms are the latest global banks to win the right to team up with local players to underwrite stock and bond offerings in China. Eventually, the joint ventures will be able to sell stocks to Chinese citizens and institutions.

Commerce WithOUT
Conscience

Ethics vs. Institutional Corruption

 

Gordon Gekko
"The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It's bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you're not naive enough to think we're living in a democracy, are you buddy? It's the free market. And you're a part of it. You've got that killer instinct. Stick around pal, I've still got a lot to teach you."

After 11 hours of accusations by members of the Senate Subcommittee on Permanent Investigations, people close to the bank said Goldman is mulling closing the SEC fraud-case chapter on the belief the firm's reputation, already damaged, might not endure a street fight with the Wall Street watchdog. The SEC on April 16 announced that it had sued the Wall Street giant on charges it misled investors about the details of a mortgage-securities deal in which billionaire hedge fund king John Paulson influenced some of the collateral used in the transaction and then bet against its performance. The SEC also sued Goldman mortgage trader Fabrice Tourre, who's been accused of concealing Paulson's involvement when marketing the deal to investors. The SEC filed its charges after months of discussions with the bank over the claims. However, sources said the agency pulled the trigger on suing the bank out of frustration for what it saw as Goldman dragging its feet toward a resolution.

 

HARVARD GRADUATES: CARL LEVIN VS BLANKFEIN
2/28/10 Carl Levin, chairman of the Senate's Permanent Subcommittee on Investigations, pummeled Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc., Both are Harvard Law School Graduates.
Levin worked as an assistant attorney general in Michigan and general counsel for the Michigan Civil Rights Commission before being elected to the Detroit City Council and then winning a seat in the Senate in 1978. He is chairman of the Armed Services Committee as well as the investigations subcommittee and has led probes into unfair credit card practices, money laundering and the collapse of Enron Corp. Last year he made $174,000.
Carl Levin said. “You shouldn't be selling crap. You shouldn't be betting against your own customers.” “Your people think it's a piece of crap and go out and sell it,” said Levin, his reading glasses pushed to the tip of his nose, referring to Goldman Sachs e-mails in which traders spoke of selling securities to customers. “We're talking about betting against the very thing that you're selling, without disclosing that to your client.” “What do you think about your own people selling securities they think are crap?” the senator asked.

ALERT Goldman "Risk Factors."
The mere materiality of undisclosed information doesn't create liability for its omission; as opposed to a misrepresentation, the culpability of an omission depends first on a duty to disclose.

However: Section 11 of the 33 Act has been held to require that the issuer disclose information that might tend to deter an investor from purchasing. As I understand it, an issuer who doesn't comply with that obligation is liable, even if it admits that it hasn't complied. In other words, you can't just warn prospective purchasers that you've failed to disclose material information - you have to disclose. And, again IMO, it seems hard to argue that purchasers would not have wanted to know that the guy who secretly assembled the portfolio was shorting it.

EVERYTHING ABOUT THE 2008 WALL STREET CRASH
which is the result of the The Commodities Future Modernization Act that allowed Toxic Assets aka "Credit Default Swaps", BIG OIL and BANKS and ENTIRE EXCHANGES to be removed from Government Purview. Plus Lax oversight by Gov't agencies and deregulation which produced the disaster on wall street. Contributions to Congress Campaigns pays them off. They are paid not to look! That is how this happens. Congress wasn't protecting the public they were helping the tax payer get ripped off.

So we are looking at a distortion of the process. The goldrush mentality of Society's Parasites (The Speculators. Why Banks and S&Ls went Bankrupt along with the Hedge Funds, the Trilateral Commission Bankers, the Big 4 Credit Rating Agencies Standard & Poor's, Moody's Corporation, and Fitch Ratings auditing firms are complicit in the malaise now sickening the global financial services sector. Topped off by another Trilateral Commission member and Federal Reserve Chairman Greenspan who admitted he didn't figure into his model that people who weren't supervised would steal! Greenspan convienently and simply admits that he failed to come to grips with the power of popular culture and greed in the delusions of crowds as part of the "economic" model.

Gordon Gekko: Greed is good

Lloyd Blankfein Goldman CEO is a sociopath. Goldman Sachs was sued on April 16, 2010, by the U.S. Securities and Exchange Commissionand is accused of fraudulently selling collateralized debt obligations tied to subprime mortgages. With Blankfein at the helm Goldman has also been criticized "by lawmakers and pundits for issues from its pay practices to its role in helping Greece mask the size of its debts."[8] Blankfein testified before Congress in April of 2010 at a hearing of the Senate Permanent Subcommittee on Investigations.

Movie Wall Street Lou Mannheim: "Man looks in the abyss, there's nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss."

Basic conclusions about Entrepreneurs: Panel Study of Entrepreneurial Dynamics [source]

1. seem to worry equally about financial autonomy and/or a feeling of being motivated in their jobs.
2. are worse at coming up with reasons they might fail
3. don't care what other people think about them.

If baseball owners and players had only played the win:win game, but the integrity of the sport itself was tarnished

1. ... that would have been a win : win : lose
2. ... And without the Third Win, society will be, at some level, damaged.

PERILS OF THE "BOTTOM LINE" MODEL

1. "Bottom Line" model where the ONLY thing that appears to matter is the money at the end of the day. Do you think MONEY is all that matters and HOW you make it is irrelevant?
2. Successful businesses do not care about being "better people they want to be a RICHER people. Does Money Equal Happiness?
3. See the Research on Happiness - Continuous register of scientific research on subjective appreciation of life.
   World Database On Happiness
4. Mr. Schachter wrote a research note, which suggests that he still doesn't quite get the concept of serving customers first, and worrying about revenues later"
5. You say you want a revolution
   Well, you know
   We all want to change the world
   You tell me that it's evolution
   Well, you know
   We all want to change the world

 

The Shareholder Value Trap

Can a public company satisfy shortsighted Wall Street investors looking for the next quarterly return and still build a company directed by long-term strategies? Some see the conflict in stark terms. You can build a company that serves customers or build a company that serves shareholders, but you can't easily serve both constituencies well.

2004 - In seeking venture capital investment, however, a company is hungry not just for cash but also for the venture firm's “reputation and access to a network of relationships – with customers, suppliers, investments bankers and other important constituents in the universe that the entrepreneur cares about,” Professor Hsu says. This may not be a startling insight to technology entrepreneurs who are familiar with venture capitalists. What Hsu's paper does, however, is provide “a scientific measurement” of the magnitude of this phenomenon. He found that offers from more reputable venture capitalists are three times more likely to be accepted by entrepreneurial companies and that, on average, these favored investors acquire start-up equity in the companies at a 10-14% discount. What Hsu discovered is that “a lot of money is left on the table” by the companies, both in absolute terms and as a percentage of the pre-money valuation accepted by the companies. Less than half of the firms surveyed accepted their best financial offer. High-reputation VCs primarily syndicate with other high-reputation VCs." Affiliating with the right venture capital partner can certify the merits of a company to other parties, such as other investors.” These investors typically invest between $50,000 and $50,000,000 in new ventures. Review each site to determine what each firm likes to invest in. Source registration required.

• The Five Most Common Lies in Business
• Top 10 lies of  Engineers
• Top 10 lies of Marketers
• The Top 10 lies of Venture Capitalists
• The Top 10 lies of Entrepreneurs

Startup Company Valuation Calculator
This is an educational and humorous multiple-choice quiz for estimating the value of an early-stage company.

Brand Value: A brand's value is simply about the extent to which it can sell its goods and services at a premium price. Many marketers mistakenly attribute product quality, styling, service and reliability to a brand name's value, when all brand value ultimately comes down to is pricing power. Brand name value is the “most sustainable competitive advantage known to business.” The value of brand names, is a mix of some advertising, a lot of luck, and being in the right place at the right time.”Branding is an illusion an emotion the intangible emotional connections people feel they have with the brand. Nurture your brand's image, “the illusion” as, the image can be more valuable than the product itself. ~ Damodaran

 

Old-Boy Network's Power Exposed

 

KarmaBank.com
Activists Attack Companies With Revenue Depleting Boycotts - Hedge Funds Attack These Companies With Stock Crushing Short-Sales
Washington Post: "The Internet allows people to swarm and hit a company where it hurts most -- in their stock price."

Soon it could take more than a secret handshake to swing boards' decisions.
Nature Science Update 4 October 2002 PHILIP BALL http://www.nature.com/nsu/021001/021001-12.html
Cliques of well-connected businessmen can easily corrupt or distort corporate board decisions, but now a team of scientists say they can assess how much power old-boy networks have over boardroom meetings. "A well-connected lobby of a minority of directors can drive the decision of the board," say Stefano Battiston of the Ecole Normale Supérieure in Paris and co-workers. But they think that it is possible to predict the chances that a board will agree with the opinion of such a lobby. If this is so, the power of the lobby can be assessed and the changes needed to break its dominance identified. It all depends, say the researchers, on how many members of a board also sit together on other boards. It's a common situation. Almost 100 years ago Louis Brandeis, a judge in the US Supreme Court, spoke of a "financial oligarchy controlling the business of the country". Not much has changed. Directors and board members of large companies form a kind of social network in which many individuals sit with at least one other person on more than one corporate board.

"They Rule"

THEY RULE are the board members of Fortune 100 companies, and you can use this site to see the relationships between these companies. Click on "Add Company" and select a favorite, then click on the board table's "plus" sign and select "Expand" to see the names of that company's board of directors. Next, click on a board member's briefcase -- let's try Sam Nunn -- and select "Expand" again to view other companies on whose board that person sits. (Nunn also sits on the boards of General Electric, Texaco, and Dell Computers.) You can also click on "Load Map" to see the connections that others have suggested. Did you know that there are 72 guys named "John" on the boards of Fortune 100 companies? Or how few steps there are between Microsoft and Hewlett-Packard? Open Secrets

U.S. Sage Attacks Executive Greed
From Abigail Rayner in Omaha, Nebraska
http://www.timesonline.co.uk/article/0,,5-669779,00.html

WARREN BUFFETT, the US investor whose folksy style masks one of the shrewdest minds in corporate America, used the annual gathering of his Berkshire Hathaway vehicle to launch a fierce attack on US executive greed and President Bush¹s planned tax cuts.
The shareholder meeting in Mr Buffett¹s home town of Omaha, Nebraska, which attracts some 14,000 "Buffeteers", is dubbed the "Woodstock for Capitalists" and is a fixture in the investment calendar. But this year¹s gathering at times seemed more like an antiglobalisation rally.
The second richest man in the world, Mr Buffett, known as the "Sage of Omaha", criticized plans for tax cuts that he said were designed to fleece the poor and reward the rich.
"I am not for the Bush plan. It screams of injustice. The main beneficiaries will be people like me and Charlie," he said, referring to the Berkshire Hathaway vice-chairman Charlie Munger. Mr Buffett said the tax plan was equivalent to "us giving a lesser percentage of our incomes to Washington than the people working in our shoe factories".
He called on investors to rise up and revolt over colossal executive pay packages, saying in the past 20 years there had been "an enormous disparity in the rates of compensation between people at the top and people at the bottom, and a disconnect between people at the top and the shareowners who give them the money.
"Arise shareholders," he concluded, raising both palms skyward. Famed for his integrity and modest lifestyle, Mr Buffett paid himself $100,000 (£62,000) in salary and a further $300,000 in bonuses last year. He still lives in the grey stucco house he bought in 1956 for $31,500.
Berkshire Hathaway, the insurance-to-candy conglomerate that he chairs, would report record operating profits of $1.7 billion in the first quarter, benefiting from the strength of the insurance sector, he said. This was double the $818 million reported for the first three months of 2001.
Mr Buffett reported a "soft" performance of Berkshire¹s consumer businesses, citing weak consumer spending power, which he claimed was not fairly reflected in the figures for US gross domestic product.
Mr Buffett said Berkshire had accumulated investable cash or "float" of $42.5 billion, up from about $37 billion a year ago. The conglomerate owns a diverse range of companies including Geico, the sixth largest auto insurer in the US, and General Re, a leading reinsurer.
Last Friday the company announced plans to buy McLane, a wholesale grocery distributor owned by Wal-Mart, for $1.5 billion.
When asked about the increase in dubious litigation in the US, Mr Buffett acknowledged the problem but seemed more concerned about the growing number of plaintiffs with a genuine grievance against a US corporation.

resources

 

 

Not for Profit isn't Against Profit, but exactly the opposite is true.
"If you choose to work in the nonprofit sector, you're not taking a vow of poverty, but you are saying you're motivated by something besides how do I make the most possible money," said John Vogel, a professor of nonprofit management at Dartmouth College's Tuck School of Business. "The chief executive officer's salary does send a signal. It does say what kind of organization you are, what you value, what you care about."

How to Recruit Smart People
Lifestyle proclivities represent a profound new force in the economy and life of America. How to keep members of the creative class: a fast-growing, highly educated, and well-paid segment of the workforce on whose efforts corporate profits and economic growth increasingly depend. Members of the creative class do a wide variety of work in a wide variety of industries---from technology to entertainment, journalism to finance, high-end manufacturing to the arts. They do not consciously think of themselves as a class. Yet they share a common ethos that values creativity, individuality, difference, and merit. Find Large Cities Creativity Rankings.

Competitive Intelligence - A Selective Resource Guide By Sabrina I. Pacifici and Donna Cavallini

Small Business Loans
Fast Upfront can help you get money for your business. We offer Small Business Loans and Business Cash Advances based on your future credit card receivables. This is similar to an unsecured loan that is given out even if you have bad credit.

Leadership Is Confusing as Hell

Definition of Crowd Sourcing
The act of taking a job traditionally performed by an employee and outsourcing it to an undefined group of people on a project-by-project basis, in the form of an open call. Firms wishing to follow this model could encourage employees to set up a company with 10 or more colleagues, and buy back their services as and when needed.

Do the right thing.
It will gratify some people and astonish the rest
~ Samuel Clemens

 

How to Make Money on the Net by Chris Brogan

• Grow bigger ears (listening) – the best way I've found to help people make money via the web is to “listen at the point of need.” The idea is that people are offering up their interests and requests and desires via the social web every day. If you have what they need, there are opportunities to get into the selling cycle on the spot, instead of waiting.
• Be protective of your community – this is how Oprah succeeded. She grew a community around content that was helpful to the people consuming it, and then she attracted sponsors who wanted access to those people. She then stayed fiercely in between the two groups, making sure her community was always protected, and that sponsors had access on her terms only. Own the relationship, own the money.
• Add more value than promotion – selling is often heavy-handed and based on wanting to close. The real winners are relationship-minded people who make not only the first sale, but all the subsequent sales thereafter. By giving your community much more value (more content, more things they can use) than just promoting your stuff, you win longer term sales relationships.
• Promote and recognize others – in selling and marketing, we talk too much about ourselves. People want to be seen and recognized. Use your platform to point out the good stuff that would appeal to the rest of your community. Mention them. Talk about your customers more than you talk about yourselves.
• Be clear on your ask – when you finally have a hard ask, a request for a sale, then be very clear about it. Don't ever sidle up to the sale. Never let there be a confusion between your goodwill efforts and your direct need for a sale. Never flinch about it, and never make it a mushy mix of community warmth and indirect sales requests. Just like relationships, short and clear is better than long and convoluted.

 

THE SCIENCE
OF HAPPINESS

 

The Science of Happiness By Mike Rudin

[... Scientists say they can actually measure happiness. Neuroscientists are measuring pleasure. They suggest that happiness is more than a vague concept or mood; it is real.

Matthew McConaughey is Right: Science Does Prove the Value of Gratitude
He crossed the streams of science and religion. Specifically, after thanking God, McConaughey added that "He," with the super big capital H, "has shown me that it's a scientific fact that gratitude reciprocates." What is McConaughey talking about?
What's the payoff of feeling grateful, of "paying it forward," and of helping out those who help you? The research suggests more hope and optimism, a better ability to manage stress, a tendency to exercise more and even sleeping better. And while not all of us are as naturally adept at feeling grateful, the research also suggests there are interventions you can do to turn your life on a more thankful path: Simply writing down the things you're thankful for, on a regular basis, seems to bring on these benefits.

What makes us happy?

According to psychologist Professor Ed Diener there is no one key to happiness but a set of ingredients that are vital.

• First, family and friends are crucial - the wider and deeper the relationships with those around you the better.
• It is even suggested that friendship can ward off germs. Our brains control many of the mechanisms in our bodies which are responsible for disease.
• Just as stress can trigger ill health, it is thought that friendship and happiness can have a protective effect. According to happiness research, friendship has a much bigger effect on average on happiness than a typical person's income itself.
• {England} One economist, Professor Oswald at Warwick University, has a formula to work out how much extra cash we would need to make up for not having friends. The answer is 50,000.
• Marriage also seems to be very important. According to research the effect of marriage adds an average seven years to the life of a man and something like four for a woman.
• The second vital ingredient is having meaning in life, a belief in something bigger than yourself - from religion, spirituality or a philosophy of life.
• The third element is having goals embedded in your long term values that you're working for, but also that you find enjoyable.

Psychologists argue that we need to find fulfillment through having goals that are interesting to work on and which use our strengths and abilities.

Measuring Happiness
 

The leading American psychologist Professor Ed Diener from the University of Illinois, says that the science of happiness is based on one straightforward idea:
"It may sound silly but we ask people 'How happy are you 1-7, 1-10? "And the interesting thing is that produces real answers that are valid, they're not perfect but they're valid and they predict all sorts of real things in their lives."
One type of measurement even tries to record people's levels of happiness throughout the day wherever they are. Ecological momentary assessment uses hand held computers. The person being quizzed is bleeped and then taken through a questionnaire.
"The measures are not perfect yet I think they are in many ways as good as the measures economists use," said Professor Diener.
It is a remarkable claim. Simply by asking people, we have a measure of happiness that is as good as the economists' measure of poverty or growth.
And if true, governments could be judged by how happy they make us.
An adviser to the Prime Minister, David Halpern, told us that within the next 10 years the government would be measured against how happy it made everybody.

Power of happiness

 

 

NYT $$ But Will Money Make You Happy? August 7, 2010
http://www.nytimes.com/2010/08/08/business/08consume.html?_r=1&pagewanted=print
CONSPICUOUS consumption has been an object of fascination going back at least as far as 1899, when the economist Thorstein Veblen published “The Theory of the Leisure Class,” a book that analyzed, in part, how people spent their money in order to demonstrate their social status. “The one single trait that's common among every single person who is happy is strong relationships". Unlike consumption of material goods, spending on leisure and services typically strengthens social bonds, which in turn helps amplify happiness. Scholars contend that experiences provide a bigger pop than things is that they can't be absorbed in one gulp, scholars have found that anticipation increases happiness. Over time, that means the buzz from a new purchase is pushed toward the emotional norm. We stop getting pleasure from it. Scholars have discovered that one way consumers combat hedonic adaptation is to buy many small pleasures instead of one big one.
Elizabeth Dunn - spending money on experiences makes you happier than spending it on plain old stuff.
Thomas DeLeire - Marriage increases happiness. Spending on leisure activities appeared to make people less lonely and increased their interactions with others.
Sonja Lyubomirsky Paying for experiences gives us longer-lasting happiness is that we can reminisce about them, researchers say. Trips aren't perfect but we remember them as perfect.

 

Happiness seems to have almost magical properties. We have not got proof, but the science suggests it leads to long life, health, resilience and good performance.

Standard of living has increased dramatically and happiness has increased not at all Professor Daniel Kahneman, University of Princeton.

Scientists work by comparing people's reported happiness and a host of other factors such as age, sex, marital status, religion, health, income, unemployment and so on. In survey after survey involving huge groups of people, significant correlations between happiness and some other factors are repeated. At the moment scientists cannot prove causation, whether for example people are healthy because they are happy, or whether people are happy because they are healthy. However, psychologists have been able to identify some very strong links. According to Professor Diener the evidence suggests that happy people live longer than depressed people. "In one study, the difference was nine years between the happiest group and the unhappiest group, so that's a huge effect. "Cigarette smoking can knock a few years off your life, three years, if you really smoke a lot, six years. "So nine years for happiness is a huge effect."

Richer But No Happier

Happiness researchers have been monitoring people's life satisfaction for decades. Yet despite all the massive increase in our wealth in the last 50 years our levels of happiness have not increased. "Standard of living has increased dramatically and happiness has increased not at all, and in some cases has diminished slightly," said Professor Daniel Kahneman of the University of Princeton.

"There is a lot of evidence that being richer isn't making us happier"

Scientists think they know the reason why we do not feel happier despite all the extra money and material things we can buy.

• First, it is thought we adapt to pleasure. We go for things which give us short bursts of pleasure whether it is a chocolate bar or buying a new car.But it quickly wears off.
• You can't take a grouch and make him giggle all the time Professor Martin Seligman, University of Pennsylvania
• Second, its thought that we tend to see our life as judged against other people.
• We compare our lot against others. Richer people do get happier when they compare themselves against poorer people, but poorer people are less happy if they compare up.
• The good news is that we can choose how much and who we compare ourselves with and about what, and researchers suggest we adapt less quickly to more meaningful things such as friendship and life goals.