The Crackdown

            In the late 1960’s a colleague started up a hedge fund, one of those then spanking new investment vehicles with the dual objective of 1) obviating stock market risk through unconventional strategies to make money when prices fall on Wall Street by finding equity returns in strange new ways that unwind any correlation with the vagaries of public equity markets, and 2) offering participation only to the wealthy.

            Long a most curious quirk in the investment management game, securities laws hold that the wealthy, solely by virtue of that wealth, are “sophisticated investors”, meaning they can’t sue you.   That explained the second objective.

            None of us ever knew quite what any of these guys meant by the first.

            That was nearly half a century ago.  Recently the Wall Street Journal reported that only now has the Securities and Excuses Commission decided to try and look into the kind of hanky-panky that might be going on here.  Our intrepid watchdogs have finally devised a method of highlighting hedge funds whose balance sheets never seem to suffer no matter how rocky the market gets.

            Holy Calamari, subscribers.  That’s Objective Number One.  Excuse us for thinking it’s about time.

Bank Capital Cushions

            The difference between managing your typical too-big-to-fail bank and running a casino is not at all what you’d think it would be.  The casino is founded on a sure thing, probability theory, and never loses - over the long haul anyway - as long as there are enough wagers taking place to satisfy the “large number of occurrences” condition underlying that important branch of mathematics.  Bankers, on the other hand, are like the guys lurking around the craps table.  They win some and lose some, but do come up short now and again, and can drop enough to wipe out their entire bankroll when Lady Luck drops the hammer on them real good.

           

As any high roller will tell you, success at gambling is all in the cash management.

That’s where yesterday’s headline comes in.  Financial regulators in Washington and Basel are working hard to increase the stash our crap shooters are required to bring to the tables, and, more importantly, trying to figure out just what the dickens the game is they’re now playing.

As subscribers know, Wall Street hires the dumbest people in the world, and the last batch of nincompoops created financial weapons of mass destruction, the nature of which can never be understood because, as everyone outside of Government can see, the dumbest people in the world have no idea what they’re doing.

Financial regulators across the globe have been trying to disassemble what, owing to a total lack of understanding about the true nature of these moronic contracts, financial “professionals” have come to refer to as “derivatives”, but financial regulators across the globe have had no reported success at that to date.  As a result, financial regulators across the globe have turned to increasing bank capital requirements as a way of fooling themselves into thinking everything's going to be all right in the Post Financial Apocalyptic Era.

We see Basel wants the institutional gamblers to keep a bankroll of 10.5% at the derivatives tables, and Washington wants 5%.

The MacDougal Post calls for waterboarding the entire staff of the Federal Reserve Bank until they tell us what’s going on with that, and asks subscribers to join our Occupy Your Bank’s Vault movement and head to your banking institution immediately to make sure your safe deposit box is still there.

Sons of $!#&%$s are screw!#$ with everything you’ve got.

The GSE Follies

            Recently, the Securities and Excuses Commission (SEC) brought civil fraud charges against six former top executives at the Federal National Mortgage Association (Fanny Mae) and the Federal Home Loan Mortgage Corporation (Freddy Mac).

  Each outfit is a government-sponsored enterprise (GSE), quasi-corporations financing Federal policy with capital from public investors, who had always assumed GSE securities to be relatively safe due to some wantonly perceived opaque Washington connection, hilarious as that may seem by 2011 standards.

           The GSE 6 are accused of not reporting the truth to investors.  Nobody on Wall Street has been charged with anything, and how many SEC staffers are angling to launch their multi-million dollar Wall Street careers from the Agency was not reported either.

Mouthpiece Math

            Since American companies stopped paying Federal Income Taxes, tricky hypesters have found sensationalism here, deploying wildly inappropriate numbers to promote their agendas.  Just now some “nonpartisan reform” group came out with a report that 30 big American corporations spent more on lobbying than they did on taxes, and the electronic press is actually covering it as news.

            “Of course they did,” the report failed to add, “because 29 of the companies didn’t pay any taxes at all.  They spent more on paper clips than they did on taxes.  On toilet paper for the executive bathrooms.  On every single line item in the corporate books.”

            Getting to the point, according to this pathetic version of surreality anyway, amounts these outfits slipped to lobbyists ranged from $710 thou to $84 mil, totaling almost half a bil over 3 years (translation: averaging something over $5 mil annually per company for 3 years).

Talk about your proverbial drop in your proverbial bucket.  $5 mil a year.  Check out an Income Statement, why don’t you?  Any major corporate Income Statement will do.

            The problems we face are difficult enough without fibbers throwing in all their fibs about them.  In addition to nonpartisan reform, maybe we need laws regulating the use of arithmetic by nonpartisan reform groups too.

Look for misrepresentation wherever corporate taxes get mentioned.  We’ve noted this kind of accounting outrage in our face before.

“I Simply Do Not Know Where the Money Is”

            Our mob connection ran the back office at Filch & Finagle.  He was responsible for safeguarding firm securities and those of Filch’s customers, but did not have an account there.  He kept his own investments in an envelope segregated from the rest of the certificates on a separate shelf inside their subbasement bank vault.

            For over half a century, our mob connection knew where his money was.  He also knew where everybody else’s money was, but his was kind of on top of theirs and a lot easier to see.

            Once, a Filch & Finagle CEO found out what our mob connection was doing, and the CEO asked him to stick the CEO's investments in another envelope and keep the CEO's money on top of everybody else's too, and our mob connection did, and there were two envelopes of their own money on top of everybody else's money inside the subbasement bank vault after that, though our mob connection said he still kept his on the very, very top.

            Overnight, that is.  Work days, our mob connection took everybody else's money out of the subbasement bank vault and wheeled it up to Filch’s cage.  The firm was on the 19^th floor of the  Falutin National Bank Building, and Falutin let him use one of their service elevators and set it up to travel directly between 19 and the Falutin subbasement vault and sent an armed guard along with him whenever he went into the Falutin subbasement vault or rode the Falutin service elevator with everybody else's money.

            The Filch & Finagle cage took up a whole wing of the 19^th floor.  The cage was enclosed on three sides by metal bars so nobody could break in that way.  The fourth side was the outer wall fronting Wall Street, and nobody ever tried climbing up 19 floors to break in that way either.

            Our mob connection had all the keys.  The one to the subbasement bank vault, the one to the cage, and the one to the locked bin that held everybody else's money when it was wheeled back and forth between the subbasement bank vault and the cage via the service elevator.

            Some former Goldberg Styx CEO and former U.S. Senator who was BM World's CEO when it lost everybody's money testified before Congress yesterday and said a lot of things that may have bewildered our subscribers, and almost all of them bewildered us too, but the one about not knowing where anybody’s money was really stood out because we happen to know how that’s done.  Well, used to be done anyway.

            If any of you happen to run into the former Goldberg, Styx/U.S. Senator/BM World CEO, please pass the above information along.  Maybe he’ll be able to do better next time, and especially when the question comes up during his trial.

            Our mob connection knew where everybody’s money was every moment of every day and every night for more than 50 years.  He ran the accounting department too, so he also knew where the numbers were recorded and how, and that they were always accurate to the penny.

            To the penny, Mister former Golberg, Styx/U. S. Senator/BM World CEO.  To the Falutin penny.

Nuwrinkle’s Conundrum

Until lately, economists had always listed the primary factors of production as Land, Labor, and Capital.  In recent decades, however, gamed-market capitalists in the United States have succeeded in getting these elements redefined, over the short run at least, as Land, Chinamen, and Capital, and this change has given rise to a puzzling new wrinkle known as Nuwrinkle’s Conundrum.  Put simply, Nuwrinkle’s Conundrum is this:

When you eliminate Labor from the primary factors of production, who do you send the paychecks to?

         There are two sides to any economy:

1)   The Frontside, where Frontside Economists tell us that paychecks turn workers into consumers, who buy stuff; and

2)   The Backside, where somebody makes that stuff; here, Backside Economists like Dibstik Nuwrinkle, former Chairman of the CEO Monetary Abuse Roundtable, have certain Americans firing other Americans to hire Chinamen, which might be all right if certain Americans weren’t sending American paychecks over to Chinamen too.

Americans have to have their paychecks.  Without paychecks, Americans can’t buy what Chinamen produce.

Our political hacks are letting this happen for one simple reason.  Chinamen are bribing them.  Washington movers and shakers have this spectacularly burgeoning debt load on their hands, and need U. S. Greenback Dollars to pay it off with, but we don’t have any.  China has them.  After certain Americans send our paychecks to Chinamen and other Americans buy China’s stuff with whatever’s left, China emails some of that cash back to us in the form of what Backside Economists would like you to believe are investments in U. S. Treasury bonds, notes, and bills.

            Now, Backside Economists are hired by the rich and careless to say whatever the rich and careless want to hear, and what the rich and careless definitely don’t want to hear these days is how our Washington movers and shakers, on the rich and careless payroll too, are taking bribes of Chinese U. S. Greenback Dollars from Chinamen, so Backside Economists fib about it.

Fact is, China isn’t “investing” in U. S. Treasury bonds, notes, and bills at all.  The Orientals are giving the Occidentals revolving grants.  Their Central Government now furnishes our Central Government with much of our costly industrial base, and is bribing our Central Governators to keep this whacky deal going by slipping our Central Governators oodles and oodles of free cash without asking for the kind of interest payments one normally requires when forced to throw money into a fiscal conflagration like we’ve got raging right now.

And our Central Governators need oodles and oodles.  More and more oodles and oodles every day.  More and more oodles and oodles for bizarre Central Government domestic initiatives like financing homes for people who can’t finance homes, more and more oodles and oodles for bizarre Central Government foreign initiatives like shooting at pretty much everybody in the militant religious fanatic sphere of influence except the militant religious fanatic leadership making those people nuts.   And even more and more oodles and oodles for way-over-the-top Central Governator executive compensation packages.

Where all this goes next is even further beyond reason.  To keep themselves in power, overstuffed Washington fat cats have to divert voter attention away from free Chinese U. S. Greenback Dollars and bizarre domestic and foreign initiatives, and come up with something else for the constituency to fret about.

            And that would be Economic Devastation.  Perpetual worldwide cataclysmic Economic Devastation.

Fortunately for overstuffed Washington fat cats, free Chinese U. S. Greenback  Dollars and bizarre domestic and foreign initiatives screw up the global economy so bad nobody can figure out who’s doing it.  Bankers in Iceland get blamed for everything, or the president of Greece, or the consorts of the President of Italy, or the ratings agencies, or some doctor dumb enough to go anywhere near the likes of Michael Jackson and them, and our elected political hacks keep on getting re-elected.

As everybody knows, Chinamen have our jobs.  Not just on the assembly line.  Everywhere.  Bosses and secretaries and shipping clerks and fork lift operators.  Even the guy over in Accounts Receivable.  The one with those polka dot bow ties.  Chinamen have his job too.  And that babe who pulled down her Hanky Pankies and sat on the copier machine, she doesn’t have a copier machine to sit on anymore.  Or a paycheck.  In fact, nobody gets paid at a lot of places these days.  Not here.  Not anymore.  The Chinese have our American jobs and our American paychecks.  And they’re paying off your Congressmen to keep them.  Paying them off with grants.

That’s what’s going on here.

Even worse, should certain Americans stop sending those American paychecks to Chinamen, China could start emailing demands for real market interest on their grants, unleashing a hyperinflation in U. S. Greenback Dollars that would curdle your financial bones.

They’re an inscrutable bunch, these Chinamen.  And us?  Well, I don’t know about me, but you?  Republican or Democrat, you’re a total freaking moron for electing the people who keep letting things like this happen to us.