Wall Street WARZONE
Warning Trends: Warren Buffett’s Berkshire Will Fail Before 2020: WWIII, China, Lost Moral Compass, No Recovery, No Growth, Capitalism Dying, Final Bubble
by Paul B Farrell, JD, PhD
| Discuss | Print | 2/23/2011

“The important thing is not this year,” Buffett tells Vanity Fair, “but where Berkshire is 20 years after I die. Not taking care of it would be like not having a will, cubed.” Twenty years? But that’s 2030, a decade after our defense budget drives Americans further in debt preparing for the Pentagon’s 2020 prediction that “as the planets carrying capacity shrinks, an ancient pattern of desperate, all-out wars over food, water, and energy supplies would emerge … warfare is defining human life.”

Warning to Berkshire shareholders: Buffett’s wrong, the most important thing really is this year, not 2030. Not even 2020. That’s too late. Why? Because the “will of the people” and the unpredictable “will of God” will always trump Buffett’s “will.” Worse, There are four powerful trends that can easily and swiftly make his legacy disappear long before 2030.

War’s been very much on Buffett’s mind. During a New York Times interview around the same time as the Pentagon’s WWIII predictions Buffett remarked: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” And global war: Remember Buffett once called derivatives financial “weapons of mass destruction” in Fortune. Then, after Wall Street’s 2008 meltdown, he surrendered to the enemy, investing billions in Goldman, headquarters of the world’s most destructive derivatives traders. What will his heirs have to surrender?

Yes, Berkshire loyalists have more to worry about than Buffett’s will: So when all 40,000 of you gather in Omaha’s Qwest Center this May, start asking about America’s future … about the decline of our middle class … about the impact of the global population exploding 50% in a generation … ask about 9 billion people demanding ever scarcer commodities … ask about how America’s debt-burdened taxpayers will react when the Pentagon war-machine demands ever-larger budgets to defend against terrorists, drug cartels and a far bigger threat, a more aggressive China building stealth bombers capable of delivering nuclear weapons, and a China rapidly buying up strategic long-term commodity rights all over the planet, in Australia, Africa, South America and Eastern Europe. Are you asking the tough questions?

Yes, the years ahead will be very threatening for Berkshire. You know it. So does Buffett. But don’t be fooled: His will is more important to him than it should be to you. Why? It will be ineffective crossing the unpredictable global economic minefield ahead, no defense against all the hidden economic IEDs and “weapons of mass destruction” more deadly than derivatives. Buffett may be a legend. But he cannot be cloned. And the economy that made him rich is old news. So forget the will. And forget 2030  ….  more in MarketWatch.

Short Buffett? Bloomberg Says the “Goldman Conspiracy” Can Beat Ol’ Uncle Warren in the Wall Street Casino, So Maybe It Is Time to Short Berkshire
by Paul B Farrell, JD, PhD
| Discuss | Print | 5/21/2010

Bloomberg Markets’ Alice Schroeder argues ”Buffett Rented His Good Name to Goldman Cheap.” So what? Sure, America got screwed, but they both made a buck. But so did investors get screwed. Here’s how I saw the shell game in my MarketWatch column, “Buffett defends Goldman, joins Greed Conspiracy.  Ol’ Uncle Warren has a bad case of denial. Remember, not too long ago Uncle Warren was calling derivatives “weapons of financial mass destruction.” And yet, there he was on stage at his love fest a couple weeks ago, with 40,000 adoring Berkshire shareholders, defending Wall Street’s most toxic companies, trapped in denial, defending the greedy culture that got America into its current mess. Does he know what he’s doing? Maybe not. And there’s likely more coming from these two shysters in this secretive “Greed Conspiracy.” Is this a good sign for the market, for Goldman, or for Berkshire? You judge. Here’s what Uncle Warren said:

* Praising Moody’s “business mode,” and by inference all rating agencies that blindly rubberstamped Wall Street’s toxic debt, setting up the last meltdown, and most likely the next …

* Defending Goldman Sachs bad behavior despite the fraud suit and a possible criminal indictment (while failing to disclose his own conflicts of interest as a big investor in both Moody’s and Goldman) …

* Praising Goldman’s CEO Lloyd Blankfein … by far Wall Street’s greediest fat-cat banker who paid himself $68 million out of his stockholders profits last year …

* Defending Goldman with a bizarre argument that Goldman is no more guilty than the other Wall Street banks, a tacit approval of the bad behavior of all Wall Street banks in the Goldman Conspiracy …

* Worse, ol’ Uncle Warren also tried deflecting attention from Wall Street’s corrupt business model by blaming government regulators for the meltdown, another example of Uncle Warren’s blind denial, ignoring the fact that in the past year Wall Street spent over $400 million on lobbyists and campaign cash to make absolutely certain regulators, Congress and the Obama team all played along with Buffett’s songs that guarantee Wall Street controls Washington regulators …

* Ironically, all this comes from a man who once lectured Congress on “Moral Integrity: I want employees to ask themselves whether they are willing to have any contemplated act appear on the front page of their local paper the next day, read by their spouses, children, and friends … Lose money for my firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless” … what’s happened to our preacher who now favors “moral hazard?”

Yes folks, Buffett’s in denial … just like his banker buddies … can you really trust him? … or should you short Buffett, short Baby Berkshires, short Goldman, short Moody’s … Why? Because they’re all “shorting America,” all responsible to piling on debt that’s pushed America’s debt-to-GDP ratio to 92%, past the IMF’s 90% danger zone … so you gotta wonder if maybe, just maybe, Bloomberg’s got some more inside poop … like maybe ’ol Uncle Warren and the Goldman Conspiracy both got conned … along with their investors … all investors … and all taxpayers … yes, maybe it is time to short.

Super-Quant Wilmott Warns: 86% of Wall Street Bosses Are “Clueless” About What Their Quants Are Doing … With Their Arsenals of WMD Derivatives?
by Paul B Farrell, JD, PhD
| Discuss | Print | 5/20/2010

Ignorance is bliss? Wrong! Ignorance is lethal when it comes to quants and derivatives. Why? Not only is Main Street clueless about what quants do, their Wall Street managers don’t have a clue. Scary huh! A new Paul Wilmott study in Hedge Funds Review reports that a whopping 86% of America’s quants say their managers are clueless about what they do. According to HFR’s Margie Lindsay, “A significant gap in understanding between quants and their supervisors has been revealed in a survey of almost 400 active quants and risk professionals.”

No wonder the 2008 bank credit meltdown was triggered. Nor should anyone be surprised when it happens again. The situation is as crazy as the Pentagon turning a nuclear arsenal over to the infantry rather than nuclear experts. Crazy-making yes, and highly predictable if you remember that quants design the derivatives Warren Buffett calls “financial weapons of mass destruction.” No wonder Lindsay suggests there are so many unknowns (Black Swans!), that the 2008 meltdown could easily happen again: (More)

“The Economist” Deals Four Aces: Europe Suing Banks on Derivative Scams … Private-Equity’s Big Debt Problems … Bernanke & Greenspan Still in Denial … Spin, Science & Climate Change
by Paul B Farrell, JD, PhD
| Discuss | Print | 4/21/2010

The Economist deals four-aces: I read it right after seeing Polanski’s new film, Ghostwriter, which, along with the Hurt Locker and Green Zone, dramatizes some of the big issues we already know about Iraq War political shenanigans. Loosely based on Tony Blair’s secret cooperation with the CIA during the war, we can see why after all these years Washington pressed the Swiss to arrest Polanski. Two pop phrases come to mind: Revenge is best served cold. And there’s no fury worse than politicans scorned. Here are The Economist’s four aces for investors searching for signs of the new bubble/bust cycle:

Alan Greenspan and Ben Bernanke still do not believe monetary policy bears any blame for the crisis … The desire to rescue a damaged reputation is a powerful motivator. That is one conclusion to draw from a new 48-page paper written for the Brookings Institution by Alan Greenspan, the 83-year-old former chairman of America’s Federal Reserve. A man once hailed as the world’s outstanding central banker is now routinely blamed for the asset bubble and subsequent collapse. This is Mr Greenspan’s attempt to set the record straight. The crisis, he argues, stemmed from a “classic euphoric bubble” … Greenspan says it is impossible to anticipate crises … central banks were innocent and impotent bystanders in a global macroeconomic shift. … This explanation is broadly similar to the idea of a “global saving glut” which Ben Bernanke, the Fed’s current chairman, has long espoused. …  There is something odd about central bankers denying any responsibility at all for long-term rates … Monetary policy may be a blunt tool to deal with asset bubbles. But that does not mean it is irrelevant … (More)

Hedge Funds & Private Equity: 10 “Billionaire-Maker” Strategies That Are Sabotaging Main Street America
by Paul B Farrell, JD, PhD
| Discuss | Print | 4/19/2010

Hedge funds and private equity firms are called the “Billionaire-Makers Dream Machine.” And it “makes” billionaires because Corporate America hates issuing new securities because they hate dealing with the public and regulators. They hate answering to their own investors and the public. Yes, they just hate the regulatory and media spotlight. So they prefer the mysterious parallel universe of unregulated hedge funds and private equity financing arranged outside the regulated banking system and with leveraged credit derivatives traded off the exchanges, funny money now totally $26 trillion. And they love the big payoffs in equity positions. In today’s era of cheap money, private equity firms soak up so much capital little is left on the table for normal channels. And that’s just fine with these highly secretive 13,000 money managers who control roughly $4 trillion and want to keep it that way. (More)

LA Times: California Bill pits CalPERS vs. Wall Street, Blackstone, Wells Fargo … Wars Over Huge Fees “Too-Greedy-to-Fail” Banks Charge State Taxpayers!
by Paul B Farrell, JD, PhD
| Discuss | Print | 4/4/2010

States, their pension funds and local muncipalities have been getting a screwing for years. In bull markets states go along with the big monopolistic fees to get the bond moneys needed to cover their lack of discipline and out-of-control services. Now, California’s fighting back against Wall Street greed … has to … with its insane deficits. LA Times reports on the CalPERS vs Blackstone Group battle over proposed ban on contingency fees paid to intermediaries … That’s the California Public Employees’ Retirement System versus Blackstone Private Equity, what Vanity Fair describes as a “$12 trillion shadow bank” … Lots more coming on this bruising battle that’s guaranteed to be a decisive one in the next bubble/bust cycle …

Legislation to ban commissions paid to intermediaries for steering California’s public pension money to investment houses has spurred a lobbying war led by Wall Street’s powerful Blackstone Group, allied with such major banking firms as Wells Fargo & Co. The battle over fees for so-called placement agents is heating up as the bill gets its first hearing in the state Legislature next week. The fight arose amid a series of federal and state investigations in California and New York into possible corruption and influence peddling at major public pension funds, including the California Public Employees’ Retirement System, the nation’s biggest.

This whole situation reminds me of the “Build America” bonds that Wall Street has been pushing on “spendthrift” cities and state governments … anything  to generate more fees back on Wall Street … derivatives, private equity, Greek debt, high-frequency trading, you name it … anything to generate big fees for bonuses … now here’s Wall Street and Blackstone fighting Main Street in California’s state legislature … and Well Fargo’s in on the game, will fight for Wall Street … another sure sign Wall Street’s blowing another Big Bubble … what’s next? … we all know … another bust  … likely by 2012, the next presidential election … bet on it …