Wall Street WARZONE
New “Toto” Exposes How “Numbers Racket” of Washington & Wall Street “Wizards of Oz” is Setting Up Next Disaster for American Economy & Markets
by Paul B Farrell, JD, PhD
| Discuss | Print | 9/29/2010

Remember that big ah-ha moment in the 1939 classic, “The Wizard of Oz?” Dorothy wants to see the Wizard. His voice booms: “Do not arouse the wrath of the Great and Powerful Oz! Come back tomorrow!” Afraid, Lion, Tin Man, Scarecrow shake. Dorothy’s dog runs up, tugs on a curtain. She chases Toto, pulls curtain open: “Who are you?” Dr. Marvel stutters: “Well, I – I – I am the Great and Powerful, Wizard of Oz.” Dorothy: “You are? I don’t believe you!” He replies: “No, it’s true. There’s no other Wizard except me.” Dorothy’s miffed: “Oh, you’re a very bad man!” Wizard: “Oh, no, my dear. I’m a very good man. I’m just a very bad Wizard.”

2009 Sequel:  Script exposes diabolical cover-up conspiracy.
Flash forward: Real life, Wall Street, Washington, Corporate American CEOs, always new leaders, always same old wizardry. Be forewarned: No matter who’s president, America will soon see a massive statistical curtain pulled back, exposing a con game of historic proportions. And when that happens, you and I will suffer another ear-splitting global meltdown, bigger than today’s housing-credit crisis, dragging us deep into a recession and bear market for years.

Cast:  New ‘leading man’ from ol’ Nixon political machine.
Yes, the lead character pulling back the curtain is none other than Kevin Phillips, a former Republican strategist for Nixon, and today America’s leading political historian. In Phillips’ bestseller, Bad Money: Reckless Finance, Failed Politics & the Crisis of American Capitalism, you’ll find eerything you need to know about the 2008 credit meltdown, and how the “numbers racket” is adding jet fuel on the next one … coming soon.

Scene One:  Numbers racket hiding behind Washington curtain.
Opening shot: Phillips pulling back the curtain, exposing charlatan Wizards in a brilliant Harper’s Magazine article: “Numbers Racket: Why the economy is worse than we know.” Far worse. This is essential reading if you really want to understand the depth of today’s political as well as economic impending meltdown, and the harsh realities facing Washington, Wall Street, Corporate America, and Main Street in 2009 and beyond … harsh because we cannot cover-up the truth much longer. (More)

“Numbers Game:” How Wall Street “Croupiers” Fudge Stats, Fix the Odds, Mark the Cards & Skim $200 Billion in Profits From $12 Trillion of Your Mutual Funds
by Paul B Farrell, JD, PhD
| Discuss | Print | 5/12/2010

There are so many clever ways Wall Street can selectively manipulate and control the data available to investors, with the direct or indirect help of the SEC and Congress: In the timing and disclosure requirements in advertisements; burying key data in a prospectus; using information that is outdated, often three months to a year or more old, for example. Wall Street also has many dealings with data trackers like Morningstar, Lipper, Moody’s, Standard & Poor’s and others supposedly independent suppliers of data investor rely on. Wall Street not only buys data from these sources, they often use their related subsidiaries to do marketing research. Cozy relationships with so-called “independent” data sources supplying data to Main Street investors get the tacit approval of politicians, regulatory agencies, private industry and the media and offer many opportunities for data manipulation.

For example, when a poor performing fund is closed or merged out of existence, its statistics also disappear, that makes the survivors and their category look better than they are. Halloween’s my wife’s favorite holiday, the biggest of the year around our house. We start early. Suddenly, right after Labor Day, vampires, ghosts, witches, black cats, mummies and zombies return from the underworld to haunt us, purge our darkside. They take over the house. Just lotsa statues, icons, scenes, cobwebs. Okay, so there’s a kid in all of us. We even have a one of the entire Peanuts gang waiting for the immortal “Great Pumpkin” to arise once again from the patch. (More)

Jones vs Harris: Supreme Court Screws 95 million Main Street Investors, Favoring “Casino Croupiers” (Rich Owners!) Ripping-Off 35% of Your Returns
by Paul B Farrell, JD, PhD
| Discuss | Print | 5/6/2010

America’s pro-management/anti-investor Supreme Court’s at it again. Read columnist John Waggoner’s “Mutual fund fees case goes back to lower court” in USAToday. In essence, the Court has once again approved of big owners siphoning off a third of the profits from America’s 95 million Main Street investors’ money. That’s what Vanguard’s founder Jack Bogle has been telling investors for decades. Owners get away with it. The SEC’s no help. Now the Supreme Court again agrees! Bogle compares fund company owners to Vegas gambling “croupiers,” where the “house always wins” by raking one-third off the top of the Main Street investor’s returns. Their scamming has been going on for decades, and still, our conservative pro-management Supreme Court rules in favor of Wall Street and the fund owners, just as they did in the 1982 case:

The Supreme Court decided by a 9-0 vote Tuesday to send a lawsuit challenging high mutual fund fees back to a lower court, a move that both sides hailed as a victory. In Jones v. Harris Associates, the plaintiffs alleged that Chicago-based Harris Associates overcharged shareholders in the Oakmark funds, which Harris manages. The plaintiffs, three Oakmark shareholders, said that Harris charged Oakmark shareholders nearly twice what it charged big institutional investors for essentially similar services. … The court ruled that courts must use the guidelines set out in a 1982 case, Gartenberg v. Merrill Lynch Asset Management, to determine whether fund fees are excessive. In Gartenberg, a lower court found fees must not be so large that they bear no relationship to the services rendered and could not have been the result of arm’s-length bargaining.

So your mutual funds can keep charging you as much money as they darn well please, as long as they can manipulate the numbers and don’t get caught. Fund company owners love the decision. Some contrarians note that the high court added: “Fund boards should take into consideration fees charged to institutional investors,” which are lower. But don’t count on it. For more, read Anna Prior’s article, “The Hidden Costs of Mutual Funds,” in The Journal. Like Bogle, Prior exposes more about the fund companies’ endless numbers game: (More)

Inflation Killing Your Nest-Egg? Go to Cash? Take Profits? Sell Dollars? Bring Back the Gold Standard? Do You Have a Plan, Your Own Plan?
by Paul B Farrell, JD, PhD
| Discuss | Print | 5/3/2010

For years I’ve been saying that Wall Street’s a big loser, that investing in stocks the past decade meant you lost big-time, yes, over 40% of your retirement portfolio, even more after adjusting for inflation. Here’s the latest on how badly inflation is eating away at your golden years, thanks to E.S. Browning’s great reporting in Wall Street Journal’s “Adjusted for Inflation, Bad Run Looks Worse:”

“Many investors realize stocks have been among the worst investments of the past decade. But they may not realize quite how bad the decade was because most forget about the effects of inflation. Despite its 2009 rebound, the Dow Jones Industrial Average today stands at just 10520.10, no higher than in 1999. And that is without counting consumer-price inflation. In 1999 dollars, the Dow is only at about 8200 and would have to rise another 28% or so to return to 1999 levels. Using today’s dollars and starting at 10520.10, the Dow would have to surpass 13460 to get back to its 1999 level in real, inflation-adjusted terms. (More)