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Opening Arguments

Jeb and Hillary

Jeez. I was sorta hoping "compassionate conservatism" was dead:

As part of announcing his 2016 presidential candidacy, Jeb Bush released a video entitled "Making a Difference." The video spotlights how Bush's work as governor of Florida from 1999 to 2007 affected four people: a low-income student, a low-skilled worker, a mother whose child is disabled and a woman who was the victim of domestic violence.

"My core beliefs start with the premise that the most vulnerable in our society should be in the front of the line, not the back," Bush says in the video. "The barriers right now on people rising up is the great challenge of our time."

The video is aimed particularly at women voters, underscoring the image Bush wants to project of himself as a deeply compassionate governor. "If you wonder what Jeb means when he talks about showing his heart, here you go." senior Bush aide David Kochel tweeted when the video was released Sunday.

But to a number of Republican strategists, some associated with other presidential campaigns and some not, the video shows a GOP politician ignoring the challenge of winning his own party's primaries before running a general election campaign. In addition, the video stresses Bush's goodness so heavily that the strategists wonder whether even a positive attribute, like compassion, can be overdone.

Can "even a positive attribute like compassion" be overdone? Absolutely, it's called "bering a Democrat." I care about you, the little people, so very, very much, so elect me, and I'll hold your hand from morning to nigh, from the cradle to the grave. All I ask for in return is your soul.

I mean, just listen to Hillary Clinton's Roosevelt Island speech:

While many of you are working multiple jobs to make ends meet, you see the top 25 hedge fund managers making more than all of America's kindergarten teachers combined. And, often paying a lower tax rate.

So, you have to wonder: "When does my hard work pay off? When does my family get ahead?"


I say now. (Cheers, applause.)

Prosperity can't be just for CEOs and hedge fund managers.

Democracy can't be just for billionaires and corporations. (Cheers, applause.)

Prosperity and democracy are part of your basic bargain too.

You brought our country back.

Now it's time -- your time to secure the gains and move ahead.

Now it's your turn, little people. Step up to the trough.

God almighty. If we end up with a Jeb-Hillary race, I might have to give up on politics altogether. Surely the Republicans will be smart enough not to nominate Jeb. 'Fraid the Democrats are stuck with Hillary, though.


Rebecca Mallory
Tue, 06/16/2015 - 8:36am

The hated fund managers are the root of the American economy.  No major project-public or private- will be built without their skills.

Hedge fund managers are compensated because they create wealth.  Typically the GP takes 20 percent of the profits, and if there are no profits the managers get nothing . Joe's kindergarten teachers will be paid regardless of performance.

Recently Chelsea Clinton and her husband, Marc Mezvinsky, purchased a $10.5 million apartment in New York City.  In order to pay for the apartment, Mezvinsky must create more than $50 million in wealth for other people- including the kindergarten teachers who are the source of Joe's angst.

It will be interesting to see if Hillary Clinton helps "get America back" from people like her son in law.

What we also need to be mentioned is that the bottom 25 hedge fund managers made less than any kindergarten teacher.  In their world creation of wealth for others is essential because for them a government pay check will not arrive every two weeks.




Wed, 06/17/2015 - 8:31am

Once upon a time, hedge funds earned their outsize compensation by, guess what? Hedging their investments. This risk-mitigation strategy reduced the gains when markets were up but avoided some of the losses when markets were down.

Today, most hedge funds have morphed into something very different: aggressive, highly-leveraged, speculative vehicles that are desperately chasing returns to outperform their benchmarks, that make huge returns for the managers regardless of the fund’s performance and end up transferring wealth from investors to hedge fund managers

By most measures, hedge funds have failed to keep up with regular markets. According to HFRX Global Hedge Fund Index:

Hedge funds returned a mere 3.5 percent in 2012, while the S&P 500-stock index gained 16 percent. Over the past five years, the hedge fund index lost 13.6 percent, while the indices added 8.6 percent. In 2013, most hedge funds have fallen even further behind, gaining 5.4 percent vs. the market’s rally of 15.4 percent. 

That’s even before we get to the pesky question of fees. The industry standard fee of “2 and 20” (2 percent annual management fee against the original investment, plus 20 percent of the investment profits) is outrageous compared to average mutual fund fees of 1.44 percent and under 0.25 percent for an index ETF. To add insult to injury, hedge fund managers get a special tax break that enables them to claim that their “2 and 20″ fees are capital gains.  These greedy jerks continue to collect billions and can't even produce market average performance.  A chimp throwing darts at a list of stocks could do as well.

These fee arrangements are a wealth transference mechanism, systematically moving money from investors to hedge-fund managers. Some of the statistics amassed by Sinon Lack’s The Hedge Fund Marage (2012) are astounding:

From 1998 to 2010, hedge fund managers earned $379 billion in fees. The investors of their funds earned only $70 billion in investing gains. Managers kept 84 percent of investment profits, while investors netted only 16 percent. One-third of hedge funds are funded through feeder funds and/or fund of funds, which tack on yet another layer of fees. This brings the industry fee total to $440 billion. That’s 98 percent of all the investing gains, leaving the people whose capital is at risk with only 2 percent, or $9 billion.

Moreover it can be hard to get your money out of a hedge fund. Many hedge funds are “gated” with only small windows when you can withdraw your money.

Why would any investor hand over their money over to a hedge fund?  It’s driven by greed and the swagger of the superstar manager. The illusion of the guy who might make you fabulously wealthy attracts capital. Investing in hedge funds makes no more sense than trying to become a billionaire by gambling big money in Las Vegas.

It’s people like John Paulson, who got publicity when he became a billionaire in 2005-06 and so money flowed in. He was soon managing some $36 billion. But lo and behold, shortly after, he hit the skids, with losses of 52 percent in one fund and 35 percent in another.

Only a small percentage of funds have significantly outperformed the markets; an even smaller percentage have done so after fees are taken into account. And no one has the slightest clue which if any funds will outperform markets over the next decade.

The rational conclusion is obvious: if you want to become fabulously rich, become a hedge fund manager, not a hedge fund investor!

It’s bad enough that regular investors will now be subject to the flim-flam tactics of hedge fund managers. Sadly, underwater pension funds have already succumbed to the lure.

Investing by pension funds in hedge funds is for the most part a feint to conceal the underlying poor performance, or even insolvency of the funds. According to a report from the International Monetary Fund (IMF) issued last month, these moves are part of an alarming trend of “gambling on resurrection.”

Gambling on resurrection is what happens when a fund starts running into financial trouble. The responsible thing for pension fund managers would be to face up to the problem and discuss what to do, accepting the possibility that they may be held accountable for creating the problem.

Many pension funds are now doing the opposite. They gamble on resurrection. They play down the problem and bet big with a high-risk/high-return strategy; if their bets pay off, they’re solvent, and if not, well, what the hell? They’re already insolvent. And it’s not their own money that they’re playing with. With any luck, they’ll be out of there long before the problems are obvious and as far as your monthly pension check? Too bad sucker I got mine, looks like a greeter job at Wally World is in your retirement plans.

Hedge fund managers "create" no wealth, they transfer existing wealth. generally into their pockets. They get priviliged tax treatment on their income for the "fine" job they do and laugh while viewing monthly statements from their overseas bank accounts.  Nothing but legal thieves.