I need 1 more person to fill out my foursome for the May 18th, Foundation for Children with Cancer golf event. As of monday night, we still needed more people to make this event a success, so if you can get your own foursome or more or less, go to the link above. If you want to join my group w Todd Stromsdorfer and Brett Mosley, call or e-mail me.
David Tracey sent me a really good video. Some of you may have heard Obama's speech (which one? Doesn't he do 10 a day) when he challenged his administration to cut $100 million from the budget. Talk about setting the bar low. Now I'm not the first to suggest that that's not very much, this video does a better job than I can, I give it a 10!
Did you watch the video? Does a challenge to cut $100M deserve a press conference? I'd argue that $100B budget cut would hardly rate a press conference at this point. Talk to me when you cut $1 trillion, or when you balance the budget (actually do it, not CBO projections).
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In the same vein, Art Mosley sent me the following, which I've seen (and forwarded) before, so if you've been on my mailing list a long time, you might have seen this before. I think it's worth another look.
Once upon a time the government had a vast scrap yard in the middle of a desert. Congress said, "Someone may steal from it at night." So they created a night watchman position and hired a person for the job.
Then Congress said, "How does the watchman do his job without instruction?" So they created a planning department and hired two people, one person to write the instructions, and one person to do time studies.
Then Congress said, "How will we know the night watchman is doing the tasks correctly?" So they created a Quality Control department and hired two people. One to do the studies, and one to write the reports.
Then Congress said, "How are these people going to get paid?" So they created the following positions; a time keeper, and a payroll officer, then hired two people to fill the new positions.
Then Congress said, "Who will be accountable for all of these people?" So they created an administrative section and hired three people, an Administrative Officer, Assistant Administrative Officer, and a Legal Secretary.
Then Congress said, "We have had this command in operation for one year and we are $18,000 over budget, we must cutback overall cost."
So they laid off the night watchman.
NOW slowly, let it sink in.
Quietly, we go like sheep to slaughter.
Does anybody remember the reason given for the establishment of the "DEPARTMENT OF ENERGY"
...during the Carter Administration?
Anybody?
Anything?
No?
Didn't think so!
Bottom line: We've spent several hundred billion dollars in support of an agency... the reason for which not one person who reads this can remember!
Ready?? It was very simple...
and at the time, everybody thought it very appropriate.
The Department of Energy was instituted on August 4, 1977.
TO LESSEN OUR DEPENDENCE ON fOREIGN OIL.
Hey, pretty efficient, huh???
AND NOW IT'S 2009 -- 32 YEARS LATER -- AND THE BUDGET FOR THIS "NECESSARY" DEPARTMENT IS AT $24.2 BILLION A YEAR. THEY HAVE 16,000 FEDERAL EMPLOYEES AND APPROXIMATELY 100,000 CONTRACT EMPLOYEES; AND LOOK AT THE JOB THEY HAVE DONE! THIS IS WHERE YOU SLAP YOUR FOREHEAD AND SAY, "WHAT WAS I THINKING?"
Ah, yes -- good ole bureaucracy.
AND, NOW, WE ARE GOING TO TURN THE BANKING SYSTEM, HEALTH CARE, AND THE AUTO INDUSTRY OVER TO THE SAME GOVERNMENT?
HELLOOO! Anybody Home?
I would like to add a few comments of my own-
1. Energy independence is a silly concept, probably unachievable, and would lower living standards. http://www.thefreemanonline.org/featured/lets-not-be-energy-independent/ ,http://www.ocregister.com/articles/oil-243386-price-energy.html
2. We could save even more money if, in addition to the Energy Dept, we eliminate the Depts of Agriculture and Education, none of which are constitutionally authorized to the federal govt in the first place.
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Finally, does the Goldman Sachs case have merit?
10 Things You Don’t Know (or were misinformed) About the GS Case
By Barry Ritholtz
I have been watching with a mixture of awe and dismay some of the really bad analysis, sloppy reporting, and just unsupported commentary about the GS case.
I put together this list based on what I know as a lawyer, a market observer, a quant and someone with contacts within the SEC. (Note: This represents my opinions, and no one elses).
Ten Things You Don’t Know (or were misinformed by the Media) About the GS Case
1. This is a Weak Case: Actually, no — its a very strong case. Based upon what is in the SEC complaint, parts of the case are a slam dunk. The claim Paulson & Co. were long $200 million dollars when they were actually short is a material misrepresentation — that’s Rule 10b-5, and its a no brainer. The rest is gravy.
2. Robert Khuzami is a bad ass, no-nonsense, thorough, award winning Prosecutor: This guy is the real deal — he busted terrorist rings, broke up the mob, took down security frauds. He is now the director of SEC enforcement. He is fearless, and was awarded the Attorney General’s Exceptional Service Award (1996), for “extraordinary courage and voluntary risk of life in performing an act resulting in direct benefits to the Department of Justice or the nation.”
When you prosecute mass murderers who use guns and bombs and threaten your life, and you kick their asses anyway, you ain’t afraid of a group of billionaire bankers and their spreadsheets. He is the shit. My advice to anyone on Wall Street in his crosshairs: If you are indicted in a case by Khuzami, do yourself a big favor: Settle.
3. Goldman lost $90 million dollars, hence, they are innocent: This is a civil, not a criminal case. Hence, any mens rea — guilty mind — does not matter. Did they or did they not violate the letter of the law? That is all that matters, regardless of what they were thinking — or their P&L.
4. ACA is a victim in this case: Not exactly, they were an active participant in ratings gaming. Look at the back and forth between Paulson’s selection and ACAs management. 55 items in the synthetic CDO were added and removed. Why?
What ACA was doing was gaming the ratings agencies for their investment grade, Triple AAA ratings approval. Their expertise (if you can call it that) was knowing exactly how much junk they could include in the CDO to raise yield, yet still get investment grade from Moody’s or S&P. They are hardly an innocent party in this.
5. This was only one incident: The Market sure as hell doesn’t think so — it whacked 15% off of Goldman’s Market cap. The aggressive SEC posture, the huge reaction from Goldie, and the short term market verdict all suggest there is more coming.
If it were only this one case, and there was nothing else worrisome behind it, GS would have written a check and quietly settled this. Their reaction (some say over-reaction) belies that theory. I suspect this is a tip of the iceberg, with lots more problematic synthetics behind it.
And not just at GS. I suspect the kids over at Deutsche bank, Merrill and Morgan are working furiously to review their various CDOs deals.
6. The Timing of this case is suspect. More coincidental, really. The Wells notice (notification from the SEC they intend to recommend enforcement) was over 8 months ago. The White House is not involved in the timing of the suit itself, it is a lower level staff decision.
7. This is a Complex Case: Again, no. Parts of it are a little more sophisticated than others, but this is a simple case of fraud/misrepresentation. The most difficult part of this case is likely to turn on what is a “material omission.” Paulson’s role in selecting mortgages may or may not be material — that is an issue of fact for a jury to determine. But complex? Not even close.
8. The case looks thin: What we see in the complaint is the bare minimum the prosecutor has to reveal to make their case. What you don’t see are all the emails, depositions, interrogations, phone taps, etc. that the prosecutors know about and GS does not. During the litigation discovery process, this material slowly gets turned over (some is held back if there are other pending investigations into GS).
Going back to who the prosecutor in this case is: His legal reputation is he is very thorough, very precise, meticulous litigator. If he decided to recommend bringing a case against the biggest baddest investment house on Wall Street bank, I assure you he has a major arsenal of additional evidence you don’t know about. Yet.
Typically, at a certain point the lawyers will tell their client that the evidence is overwhelming and advise settling. That is around 6-12 months after the suit has begun.
9. This case is Political: I keep hearing that phrase, due to the SEC party vote. It is incorrect. What that means is the case is not political, it means it has been politicized as a defense tactic. There is a huge difference between the two.
10. I’m not a lawyer, but . . . Then you should not be ignorantly commenting on securities litigation. Why don’t you pour yourself a tall glass of STF up and go sit quietly in the corner.
I have $1,000 against any and all comers that GS does not win — they settle or lose in court. Any takers? My money is already in escrow — waiting for yours to join it. Winnings go to the charity of the winners choice.
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