My Note –
About a week and a half ago, I was tracking the funds that have been going to Haiti over the course of many years. Tracking these funds indicate that when consultants and companies from outside Haiti are paid to participate, they take those funds back to their home country which improves its economy and not Haiti’s. The companies know ahead of time, how the funds are “earmarked,” what they are for, what the requirements for the funds are, how to access them, what the deadlines are and how to submit proposals for them.
They structure their business model and proposals to accommodate the requirements in a way that gives them access to those funds, sales of their products and services, consulting fees and contracts through those funds and use Haiti’s needs as an excuse for their own purposes to enhance their own profits. In the meantime, the needs of Haiti and Haiti’s economy are not served. Even when they are served in some measure, the game goes on without any real substantial improvement or change to the infrastructure and economy in Haiti. All of those moneys go to serve the interests of economies and profitability elsewhere.
Why would it make sense to pay over $156,000 dollars for a consultant to define a system of vocational and employment classifications for a country (Haiti in particular), whose unemployment is 80% and whose daily wage is a total of $2.00 per day as a minimum wage when people are employed? How does it help Haiti to pay over $150,000 per consulting firm to study whether adult vocational education would be of help when obviously it would and when it could be established for that sum of money?
Then, aside from the vast numbers of places where I found those funds for Haiti that have been streaming to them by millions and hundreds of millions of dollars for many years, I had been watching as the hedge fund managers across Wall Street had started making the same de-valuing plays which have been affecting economies around the world. About the same time, I noticed a real impact to a project off the coast of Portugal when I was looking up ocean wave generated power projects. Babcock and Brown had the money – they went belly up and the project sits in permanent limbo, neither benefiting anyone going forward nor being able to have its funding restored. Those funds were effectively stolen out from under the project.
As if that wasn’t enough, as I listened to bankers, financial investment firm CEOs and hedge fund managers along with their lobbyists saying that their “plays” haven’t hurt anyone and they shouldn’t be hindered by regulations that are being considered – I saw the note on bloomberg that the Yale endowment is essentially robbing the school’s funds in order to cover the losses from its bad bets. Are they kidding?
So, noting that the European Financial Affairs Commission is meeting on Thursday of this week, I thought maybe a few ideas could be considered to start making solutions to these problems -
In 2008, the US Securities and Exchange Commission banned short-selling and naked short selling. I suggest that capping the volume of blocks that can be moved, sold, traded or short selling plays that can be made as a block would go a long ways to stop the devaluing that occurs also. The prohibiting of these plays against the values that drives those values into the ground rapidly would have to be accomplished hand-in-hand across economies and across markets almost simultaneously by joint agreement between international regulating bodies. And, it would have to be done now.
The change in the huge volume blocks that can be manipulated in the same day or trading session or within the same week, along with the change that would ban short selling plays that should be illegal anyway, could save the values that underwrite the economies in Greece, Portugal, Spain, Ireland, the UK and around the world. Partly because where ever they are allowed, the hedge fund managers and brokers will play it out the same way there again next – those changes would need to be made quickly and as a united front across the markets and nations around the world. The Economic European Union would be a good place to take the immediate steps and Joseph Stieglitz had noted some good ideas that would work in tandem with the other two which were published in an article yesterday in SkyNews UK. (which is below, along with some 2008 news links about the banning of short selling that also describe the damage that hedge funds did before the ban could be made.)
- cricketdiane
***
SEC bans short-selling of 799 financial stocks
By Marcy Gordon, AP Business Writer. WASHINGTON — Federal securities regulators, in an effort to boost investor confidence in the face of a market crisis, …
SEC halts short-selling of financial stocks -… – msnbc.com
New SEC Rules Target ‘Naked’ Short-Selling – Washington Post
***
‘Burn’ The Speculators, Says Top Economist
11:37pm UK, Monday February 08, 2010
Dafydd Rees, Jeff Randall Live producer
European governments should intervene in stock markets and “burn” the speculators, one of the world’s leading economists has told Sky News.
Professor Joseph Stiglitz said authorities in the eurozone should do what the Chinese authorities did in the late 1990s when the Hong Kong currency came under attack.
The Nobel prize winner has been advising the Greek government on how to deal with its economic crisis as it poses the biggest test yet for the Euro.
The Chicago Mercantile Exchange calculates that speculators have now bet $7.6 billion in short positions against the currency.
Speaking to Jeff Randall, Prof Stiglitz said Greece’s political leaders are striking the right balance between cutting public debt and stimulating economic growth.
He said the country would categorically not require a bail-out, but urged governments to teach the speculators a lesson by intervening in stock markets, as happened in Hong Kong.
There, the speculators knew the government would respond by pushing up interest rates, which in turn would cause share prices to fall.
So the Chinese authorities bought heavily in the stock market – forcing share prices up instead and “burning” the speculators who had bet that share prices would fall.
“The speculators will always look for the weakest link. What they’re doing now is a version of the Hong Kong double play in 1997 /1998,” he said.
“When you raise interest rates, the stock market goes down, so they bet that the stock market would fall.
“They (the speculators) said we can’t lose because if they don’t defend the currency, we’ll make money on the currency.
“If they do defend it, we’ll make money on the stock market.
“What Hong Kong did in response was to raise interest rates and intervene in the stock market.
“They burnt the speculators and Europe needs to do the same thing.”
Prof Stiglitz, who has advised Presidents Clinton and Obama, is also the author of a new book Freefall: Free Markets And The Sinking Of The Global Economy.
***
My Note -
The hedge fund managers and large institutional investors are hitting the economies of the world with short plays and bets against values in order to profit which are driving those values into the ground just as they did to Fannie Mae and Freddie Mac, to General Motors, to other corporations and even to state governments across the United States and to the economic base of countries across the world. Using this particular group of “plays” has devastated economies, corporations, pension funds and bond values throughout the US and now they are playing it out against economies, markets, currencies, and assets around the world. The European Economic Affairs Commission is meeting in a couple days, and they need to take the immediate actions necessary to stop the process that is occurring before any more damage is done. Some of the things they can do are to take action that will stop the effects of this process are -
1. Arbitrarily change the number of shares that can be traded in one group, the value of individual plays made on the same day or in the same week and within the same trading session from any one player — these volume blocks need to be capped to prohibit moving huge blocks of shares at one move which can be used to manipulate values and absolutely does destabilize values and markets. The dramatic value shifts are occurring because individual fund managers can make plays which move tremendous blocks of shares or bonds or short plays at the same time which can devalue or re-value these assets in periods of time that are to short to be absorbed. This one thing could go farther to stop the immediate devaluations that are occurring than any one other thing which have been allowing them to hit and run and profit.
2. There needs to be an immediate end to the short selling, bets against the values in order to drive them down, dumping the bonds as huge blocks, and other plays designed to profit when the values plummet – these practices need to be prohibited or banned entirely and immediately. When these types of plays are allowed, they profit no other beyond the hedge fund player making these bets and does so at the expense of the entire economy and the overall markets. They have so far brought down entire corporations by doing it, destroyed the economic values of entire asset classes using this process and are now going from playing field to playing field around the world destabilizing economies by using it.
3. If anyone should be paying for the losses that have been created in this marketplace, to government treasuries, to states’ budgets, to national assets, to the values of national corporate assets – it is the very banks, financial institutions, investment houses and hedge fund managers that sold the world a bill of goods in order to line their own profits. They knew the risks. They knew the outcomes. They knew the real value of what they were selling and that the way they were suggesting it could be used to make money create more money was inherently destructive. They knew it would destroy currency and real property values and real asset values. They knew it could rob the money sitting in large pooled reserves that did not belong to them for their use as a gambling fund with no consequences to them for any losses they incurred. And, they knew that if and when those losses occurred, those pool values, fund values, share values, asset values, currency values, corporate substance values and property values would be stripped to nearly nothing while they profited personally and collectively. They knew and those profits were illegally, immorally and unethically acquired. Why should they keep getting to do it at expense of every citizen, family, community and nation in the world?
4. The note by Joseph Stiglitz makes sense which was printed in SkyNews, about a method of stopping the plays by the hedge fund managers and the damages they are causing which are currently undercutting the asset values of the economies in Greece, Portugal, Spain, the European Union, among others and that have already impacted Ireland, Germany and brought down Iceland’s economy and financial institutions to insolvency. The method he explains has been used in Asia effectively and could be used to stop the desirability of those specific plays which devalue assets, currencies and economies.
5. Deficits in state governments have been created from the same use of state funds to invest and leverage while using those increased value pools to cover actual operating costs and projects. This process only works when the return is positive and when the revenues to cover the leverage continue as income streams at increasing levels. This has now resulted in huge deficits that cannot be made up in any other way than operating at a very basic level of insolvency or not operating at all, as has happened across the board in every arena from state and local governments to corporations that now no longer exist to banks that have been absorbed by FDIC measures which seized assets and liquidated them in order to make good on the financial imbalance. This is not a game.
There are real consequences being born and experienced by every living person and community. Tremendously strong institutions, corporations, budgets, nations and assets that have been in existence for long periods of time and successfully survived every insult and danger in between have been brought to absolute destruction and been dismantled, bankrupted, and dissolved as a result of the recent economic and financial business, banking and investment methods. Money that is only used to make more money using leverage of 40 to 1 or 72 to 1, (or by using other people’s money to gamble and to hedge gambles and to cover losses on bad bets in the hundreds of millions of dollars with no vested interest in the process) has destroyed the economic stability of every country it has touched.
Stopping this process and recreating it in an appropriate financially sound manner isn’t a matter for bankers to decide nor for them to influence any longer – their vested interest is to continue participating in insider trading, being an internal hedge fund themselves and to refuse going back to their original business model where their core and primary profits were derived from lending money.
- cricketdiane
Babcock and Brown – the wind / ocean energy project that is on permanent no-go because the funds went into their investment group which is now insolvent and bankrupt. Off the coast of Portugal, there is no going forward with the project nor any way to recoup the funds that were hijacked by those investors which were intended for the project such that it can proceed. The project was intended to benefit the people of Portugal and to make progress on providing alternative energy production systems which is why the money was made available for it to be established. The only thing that money has done is to line the pockets of the investment group and Wall Street brokers who now live without consequence for having stolen it. This situation has been repeated over and over and over around the world, in every country, impacting every community and undermining progress in every single arena of worthwhile projects that were underway.
There has to be a way to prevent these investment groups from raiding funds and assets from companies, institutions, corporations, pensions, pension funds and state budgets. When these investment companies are created with the intention of buying companies to raid their assets, leverage against the companies’ future earnings in order to line the pockets of the investment group, and dismantling the future opportunities of the companies’ solvency AND PROFITS, they are doing it to the advantage of no one but themselves. They have to be discouraged from continuing in this process across the world.
They have no vested interest in the building of the company and its assets, neither originally nor at the time when they become involved with it, and the purposes, mission and intent of the companies are in no way aligned with their own. The goals of these investment groups are only to hit the company for all they can, dismantle as much as they can, leverage against the company assets as greatly and quickly as they can and to walk away with as much of the profits now and in the future as their own to use for their own personal benefits. The intent of these individual investors and investment groups is nothing more than to underwrite their lavish lifestyles, to tally a notch on their own status for having done it and to serve their ego for getting away with legally robbing the system blind at everyone’s expense without consequence.
(my note – cricketdiane, 02-09-10)
***
http://www.yale.edu/investments/
http://www.yale.edu/investments/Yale_Endowment_08.pdf
(see article from bloomberg below my note)
My Note -
The Yale endowment fund and other higher educational institutions which are national assets are stealing from the school’s programs, departments, capital projects, science centers, faculty chairs, services, scholarships, long-term viability and operating budgets, in order to cover the losses from their investments using endowment funds. Instead of starting from the value of the endowments as they stand now and rebuilding them, they are literally stealing from the school’s and education resources they are designed to serve in order to bring the endowment value back to the level where they started before they lost hundreds of millions and even in some cases, billions of dollars from it.
The newspaper article from Bloomberg and BusinessWeek indicated that 60% of the capital projects are being cut. There is literally a $1 Billion dollar science center that is being put on hold at Yale at a time when our national interests can only be served by continuing to be more competitive in the arena of a greater quality in higher education and in those educational institutions that provide them. At the time that we most need the brain trust and intellectual assets of these institutions to be confronting and solving the problems that our world is bowing under, their minds are worrying about whether their position will be cut or their department robbed of its funding or their buildings taken from them to use for a gymnasium instead that was stopped in the tracks of its building process.
Dartmouth is reported to be cutting staff and faculty. Other universities are likely doing the same thing. Departments are being stripped of their ability to provide a globally competitive education and to exist as a globally competitive educational institution of higher education by the insistence of these endowment fund managers and their investment account managers in Wall Street to use “robbing the school” to restore the endowments from their investment losses back to their original monetary level. This method as a solution will result in cutting the legs off these schools for the next ten years and maybe beyond, at a time when they are most needed to participate and be national assets.
We can no longer accept “business as usual” and the methods that are being applied do not take into account that the underlying facts of these economic and financial situations today are different than they were at any other time and during any other financial recession, depression, and economic crisis. New pathways must be made and uniquely suited combinations of previously used methods, parts of methods and new action choices must be woven together in flexible ways to create workable solutions that uniquely apply to the current crisis and its aftermaths.
- cricketdiane
Bloomberg
Yale to Cut Capital Spending by 60% After Endowment Losses
February 08, 2010, 01:23 PM EST
By Michael McDonald
Feb. 8 (Bloomberg) — Yale University, the second-richest institution of higher learning in the U.S., will cut its capital program by 60 percent to $250 million next year after endowment losses, according to bond offering documents.
“Until greater funding becomes available, capital expenditures will continue although at a slower pace,” the university in New Haven, Connecticut, said in documents released ahead of the sale of $540 million of tax-exempt securities this week through the Connecticut Health and Educational Facilities Authority.
The school’s endowment, second to that of Harvard University, fell to $16.3 billion from $22.9 billion in the 12 months ended June 30. Yale will delay as much as $2 billion in capital projects over the next five years, university President Richard Levin said in a letter a year ago.
School endowments lost on average 18.7 percent in the year ended June 30, according to the National Association of College and University Business Officers. The losses are forcing schools to rein in capital programs after boosting long-term debt by 54 percent in fiscal 2009, according to the survey of 842 of the institutions released on Jan. 28.
Endowment Losses
Harvard suspended work early this year on a $1 billion science center after the value of its endowment fell to about $26 billion in the year ended June 30, from a peak of $36.9 billion in 2008. The university in Cambridge, Massachusetts may cut its capital spending in half to $500 million a year, according to a report last year from Moody’s Investors Service.
Yale’s capital spending on facilities grew by almost six times between 1998 and 2008 to a record $568.9 million, according to its most recent annual financial report, and is on pace to reach $600 million this fiscal year, which ends June 30, according to the bond offering documents.
Levin and Provost Peter Salovey said in a letter last week that the school will cut more than $50 million from its 2011 budget, partly by freezing officers’ salaries, and is seeking another $100 million more in savings.
Tom Conroy, a Yale spokesman, confirmed the data from the bond offering documents and declined further comment.
–With assistance from Oliver Staley in New York. Editors: Stacie Servetah, Robin D. Schatz
To contact the reporter on this story: Michael McDonald in Boston at 
+1-617-210-4639
or mmcdonald10@bloomberg.net.
To contact the editor responsible for this story: Mark Tannenbaum at +1-212-617-1962 or mtannen@bloomberg.net
***
My suggestion -
First of all, the economics professors, financial academics, business school chairs and faculty members need to get nosy about these Yale and other endowment and operating funds. The account executives and managers handling these events are not in any way prepared for the reality of the situation that currently exists. This is not, nor has it been a six month downturn which quickly and effectively turns around. The methods they are using to resolve these issues are not adequate nor appropriate to the task.
The intellectual capacity of the academic community is needed right now to apply their uniquely suited knowledge and understanding to these real situational crises that have been manufactured by the overall economic gaming process. These skills that have educated the account and fund managers in the first place can be used to resolve the issues that have been created by playing with these funds in the way they were taught. These business and investment strategists have been operating under the “assumptions” that are the result of what they were taught.
Second, as with the state of California and its “budget shortfall” of minus $19.9 Billion dollars, any and every educational institution, pension fund, state budget or other corrupted financial book that has been caused by excessive losses in the investment pools – the answers to resolve the shortfall must start at the top, not at the bottom of the balance sheet.
Where the State of California, universities and others have over 80 lawyers on staff making $187,000 a year each in several departments, hordes of administrators making $300,000 a year plus, scores of departments with armies of account managers and investment managers making $500,000 a year and more in numbers resembling a steno pool rather than a team, the cuts at the bottom of the balance sheet simply create too little too late. Across too broad a spectrum cuts are being made which accomplish a vast destruction in solvency and competitiveness while not creating any real “savings” in costs and accomplishing too little, too late to make any real difference. The answers are available which will work and that will provide workable solutions. But the idea that broad, sweeping cuts in costs across the bottom and middle of these organizations will solve these economic and financial problems is costly in the long run while doing little to ensure solvency in the short run so long as the top highly paid members continue padding their pockets and insuring their positions with little merit to show for it.
The viewpoint that suggests it can be done that way relied upon two important assumptions which are no longer accurate. One of these is that “appearing to be profitable and solvent will insure confidence and work an organization through a short rough period.” And, two is that “cost cuts that result in a current bottom line profitability figure have no bearing on the long-term competitiveness, profitability or solvency of the organization.” These are false based on the current facts about the US economy and economic basis, and these are also false based on the new facts in play around the world and within the overall global economy. That is why, old methods of resolving these issues must be made into a different method and process which takes these new facts into account and new methods must be found.
The brain trust of our intellectual and academic communities can be applied to create these new solutions and to modify old solutions to make them more appropriate.
Now that the decisions of the endowment fund and investment fund account managers have destroyed the competitiveness of these organizations in order to cover the losses of their gambles with the funds, there is a school called Yale, which has no competitive edge as the best of the best. Why would anyone want to pay what it costs in tuition to go there? Now, that the state of California has become the land of poverty instead of the Golden State of Prosperity, why would anyone want to do business there, live there or create innovative opportunities there in the future?
Suggestions that I have which could help to absorb the short term losses are:
1. Increased revenues - for the state of California, this could include charging a higher percentage in royalties and higher fees to the resource licenses that the oil drilling platforms and the oil drilling companies enjoy throughout the state. These fee arrangements have always been unnaturally low and could cover most of the state’s deficit.
For Yale and other globally competitive universities, an increase in revenue could be found as a result of increased activity in research and technology transfer licenses and royalty agreements. Along with co-branding agreements concerning those technology transfer deals, the university endowments could be rebuilt quickly and effectively without stripping the colleges of their capital building projects and operating budgets.
2. Remove and cut costs at the top, rather than at the bottom – these institutions, organizations and state budgets were never intended to be operated like a hedge fund. The staggering number of administrators, lawyers, accountants and other highly paid white collar profiteers, including investment managers needs to be cut. Positions and departments serving the same purposes in these areas of attorneys, investment advisors, accountants, more lawyers, administrators to administrate administrators and other nonsense of the same ilk, need to be amalgamated (combined) into single contract teams that apply themselves to the tasks as needed. The continuing bonus pools, expensive perks and junkets, exorbitant salaries, obscene salary increases and per diem increases need to be stopped immediately. No one is going to Harvard or Yale at the costs that requires in order to make sure that a team of lawyers and investment managers have a job there. That is a misuse of the funds available there.
3. Co-branding, Co-leasing, corporate sponsors, increasing the patronage of the institutions, increasing the level of patronage of institutions (even states) – can also remove the shortfall losses. Alumni teams becoming more involved, and increased participation by corporate sponsors, as well as by accessing the Federal stimulus package funds, can all serve to cover the immediate needs of these organizations. Creative co-leasing agreements, franchising the name and brand of the institutions including the state of California, can create huge and immediate liquid capital and profits while remaining competitive. When it is done right, the competitive edge is actually enhanced insuring the future foundation and continuing economic opportunities for the organizations.
4. Change the thinking paradigm that insists on short term solutions to these inherently long term problems – there is no way that solutions used on historically situational economic crises are going to work in the same way when applied to this economic crisis and on the rippling effects of its impacts. The situation is different today, the economic factors are different, the economic facts are different, the world is a participant rather than an afterthought and the entire dynamic of time and value is different. This is going to require solutions created that may draw upon those previously used but cannot afford to be imprisoned by those ways of thinking. A solution which only accommodates a six – nine month downshift in the economy is not going to work on a total economic devastation that has already occurred which lasts far beyond a six – nine month window of time. The impacts are far deeper and broader than those kinds of solutions can accommodate.
- cricketdiane
***
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Development of an international electronic portal (www.unctad.org/infocomm), in which more than 40 commodity profiles containing practical and added-value information on market structures and innovations will be available;
