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August 17, 2012

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From the article:
Known as an obsessive trader who had the highest returns at the firm, Mr. Corzine frequently inhabited a desk on the trading floor.

He'll get investments because he has a long career of being good at trading. Also, it won't be a mutual fund.

There are people from whom Corzine will not steal; and there are people Corzine will steal for. If you're in the first category, you are OK. If you're in the second category, you're golden.

Madoff ran his scheme on this. One, it was an afinity scheme, he solicited Jewish investors, who believed because he was in their ethnic group he would not steal from them. Also, he seems to have encouraged the impression that his high returns came from some kind of insider trading, encouraging people to think they were getting in on something special. A lot of rich people invested without due diligence, and a lot of rich people collected big fees just for handing money to Madoff, without due diligence. The wink wink discouraged people from asking questions, in fact acted as kind of an assurance.

The small investor should stay the hell away from Corzine. Even if you are big enough to have confidence he won't steal from you, you should still stay away; he doesn't seem to be a real good honest investor. If, however, you are powerful and connected enough as a member of the financial gangster class, it may be a good idea to invest money with Corzine, because he will steal for you. He has zero morals and is untouchable; he can do anything and get away with it. It's like a Mafia guy giving money to another Mafia guy for some criminal enterprise; he can't go to the police but he doesn't need to.

JP, as usual, is missing the forest for the trees. The whole financial system allows powerful -- if recently humbled -- people to continue their shell games from one entity to another. It's similar to policies where a violent child is kicked out of school A for only to be enrolled in in school B -- nothing has really changed.

Also, the fact that he's now gambling with his family's money should tell you a lot about the role of accumulated capital in allowing bad actors to continue transferring value from others.


Patrick and Thrasymachus, yeah yeah yeah, my remarks were not directed at anyone powerful and connected from whom Corzine won't steal, since I assume nobody like that reads this blog anyway.

"The small investor should stay the hell away from Corzine."

The small investor won't have the opportunity to invest in Corzine's hedge fund.

Yes, my close relatives running a large UK hedge fund. They get rich with other people money. As for investors, good luck if you can make money.

I perosnally refuse to put my money into their fund.

Maybe it's early but where is the lolertarian brigade at? Silent as always when presented with real world case studies. They're a lot like liberals as both groups hold utopian worldviews. No surprise at all politically oriented young people are drawn to these ideologies. They sound nice in theory but mean little in practice. Corzine makes their head spin because he's rich, a Democrat, and at the upper echelons of society no matter his ineptitude, possibly criminal behavior, and value transference

If I was looking to pay somebody to invest my money, my first choice would be the guy with the most connections. A guy who is so connected prosecutors and regulators won't touch him could make me a lot of money with dirty deals, presuming that was his goal and not taking my money and running.

99% of the money made on the stock market is from shady stuff, insider trading, government picking winners, etc. If you live in a corrupt mafia society the smart money bets on the mob.

On the topic of value creation and how it's handled by society. Here's an article from Fortune in 1955:

http://features.blogs.fortune.cnn.com/2012/05/06/classic-top-500-executives/

A major theme is how the progressive income tax (I think around 90% on equivalent incomes over 3 some million dollars) have changed and shrunk the extravagance of the wealthy. Here's some more analysis of how it worked.

http://the-american-catholic.com/2011/01/28/rewinding-taxes-to-the-good-old-days/

I used to be a low tax guy, but I think there are more knock on effects of these higher tax rates then just fiscal effects and I'm pretty convinced that not all the effects are bad.

"Commenters have brought to my attention"

*A* Commenter.

"You really do have to wonder why someone would invest in a Corzine mutual fund; the worst case is that he does to your money what he did to MF Global."

The wealthy clients he's looking for wouldn't invest with him to earn money, unless they're stupid. Instead, they'd be looking to make connections with Corzine whose connections appear to include federal prosecutors and judges...

"On the topic of value creation and how it's handled by society. Here's an article from Fortune in 1955:

http://features.blogs.fortune.cnn.com/2012/05/06/classic-top-500-executives/

A major theme is how the progressive income tax (I think around 90% on equivalent incomes over 3 some million dollars) have changed and shrunk the extravagance of the wealthy. Here's some more analysis of how it worked."

Pointing to the example of the booming American 1950s economy to defend high taxes and heavy handed government regulation is a weak argument. The boom of the 1950s was attributable to the fact America was the only major world economy not to have had her industrial facilities firebombed. Once Europe and Japan got back on their feet in the 1960s and 1970s, FDR's progressive economic policies were exposed to be inferior to the free market model pursued by Reagan in the 1980s and the laissez faire American economy of 1776 to 1932.

"Maybe it's early but where is the lolertarian brigade at? Silent as always when presented with real world case studies."

Nothing in this article disproves libertarian economic policies because the "value transference" proponents don't have a better alternative to letting free market actors decide what value is. The only alternative value transferers have to capitalism is letting the government decide what constitutes value creating activities, a solution that is worse than the problem.

Where has government demonstrated it can determine economic value better than the private sector? Solyndra and green energy scams? The college bubble where the middle class is being strangled by non-dischargeable government loans? Social Security where the ROI on the decades worth of payroll taxes American retirees have put in is so lousier than even the weakest of retirement investment funds?

Has anyone else noticed that whenever people get prosecuted for white collar crimes they're not part of the HYP club? Seems like you're set for life if you attend the right schools. It's not like ivy leaguers aren't misbehaving but they do get away with it.

KD,

If taxes do up, executive types will just find ways to spend company money on themselves such as more corporate jets, cars, country club memberships.

He won't succeed. Traders, when they are successful at all, rely upon massive leverage for their success. He will never wield that leverage with a hedge fund. In fact, I predict catastrophic failure. Since he won't be able to lever up "safe bets", he will swing for the fences with less levered bets and lose big time.

He and Meriwether should team up. 3 time losers each.

One problem with stealing silly amounts of money is doing anything with it. I wondered how Corzine was going to try. He is starting the biggest money-laundering operation evah.

"The boom of the 1950s was attributable to the fact America was the only major world economy not to have had her industrial facilities firebombed. Once Europe and Japan got back on their feet in the 1960s and 1970s, FDR's progressive economic policies were exposed to be inferior to the free market model pursued by Reagan in the 1980s and the laissez faire American economy of 1776 to 1932." - The Undiscovered Jew


I'm not so sure about this. A lot of good came out of FDR's era in office financial regulations in particular. Modern suburbia was enabled by the government enterprises and the fixed mortgage. Moreover you can't cite the unique circumstances regarding post-WW2 but then ignore them from the 1776 to early 20th century period. I'd contend this was an even luckier windfall. America was a land rich in resources and ripe for the taking. No country will ever again rise to prominence as quickly as we did.

"Has anyone else noticed that whenever people get prosecuted for white collar crimes they're not part of the HYP club? Seems like you're set for life if you attend the right schools. It's not like ivy leaguers aren't misbehaving but they do get away with it."

Ivy leaguers get especially jealous and resentful when non-ivy leaguers who become richer than them, and thus go out of their way to bring them down.

It could also be that ivy leaguers are smart enough to get away with their white collar crimes and choose their crimes more wisely or smart enough to get rich without having to resort to crime in the first place.

@Conquistador --

If you include business schools, the Ivy League is pretty well-represented when it comes to white collar crime: Milken (Wharton), Skilling (HBS), Phil Bennett (Harvard), etc.

Off topic but I thought this article was interesting (if a bit long):

http://www.sneakerfreaker.com/articles/Why-Are-Kids-Getting-Killed-For-Their-Jordans/

It talks about the violence at sneaker releases. I like the contrast between these events and Apple releases. One commenter mentions it but seems to miss the obvious reasoning.

Germany and Japan are extremely regulated economies to the left of America. This was true as much during their rise as today.

"A lot of good came out of FDR's era in office financial regulations in particular."

Indeed. A good example can be found in the image below:

http://www.billfoster.com/media/uploads/BankFailures1864-2009.png

In fact, FDR's regulation was so effective that most Americans forgot there was such thing as banking crises. Before FDR, crises similar to the one in 2008 happened on a regular basis.

"Corzine makes their head spin because he's rich, a Democrat, and at the upper echelons of society no matter his ineptitude, possibly criminal behavior, and value transference"

Corzine => white privilege (?)

Ironically the "99%" left isn't calling for his 1% head.

Pace Undiscovered Jew, Governments make productive value decisions all the time. Governments tend to be very bad at picking individual winners (like Solyndra or the Minitel in France), but governments can outperform free markets when they create the infrastructure for an industry and then let private corporations compete against each other in that industry within a government dictated system of rules and even price supports and subsidies. There are any examples of this - the internet, the US areospace industry, the Japanese auto industry, the German steel industry, British banking, probably 90% of the Chinese economy. All of these industries are successful, and characterized by significant government interference, collusion and direction.

"Moreover you can't cite the unique circumstances regarding post-WW2 but then ignore them from the 1776 to early 20th century period. I'd contend this was an even luckier windfall. America was a land rich in resources and ripe for the taking."

US growth was not driven by natural resources when America surpassed Great Britain as the largest world economy in the late 19th century. Our economic expansion was spurred by industrialization and manufacturing development. And this manufacturing renaissance was supported by a corporate friendly policy environment.

"Ironically the "99%" left isn't calling for his 1% head."

Corzine is more like the top 0.0001%.

"Germany and Japan are extremely regulated economies to the left of America. This was true as much during their rise as today."

You're missing the point; Germany and Japan had NO industrial capacity in the first few years following WWII*. The spent most of the 50s rebuilding a manufacturing base more or less from scratch. And it was only in an environment where America essentially had no major foreign economies to compete against - whether capitalist or non-Communist socialist - that progressive economics looked compatible with rapid economic growth.

And once European and Japanese assembly lines began rolling again, our progressive run industrial capacity lost it's edge and was only revitalized by Reagan's free market economics. That Japan and, in particular, Germany managed to successfully compete against American manufacturing despite having overregulated and overtaxed economies doesn't indicate socialist policies are preferrable to capitalism. If anything, Germany and Japan would have competed *more* successfully against the FDR-ized economy of America in the 1960s and 1970s if they taxed and regulated themselves less.

* In the late 1940s and through most of the 1950s, America's economy comprised ~50% of global GDP. This percentage gradually declined to about 25% where it has remained for the past few decades.

TUJ,

America wouldn't have developed a manufacturing sector in the first place if it weren't for tarrifs. We were a protectionist country from 1776 until after WWII, when we embraced unilateral free trade as a way to support allied economies and prevent them from going communist.

If Japan and Germany had higher taxes and more regulation then the "FDR-ized" economy, why did they out compete the "FDR-ized" economy. If Reagen fixed things why have we still been losing to them since then?

Sigma, blog about the college tuition/college value transference crisis and about accelerated 60 credit degrees and government mandated price controls on tuition hikes, please?

The tuition crisis is getting worse as more white Americans have their money stolen to fund leftist activist professors of every kind:

Five States Where College Tuition Is Soaring

http://online.wsj.com/article/SB10000872396390444772404577589294216364300.html?mod=googlenews_wsj

California. Average tuition and fees for in-state student: $9,022 in 2011-12, up 20.5% from a year prior and 98.3% from five years ago.

snip

Arizona: Average tuition and fees for in-state student: $9,428 in 2011-12, up 16.8% from a year prior and 101.7% from five years ago.

snip

Georgia. Average tuition and fees for in-state student: $6,808 in 2011-12, up 15.9% from a year prior and 74.2% from five years prior.

snip

Washington. Average tuition and fees for in-state student: $9,484 in 2011-12, up 15.7% from a year prior and 67.3% from five years prior.

snip

Nevada. Average tuition and fees for in-state student: $6,044 in 2011-12, up 3.7% from a year prior and 65.8% from five years prior.

More on the college value transference crisis for you to blog about:

Report: College tuition up more than 1000 percent in 30 years.

http://www.wkyc.com/news/education/article/256563/35/Report-College-tuition-up-more-than-1000-percent-in-30-years

KENT -- A new report shows the cost of a college degree has increased more than 1,100 percent in 30 years.

A Bloomberg report shows tuition is outpacing food, many other goods, even medical expenses, since records begin in 1978.

More on the college value transference crisis for you to blog about:

Mythbusting 101: Uncomfortable Truths Your College Won't Tell You - Part II

http://www.forbes.com/sites/markhendrickson/2012/08/19/mythbusting-101-uncomfortable-truths-your-college-wont-tell-you-part-ii/

5) “Going deeply into debt for some degrees can ruin your life.”

One of my wife’s former pupils graduated with a bachelor’s degree in theatre and $125,000 of student loan debt. The odds of being one of the relatively few theatre majors who can earn enough money in theatre to repay a debt of that size are not encouraging. Indeed, after graduating and finding no work in the theatre business, this dear person realized that she had made a horrible and costly mistake. The mass of debt hovering over her not only takes a bite out of her modest income, but has diminished her marriage prospects and postponed for many years (perhaps permanently) her desire to have children. She literally can’t afford to live her life as she had hoped.

Why didn’t someone in her college’s financial aid office warn her about taking on so much debt for such an uneconomical degree? See the first truth in Part One: All but the super-endowed colleges are businesses that are hungry, often desperate, for revenue. You can’t expect employees of a college to tell students that they shouldn’t borrow so much money to go to school there. Warning: college financial aid offices operate with a built-in conflict of interest, and they represent their college’s best interest, not yours.

snip

Wisconsin Governor Scott Walker has proposed a “flexible university” that will reduce students’ costs by giving them credit for knowledge they acquire independently.

These developments are portentous. Forward-thinking businesses may shatter the dogma that someone needs to amass 120 credit hours in order to receive a diploma by offering apprenticeships that include providing whatever coursework someone needs to work in that type of business.

"America wouldn't have developed a manufacturing sector in the first place if it weren't for tarrifs. We were a protectionist country from 1776 until after WWII, when we embraced unilateral free trade as a way to support allied economies and prevent them from going communist."

I'm not sure if protectionism made a difference (positive or negative) towards our industrialization. From 1776 to about 1830, our protectionism only defended farmers because our economy and trade was primarily agrarian. After 1830-1840 was when our manufacturing development took off, but foreign competition may not have been much of a hindrance because it was expensive and time consuming for Europeans to ship goods to the US by boat.

In addition, we moved towards a free trade model towards the end of the 19th century when our industrialization matured and businessmen wanted to open Europe, Latin America and parts of Asia to our goods.

Without protectionism, we still would have industrialized rapidly. If anything, stealing British intellectual property that related to Britain's manufacturing processes in the early 19th century was much more beneficial to us than trade protectionism.

"If Japan and Germany had higher taxes and more regulation then the "FDR-ized" economy, why did they out compete the "FDR-ized" economy."

The prior lack of serious foreign competition made American big business lazy.

"If Reagen fixed things why have we still been losing to them since then?"

Japan has been in a rut since the early 1990s and has seen their own manufacturing advantage erode against other Asian manufacturing nations.

And Germany has suffered weak GDP growth since the early 1990s. Their manufacturing base is still strong, but that's more in spite of Germany's socialist policies, not because of them. There's no reason why a capitalist Germany couldn't be as rich per capita as free market Switzerland.

One other thing about Corzine that I haven't seen mentioned in this thread is that Corzine is a HUGE liberal. Corzine is a former US Senator and Governor of NJ and his record in elected office is across the board lib.

Tuition is soaring.

Okay. Where is the money going?

Is it going to NAM's with lower HS gpa's than white and Asian kids paying full fare?

I mean it is very hard to attract NAM's with decent scores and grades because some other school will give them a free ride.

Where else is the money going? More support staff aka pointless chick jobs?

Higher salaries?

Cushier dorms?

What?

"If Japan and Germany had higher taxes and more regulation then the "FDR-ized" economy, why did they out compete the "FDR-ized" economy. If Reagen fixed things why have we still been losing to them since then?"

Outperform the US how? Those economies are heavily dependent on exporting to the United States. If not the US, where else could they move their output?

"If Japan and Germany had higher taxes and more regulation then the "FDR-ized" economy, why did they out compete the "FDR-ized" economy. If Reagen fixed things why have we still been losing to them since then?"

We haven't. The US still has a significantly higher per capita GDP than Germany or Japan, despite HBD, and they have fallen even further behind us in the last couple of decades. There is no way I would trade our economy for theirs.

"Okay. Where is the money going?"

The money goes to everything you complain about.

The money goes to liberal arts professors (mostly through the general education credit hours because few students major in liberal arts.)

White families are subsisiding nonwhites because they earn too much money to qualify for aid.

Liberal arts students get lower tuition rates than STEM and business students because the colleges say it's not fair the later group of students who will on average earn good money pay the same as liberal arts students who will have lower incomes upon graduation.

It goes to diversity seminars and speakers, feminist slutmartch rallies, green awareness week.

The tuition goes to more paper shufflers and bureaucrats.

Ever single liberal pet cause under the sun is funded by these tuition increases.

"I'm not sure if protectionism made a difference (positive or negative) towards our industrialization. From 1776 to about 1830, our protectionism only defended farmers because our economy and trade was primarily agrarian. After 1830-1840 was when our manufacturing development took off, but foreign competition may not have been much of a hindrance because it was expensive and time consuming for Europeans to ship goods to the US by boat."

TUJ,

Our Southern farmers didn't need protectionism, because their labor costs were negligible. And Europeans (Britain in particular) profitably shipped their manufacturing goods. You should do a little homework on this instead of speculating. For starters, see this illuminating piece by Ian Fletcher: http://www.huffingtonpost.com/ian-fletcher/america-was-founded-as-a_b_713521.html

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