A rather odd coincidence.

Two top hedge-fund managers from the purported Wall Street mafia have left the scene, in different ways.

Goldman’s chief hedge-fund manager, Pierre-Henri Flamand (chief of GS Principal Strategies), retired in February after 15 years at Goldman. Flamand was with Principal Strategies from 2002 -2007, and then turned it into a hedge-fund in 2008, is starting his own fund. He’s being replaced by another manager from GSPS. Goldman has been accused of conniving with select hedge-funds to conduct bear raids on banks and governments.

Meanwhile, Adam Sackett, co-chief of trading at Third Point Capital, died on March 11, March 10, Wednesday night, apparently from a sudden bacterial infection. Third Point is one of the hedge-funds accused of colluding with David Einhorn’s Greenlight and SAC’s Steven Cohen in manipulative activities. Sackett had previously worked at Jim Chanos’ hedge-fund Kynikos (suspected by some to be part of that group), according to this death notice in the New York Times.

Note: Bankruptcy examiner Anton Valukas’ report on the demise of Lehman came out on March 11, 2010, the day after Sackett died.

Our condolences to the family.

In a letter to investors, posted at scribd, Daniel Loeb, Sackett’s co-chief at Third Point, called him “brilliant, kind, and funny, ” says the WSJ.

Last year, Third Point lost three senior officers, its chief operating officer, Brian Wilson, chief risk officer, Devin Dellaire, and head of investor relations, Tom Kratky.

And what’s been happening on the Madoff front? According to a long Wall Street Journal piece, he was allegedly beaten up in prison in December by another prisoner serving time for a drug conviction. He’s also been seen socializing with a Colombian crime family boss, Carmine Persico.

(From wiki:

“As of November 2007, Carmine “Junior” Persico still remains the reputed Boss of the Colombo crime family, with current street boss Thomas “Tommy Shots” Gioeli, and former Persico rival, John “Sonny” Franzese as the Underboss, but due to parole violations, Andrew “Andy Mush” Russo is the acting Underboss instead of Franzese, with the Aloi brothers, Vincenzo and Benedetto, as alleged Consigliere.

Carmine Persico has reportedly been running the Colombo crime family since the 1970s, days after Joseph Colombo was shot, and Persico’s name has been mentioned in dozens of murder-cases since then, as he has been in charge of the Colombos for over three decades. During his 50-year-membership with the Colombo crime family, he has survived three internal wars, his life sentence, and allegedly been shot more than 20 times. Persico is also only one of three defendants from the Mafia Commission Trial who received 100 years and is still alive.

Still, Persico remains the Boss of the Colombo crime family. As of March 2009, Persico is serving a life imprisonment at the Butner Federal Correctional Institution (FCI) Medium in North Carolina. His projected release-date is March 20, 2050, effectively a life sentence.^[1] It has been reported that Persico socializes with fellow inmate Bernard Madoff.^[4])”

Meanwhile, court appointed trustee Irving Picard is suing Madoff’s sons for $198 million, for dereliction of duty as his employees.

The two sons, as well as Madoff’s brother, are being charged with tax fraud.

Altogether five others have been charged in connection with this scheme, two having pleaded guilty and the rest maintaining their innocence.(Lila: I’m not clear from the WSJ piece if the two sons are part of the five or in addition.)

On March 17 (Wednesday) a federal grand jury also indicted Jerome O’Hara and George Perez, two programmers who allegedly developed the software that helped Madoff with his scheme. (More at Daily Finance).

Capitalism & Morality

“This idea that the government has services or goods that they can pass on is a complete farce. Governments have nothing. They can’t create anything, they never have. All they can do is steal from one group and give it to another at the destruction of the principles of freedom.”
-Ron Paul

“To the masses, the catchwords of Socialism sound so enticing… so they will continue to work for Socialism, helping thereby to bring about the inevitable decline of the civilization which the nations of the West have taken thousands of years to build up.”

-Ludwig von Mises

Please join us in a Seminar to discuss the vital importance of social and economic liberty. We will explore how compromising liberty and morality in search of superficial egalitarianism and seeming security has put the West on a slippery and dangerous path.

Program (Saturday, 8 May 2010):

• 8:30 to 9am: Introduction by Jayant Bhandari
• 9 to 11am: “Character & a Free Society” by Lawrence W. Reed, President, Foundation for Economic Education, USA. As a journalist, Lawrence visited 69 countries; spent time with Contra rebels in Nicaragua; lived with Mozambique rebel forces; traveled with freedom activists in Poland
• 11 to 11:15am: Coffee
• 11:15 to 1:15pm: “Defending the Undefendable,” by Walter Block, Harold E. Wirth Eminent Scholar Chair in Economics and Professor of Economics at Loyola University New Orleans and Senior Fellow with the Ludwig von Mises Institute, USA
• 1:15 to 2:15pm: Lunch
• 2:15 to 4pm: “How Capitalism Tames the Vices,” by Lila Rajiva, author of The Language of Empire (Monthly Review Press, 2005)  and the bestselling Mobs, Messiahs and Markets (Wiley, 2007), co-authored with Bill Bonner
• 4 to 4:15pm: Coffee
• 4:15 to 4:45pm: Closing remarks by Paul Geddes, Vice-President, West Coast Libertarian Foundation, Canada

Cost: Early-bird offer; $80 per person, $40 for students; lunch & coffee covered by the admission fee

Date: Saturday, 8 May 2010

Venue:
Event Rooms 1300-1500
Segal Graduate School of Business
500 Granville Street
Vancouver, BC, Canada V6C 1W6
(This is an independent event, not affiliated with the School)

“Contrary to the vulgar belief that men are motivated primarily by materialistic considerations, we now see the capitalist system being discredited and destroyed all over the world, even though this system has given men the greatest material comforts”

-Ayn Rand

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”
-Murray Rothbard

“…if we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion.”
-F. A. Hayek

“The free market punishes irresponsibility. Government rewards it.”
-Harry Browne

“Morally acting man seeks profit; immorally acting man seeks plunder.”
-Jay S. Snelson

REGISTER:

Jayant Bhandari
1502-1189 Melville Street
Vancouver, BC, Canada V6E4T8
Telephone: +1-604-288-7569
Email: contact@jayantbhandari.com

Link to the Flyer

Zerohedge points out what seems to be obvious to all but those whose professional interests lie in not being able to find their nose on their faces:

“Let’s get something straight right off the bat. We all know there is a certain level of fraud sleight of hand in the financial industry. I have called many banks insolvent in the past. Some have pooh-poohed these proclamations, while others have looked in wonder, saying “How the hell did he know that?” Continue reading →

Jayant Bandhari in Liberty Unbound:

“Starting in May 2005, Canada’s National Post, a generally anti-statist newspaper, ran a series of stories on the enormous successes of India’s opening economy. On the first day of the series, most of the front page was occupied by a picture of an Indian rocket taking off. The story said that the Indian government was seriously contemplating a mission to the moon. Continue reading →

Aha! Searching for more confirmation of my theory that there’s an ongoing effort to white-wash the role played by hedge-funds/speculators in destabilizing the economy, I came across this intriguing passage at wiki, about the upcoming Oliver Stone movie, Wall Street: Money Never Sleeps, a reprise of his 1987 movie Wall Street:

“The New York Times reported that, as part of research for the film, Douglas and Stone had a dinner meeting with Samuel D. Waksal, the founder of the biopharmaceutical company ImClone Systems, who spent five years in federal prison for securities fraud.^[42] They also stated that LaBeouf, along with Stone, discussed the financial collapse with multiple hedge fund managers.^[42] Stone stated that, earlier in the summer he had taken LaBeouf to a cocktail party, organized by Nouriel Roubini, a New York University economics professor and chairman of a consulting firm who earned acclaim for predicting the financial crisis early. At the party Stone and LaBeouf discussed the financial collapse with Roubini and also
discussed hedge fund managers, who are clients of Roubini’s firm. Roubini stated that: “In this financial crisis it was the traditional banks and the investment banks that had a larger role in doing stupid and silly things than the hedge funds.”^[42] Stone also stated that he had conversations with Jim Chanos, a “prominent” hedge fund manager who had urged him to focus less on hedge funds and more on the banking system, Chanos stated: “There was a much more important story, a bigger story, in what happened with the system.”^[4]”

Wouldn’t you know it…

Of course, here at the MBP we don’t have a problem with the thesis that the investment banks behaved stupidly…and badly. We just have a problem with the accompanying non-sequitor – that the hedge-funds behaved any smarter or better.

A few made out like..er…bandits, true. But, it’s our theory, and we’re sticking to it,  that many of the ones who did – especially the ones who’re getting a boost in the media – were part of the “inner circle” of government-connected banks that essentially ran this whole racket.

Chanos seems to have been part of that clique.

And Paulson too.

It’s not government versus banks. That’s the silly black-and-white debate created for mass consumption.

It’s more like some parts of the government +some banks + some speculators versus everyone else.

With the SEC (government), “captured” by some hedge-funds and banks, any regulatory change (whether it’s more reg. or less reg.) ends up serving the same set of masters. It’s heads-I -win- tails- you- lose for them….

Unless we can start seeing this for what it is and bypass ideological rigidity, we will never be able to prevent the system being gamed.

Or, to put it in terms of those formulae beloved of financial “masterminds” who think we rubes can’t see through this baloney:

It’s not G v. B.

It’s

(s)G+(s)B +(s)S  v. EE, where ‘s’ is always a positive integer.

(Chuckle). I think I have a future as a “quant.”

Of course, all this is only the short-term fix. The long-term fix is the Federal Reserve.

But while we’re working on the illness, there’s no reason we can’t treat some of the symptoms correctly, as well.

Larry Reed:

“Equal people are not free, the second half of my first principle, really gets down to brass tacks. Show me a people anywhere on the planet who are indeed equal economically, and I’ll show you a very unfree people. Why?

The only way in which you could have even the remotest chance of equalizing income and wealth across society is to put a gun to everyone’s head. You would literally have to employ force to make people equal. You would have to give orders, backed up by the guillotine, the hangman’s noose, the bullet or the electric chair. Orders that would go like this: Don’t excel. Don’t work harder or smarter than the next guy. Don’t save more wisely than anyone else. Don’t be there first with a new product. Don’t provide a good or service that people might want more than anything your competitor is offering.

Believe me, you wouldn’t want a society where these were the orders. Cambodia under the communist Khmer Rouge in the late 1970s came close to it, and the result was that upwards of 2 million out of 8 million people died in less than four years. Except for the elite at the top who wielded power, the people of that sad land who survived that period lived at something not much above the Stone Age.”

My Comment:

The Reed quote shouldn’t be misconstrued.

Reed isn’t advocating violence against the government...he is making the commonplace observation that, ultimately, government authority is backed up by force…and he then gives examples of that force…from the guillotine (revolutionary government of France)..to the bullet (modern standing army, police officers etc.).

Now, is every one who resists paying tax, for example, going to be eliminated? Obviously not. Much more likely, they’re in for a long, tedious court battle, endless letters, petitions and hearings…culminating in a fine/penalty, confiscation of their property, possibly a jail sentence.

But let’s not get sentimental. Should you resist court orders and flee, you can be shot. Should you resist a warrant or arrest physically, it’s almost a certainty you will be shot. This isn’t the violence of the citizen. This is the violence behind Leviathan.

Pointing it out doesn’t make me an advocate of violence. It makes me realistic.

It’s why I don’t advocate physical resistance. It would be very stupid today, against the kind of arsenal the federal government has at its command. Nor do I advocate tax evasion.

Legal tax avoidance I heartily recommend, as does the IRS itself. However, I don’t see why I should regard anyone at the receiving end of state justice to be necessarily guilty of some great moral sin.

There’s legitimate authority (the cop who comes to a victim’s defense) and there’s corrupt authority (tax laws or criminal penalties applied differentially to the powerful and the powerless).They are two different things.

There are crimes that involve injustice to another human being (murder, fraud) and there are legal infractions that are based simply on dissidence from the prevailing views on economic freedom and justice (many so-called tax “crimes”). Those are two different things…

From Sauvik Chakraverti’s Antidote:

“Mint has a little piece that says one-third of all government expenditure is financed by borrowing, and one-fifth of all expenditure goes towards paying interest. They add that out of every 100 rupees spent, 14 rupees goes towards creating assets, while the rest goes towards salaries – that is, towards consumption. Note that “welfare” and poor relief also have nothing to do with production; they are all matters relating to consumption. Also note that, in India, most of the “consumption” is done by the personnel of The State itself – the politicians and the baboons.

Now, capital consumption is the highway to de-civilization. Progress and civilization has always meant increased saving and investment – that is, the accumulation of capital. This capital, when invested in production, raises the wages of labour and results in an abundance of goods and services for all. This is how, throughout history, civilizations have arisen.

What about those who “invest” in government bonds? Their savings do not go into capital creation or production. They merely finance the consumption activities of The State and they are rewarded with interest that comes from us taxpayers. How can this be called “investment”? It is not. It therefore becomes clear that all government borrowing is nothing but capital consumption – the highway to de-civilization.

I am therefore of the opinion that widespread awareness must be created about the pernicious consequences of putting private savings into government bonds. Investors should be made aware of the fact that they are destroying precious capital in a capital-poor country, and that they would be doing their bit for the nation if they made genuine investments either in the stock market, with the banking system or elsewhere within The Market. Further, public opinion must demand that all these perpetual irredeemable loans be repudiated at once. Those who will lose money have only themselves to blame, for they “invested” their money in an insolvent institution. They did not invest in The Market. So theirs were not “capitalist investments” at all. Throughout history, many foolish people (including the Medicis) have lost fortunes by lending to monarchs. Let this important lesson be learnt once again.”