2:00PM Water Cooler 7/22/15

By Lambert Strether of Corrente.


List of traitors in House and Senate, with phone numbers. Hat tip, reader Vatch. Be sure to visit them when they return to the district. If a traitor is mentioned in Water Cooler, their name is in bold.

Trade ministers from the U.S. and 11 other nations from both sides of the Pacific will meet in Hawaii next Tuesday to attempt to finalize what would be the world’s largest regional trade and investment agreement: the Trans-Pacific Partnership. But while the pact has general public support in most of the countries involved, there are also deep partisan divisions in some of them over the issue” [Pew Research].

“One major element, though, of TPP remains far too up in the air: the heart of an FTA itself—net market access gains. U.S. dairy exporters are still waiting to see commercially meaningful access for all products to the highly protected markets of Canada and Japan” ” [AgWeb].


Talking Points Memo reader survey: Readers support Sanders (44.8% to 36.6%) but think Clinton will win (78% to 16.5%) [Talking Points Memo]. Not a representative sample, but influencers.

“Sanders’ supporters, who number among the most intense partisans in the primary, have not helped close the gap” [WaPo].

The S.S. Clinton

Clinton suggests the minimum wage is a local issue [Truth Digest]. Eesh. “Leave it up to the states”?

Quinnipiac poll: “Former Secretary of State Hillary Clinton is behind or on the wrong side of a too-close-to-call result in matchups with” Rubio, Bush, and Walker [Quinnipiac]. The election is 474 days away; I don’t think these top-line numbers mean much, especially in state polls. It’s Clinton’s persistently poor trust numbers that might be more concerning to her campaign. But despite them, people seem willing to vote for her anyhow. Lowered expectations?

“A day after proposing higher capital gains taxes on short-term investors, Clinton raised at least $450,000 last night at the Chicago home of Raj Fernando, a longtime donor. His firm, Chopper Trading, specializes in high-frequency transactions and was recently purchased by Chicago-based competitor DRW” [Crains Chicago Business]. “Clinton’s summertime fundraising circuit highlights a central tension of her campaign: how to encourage financial executives to open their wallets for her presidential effort even as she comes out with plans aimed at reining in multimillion-dollar paychecks.”

Transcript of recent Iowa survey of Democrats [Bleeding Heartland].

Republican Clown Car

 Donald Trump to Tour U.S.-Mexico Border to Draw Attention to Illegal Immigration” [Wall Street Journal]. That should be fun.

Stats Watch

MBA Mortgage Applications, week of July 22, 2015:  After swinging wildly the prior two weeks, the purchase index came in little changed in the latest week” [Bloomberg].

FHFA House Price Index, May 2015: “Year-on-year, FHFA’s reading is a solid plus 5.7 percent which is the best rate since April last year” [Bloomberg]. “The index, at a level of 222.81, is about where it was way back in the bubble days of April 2006 and is 1.8 percent below its record peak in March 2007.”

Existing Home Sales, June 2015: “Existing home sales were very strong in June, up 3.2 percent to a higher-than-expected annual rate of 5.49 million which is the best since the bubble days of February 2007” [Bloomberg].

“The percentage of job seekers relocating for new positions declined in the first half of 2015, suggesting that as the recovery spreads, individuals are able to find better employment opportunities in their local market” [Econinterest]. I don’t know what the word is for a “new normal” that just bumps along rocky ground, never collapsing, never soaring, but it isn’t “recover.” “Decovery”? As in I used to be covered, but now I’m not? Or I used to have cover, but now I don’t?

Trucking index soft (but subject to backward revision and not necessarily representative [Econintersect].

“Over the last three months, Apple grew its revenues by 33%, saw its profits increase by 38% to $10.7 billion, put away more than $202 billion in cash for a rainy day — and yet lost more than $60 billion in market value in just three minutes on Tuesday” [Fortune]. “The reason for this initially mind-boggling disparity? Expectations.” I don’t know about you, but I’ve been getting an awful lot of promotional giveaway popups for the Apple Watch recently….

“[O]ne way or another there will be an enormous amount of volatility within the Chinese economy, not just because it is a relatively poor developing country, which have always been more volatile economically than advanced countries, but also because it is so highly dependent on investment to generate growth. Hyman Minsky argued that economies driven by investment are extremely volatile and overly susceptible to changes in sentiment, and he is almost certainly right” [Michael Pettis].

“John McCormick, a senior managing director at Blackstone Group LP, has been … a tireless evangelist for what are called liquid alternative investments, or “liquid alts.” Like hedge funds, they invest in everything from simple stocks and bonds to all sorts of complex derivatives and other ‘alternative’ assets. The main difference is that liquid alts are packaged as mutual funds and marketed to retail investors who can’t invest in traditional hedge funds” [Reuters]. “Though critics complain about high fees, opaque strategies and other factors that they say make liquid alts inappropriate for small investors, these products have become one of the fastest-growing types of mutual fund.”

“[M]any on Wall Street worry that junk bonds, bank loans and esoteric investments held by some of those funds will be extremely hard to sell if the market turns, leaving prices pummeled in a rush for the exits” [Wall Street Journal, “Hedge Funds Gear Up for Another Big Short”]. Not sure how “Son of Big Short” happens without CDOs.

“It is an inherent underpinning of “free markets” that they must remain open for trading during regular market hours unless there is a catastrophic event. [Yet] Greece’s stock market has been closed for more than three weeks. China is officially reporting that it is experiencing 7 percent economic growth but 20 percent of its stocks on its stock exchanges remain halted from trading. … And while the U.S. stock markets are indeed trading, far too much of these markets is trading in the dark” [Wall Street on Parade].

“Factom is using the blockchain to build a permanent and secure land title record in Honduras, one of the poorest countries in Latin America, where land-grabbing and corruption are rife” [Reuters].

Black Injustice Tipping Point

Sandra Bland: “The dashboard video camera of a traffic stop in Texas of a black woman later found hanging dead in her jail cell was not edited but efforts are being made to repost it, Texas officials said on Wednesday, citing technical issues” [Reuters].

Sandra Bland: “A man leaves the truck in the center of the frame at 25:05. For the next 15 seconds, he walks toward the right of the frame and leaves. At 25:19, he suddenly appears again, promptly disappears, then returns at 25:22. The same footage of him walking is subsequently repeated.” [Medium].

“What happened to Sandra Bland in cell 95? Debate continues with video release” [Los Angeles Times]. Good round-up.

“Sousaphonist serenades Confederate flag supporters in Columbia” [Charleston City Paper]. Seems to have gone viral:

“ExplainedELI5: Why is it so controversial when someone says ‘All Lives Matter’ instead of ‘Black Lives Matter’? [Reddit].


“Federal judges vacated five of imprisoned former Illinois Gov. Rod Blagojevich’s (D) convictions in a unanimous ruling that will prompt a retrial… [T]he decision from the 7th Circuit Court of Appeals questioned whether his proposal to trade a cabinet appointment in exchange for appointing top Obama aide Valerie Jarrett to the Senate seat is actually a crime” [The Hill]. Why don’t we just stop all the hole-in-corner stuff and put cabinet appointments on the open market?

“Three Navy admirals forced into retirement after being linked to a bribery scandal had enjoyed fancy dinners and cigars, sightseeing trips, shopping binges and high-value hotel accommodations from the key figure in the case: colorful Singaporean businessman Leonard Glenn Francis” [Los Angeles Times]. Singapore?!

“The long-awaited Financial Conduct Authority’s (FCA) report into Royal Bank of Scotland Group Plc’s (LON:RBS) treatment of distressed business customers has been delayed again, The Times has reported” [Invezz]. (“Lawrence Tomlinson, who acted as an adviser to former Business Secretary Vince Cable, had accused RBS of systematically sucking cash out of viable small businesses” [Reuters].)

“Singapore police said Wednesday they have frozen two bank accounts as part of an investigation into 1Malaysia Development Bhd., the troubled state-investment fund with links to Malaysian Prime Minister Najib Razak” [Wall Street Journal, “Singapore Freezes Two Bank Accounts in Connection With 1MDB Probe”]. Support of [Najib] “appears strong among the United Malays National Organization, the bedrock of a coalition that has ruled Malaysia since 1957.” Thing is, the UMNO is a certainly a beneficiary of policies that an ISDS court would consider trade barriers. So it will be interesting to watch Najib try to square the circle of signing TPP and maintaining their support.

“China feared that casinos in Macau owned by the billionaire gambling magnate and Republican party funder Sheldon Adelson were used by US intelligence agents to entrap and blackmail Chinese officials” [Guardian].

 “Italian police said on Wednesday they had seized assets worth 2 billion euros ($2.2 billion) and issued 41 arrest warrants in raids on gambling companies in Italy and abroad run by the ‘Ndrangheta mafia organization” [Reuters]. “Police believe the firms, including six that were operating out of Malta, were used to launder vast sums of illicit cash.”

“[New York State “ghost committees”] have more than $14.7 million in their campaign accounts, more than 15 percent of the total reported by every state and local politician. Many belong to former elected officials who are lobbyists, deceased or incarcerated [Capital New York]. The categories “lobbyists, deceased or incarcerated” being not necessarily mutually exclusive.

Police State

“NYPD Commissioner Bill Bratton today called for the state to change resisting arrest to a felony charge” [Observer]. See, if resisting arrest had been a felony, the NYPD would never have choked Eric Garner to death. Bratton “acknowledged that many cases may not be legitimate—advocates complain that resisting arrest is often the only charge against someone who was not resisting arrest for something else and that it’s often tossed out. Mr. Bratton said the department would expand its CompStat tracking program to monitor how many such charges are vacated.” So that’s alright then. Eventheliberal Deblasio’s first appointment, one might remember.


“The Great Recession, not natural gas, the main factor in CO2 emissions drop” [Raw Story].

Class Warfare

“The financial crash and its fallout will ultimately cost the hardworking American people more  than $20 trillion in lost gross domestic product (GDP). Those losses include historically high unemployment, underemployment, long-term unemployment, foreclosures, homelessness, underwater mortgages, bankrupt businesses large and small, lost savings, deferred or denied retirements, educations cut short, and so much more (PDF) [Better Markets, “The Cost of the Crisis”].

News of the Wired

“Mystery of dead man and his 1,200 guns deepens” [Los Angeles Times]. Like L.A. Confidential, but creepily real.

“Brisk business for drug baron T-shirts after escape” [Digital Journal].

“Health officials kill proposal to curb mercury dental fillings” [McClatchy].

“Nigel Richards, a New Zealander, won Scrabble francophone world championship even though he cannot speak any French” [France24].

“Residents on Deming Street are asking town officials to reconsider a proposal to convert an empty field in their neighborhood into a community garden” [Hartford Courant].

“4 Hours Scrolling Through Facebook Before Bed Referred To As ‘Winding Down’” [The Onion]. Yeah, it was too much for me. So I switched to Twitter.

* * *

Readers, feel free to contact me with (a) links, and even better (b) sources I should curate regularly, and (c) to find out how to send me images of plants. Vegetables are fine! Fungi are deemed to be honorary plants! See the previous Water Cooler (with plant) here. And here’s today’s plant (Dimitri):


A life spiral….

NOTE: Please free to test the donation dropdown, where the amount you select should finally appear on the PayPal form! Thanks to kind reader DK, who fixed my code. (And if you have problems, please let me know using the contact link, so as not to clutter the thread.)

If you enjoy Water Cooler, please consider tipping and click the hat. I need to keep my server up! And take a trip….


Print Friendly, PDF & Email
This entry was posted in Guest Post, Water Cooler on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. jmkiru

    this might be overly cynical of me… but wouldn’t a primary effect of making resisting arrest a felony be the immediate white washing of every fatal police shooting by means of laying the blame for it at the feet of the resistor, in the form of a felony murder charge? Simply charge someone with resisting arrest, then lay the shooting at their feet because it was during their commission of a felony… no need to investigate an officer involved shooting ever again!

    I’m obviously not a lawyer, but it’s the first thing I thought of when I read about this.

  2. Brindle

    re: Sanders/ WaPo

    This article is a thinly disguised anti-Sanders spiel. The first quote is from a Dem elite Hillary supporter Barney Frank, who turns logic its head by declaring the Sanders supporters are well-off white people who won’t be hurt much by a GOP presidency compared to Hillary’s working class rainbow coalition.

    This is WaPo after all, and they have been quite obvious in their preference of a Bush/Clinton election.

      1. Brindle

        Yea, I noticed some weeks ago that Hillary insider Joan Walsh was re-tweeting various “Sanders doesn’t connect w/ Black voters” lines. It’s probably been in the works for awhile.

        1. different clue

          I hope the Sanders group can spare some money/time/people to do “mortal combat” quality opposition research on the black “protesters” for use against them if they are deployed again against Sanders at future Sanders events. I hope the Sanders group also does very careful psychological studies and psy-ops war-gaming to advise Sanders on how to look better than the “protesters” the next time the Clintonites send them. And Sanders should figure out how to look totally innocent of any oppo knowledge or psy-war skills throughout the whole thing.

    1. Llewelyn Moss

      Also no mention in Wapo that article of that Bernie drew 11,000 people to the rally in Phoenix. Sounds more like pervasive voter disgust and anger with the status quo and not just a bunch of “intense partisans”. Dem voters just haven’t yet realized that Hillery IS THE STATUS QUO.

      1. Arizona Slim

        I was at that rally. More than 11,000 of us in a convention center exhibit hall that could have held three times as many people.

        And, for some STRANGE reason, there is very little media mention of this event.

          1. different clue

            The media can only drop a Cone Of Silence over the Sanders events. They can’t stop people from attending and they can’t stop attendees from socially mediacasting the true extent of Sanders’s visible support.

            And there are still land lines, index cards, and other physical tools and technologies left over from an earlier analog era which political campaign organizers could use to propel Sanders just as an earlier generation of such organizers/workers used them to propel McGovern into the Nomination.

            1. Oregoncharles

              After which, the Democratic Party committed itself to “Never Again!”

              Remember RFK.

              1. different clue

                Well . . . what I remember is that RFK was assassinated by person or persons unknown after he showed initial signs of being able to work himself into a position to re-open the JFK case. That’s what I remember.

    2. jrs

      Of course noone will be much hurt by a GOP presidency compared to Hillary, as they will both be horrible.

  3. Ditto

    The Democratic base constantly votes against it’s own interest in primaries due to unsubstantiated beliefs about electability , which explains Talking Points Memo. It’s a habit that the base devekoord from the 70s -90s but I question whether it still makes sense. Is the base really any good at picking candidates based on electability ?

    1. NotTimothyGeithner

      Electability was used by Clinton in 2007. It may have been a dog whistle for Obama, but Hillary and her cronies are repeating the same attacks they used then. It may have been in play early, but New Hampshire is basically white Alabama.

      And as far as Hillary’s surrogates or any surrogates opining about electability, no one cares. After all, conservative darling endorsed Mittens, and Trump’s current supporters voted for Santorum. There are a few exceptions. I can’t think of a living American who could make a difference. My guess is Liz Warren supporters and anti-Hillary types cover a similar field. Who knows or cares who Barney Frank is? This is a country where people cant find Iran on a map. As long as Hillary only fields elite surrogates and cant draw crowds, the electability issue wont enter the general discussion.

      Hillary will have a real problem with her declining numbers over the last two years. She is already a lower despite every advantage. Frauds like Rubio are outperforming her.

        1. MT

          I don’t buy the argument that demographics will lead to Democratic inevitability. It is an argument that is popular with the front page writers of DailyKos, and I believe it is popular because it fits within the racial/social framing that allows the party to ignore economic matters and continue with their kayfabe. In fact, some of the more interesting side-stories of the 2014 midterm elections were the elections of Republicans from minority communities that were nearly indistinguishable in economic or social policy from current Democrats.

          I think the demographics argument is wrong for other reasons as well. A growing number of Hispanics are conservative: No one would mistake Jeb Bush’s children (who are Hispanic) for Democratic Party supporters. Furthermore, the different demographic groups that are currently Democratic supporters are facing increasingly diverging interests. One example is affirmative action for college admissions, which the Asian-American community is opposing with more focus. (As an aside, the SCOTUS blog has had an interesting series of postings about the long-term prospects of affirmative action for admissions.)

    2. ifthethunderdontgetya™³²®©

      It’s also a product of “Thanks Ralphing.”

      Blame Ralph Nader for G.W. Bush, don’t dare question your right-wing, less-evil-by-as-little-as-they-can-get away-with Dems.

      (This in spite of the fact that Nader was well down the list of reasons that G.W. Bush was installed in 2001…it’s the narrative that counts.)

      1. different clue

        A lot of Naderbots hope to blur the distinction between what got all Gore voters robbed of their election ( in which Nader was far down the list), as against Nader’s spiteful nasty motivation which was to do what he could to get Gore defeated and Bush selected. That Nader had little actual impact on these events doesn’t excuse the Naderbots from facing the fact that Bush is exactly the President Nader wanted and Gore was specifically the President that Nader wanted to prevent.

        I notice the Green Slime Filth Naderbots have rather less to say about McGaw versus Wellstone.
        Perhaps they are too busy taking vacations to Minnesota so they can dance on Wellstone’s grave.

  4. Jim Haygood

    From our ‘double jeopardy’ department:

    WASHINGTON — Dylann Roof, the man suspected of killing nine people at a historically black church in Charleston, S.C., last month was indicted on Wednesday on federal hate crime and other charges, including some that carry the federal death penalty, two law enforcement officials said on Wednesday.

    Mr. Roof, 21, already faces nine counts of murder in state court and could face the death penalty there. But Justice Department and F.B.I. officials have said the Charleston shooting was so horrific and racially motivated that the federal government must address it.


    Bad logic. Overlapping state and federal prosecutions make a mockery of the Fifth Amendment: ‘…[n]or shall any person be subject for the same offence to be twice put in jeopardy of life or limb…’

    Courts now invoke the subterfuge that state and federal criminal laws are different offenses, when the plain meaning of ‘offence’ was the criminal act of the defendant, not differently-worded laws.

    1. Vatch

      Duelling prosecutions such as this can be abused, yet strangely, they can also be a weapon against tyranny. If a police officer murders someone in custody and it acquitted in a state court, it might still be possible to prosecute him for the same action in a federal court. I don’t think that happens very often, though. Otherwise, the police would try a lot harder to avoid killing people.

      1. Jim Haygood

        Recognizing the superior resources of government, the constitution sought to level the playing field by giving the government only one chance to prove criminal guilt.

        Not that police officers are ever charged with anything, but as citizens, they are entitled to equal protection of the law.

        Anyway, that’s all over now. The conviction machine can just keep filing and trying new charges until the pre-determined result (guilty) is obtained, while exhausting the resources of most defendants in the process.

        As Roof’s case shows, this is a political decision. Get accused of something really heinous, and you’ll be facing two sets of charges … possibly with a federal death penalty, even if your state doesn’t have one.

        1. sleepy

          Recognizing the superior resources of government, the constitution sought to level the playing field by giving the government only one chance to prove criminal guilt.

          There is more to it than “the” government. The constitution limited how may bites of the apple the US government got, and ultimately how many bites the states got. The US government trying a defendant only once didn’t preclude a state from trying him/her once as well.

          The government of Colorado is not the government of the United States any more than it is the government of Albania. Double jeopardy only exists when there are the same parties on both sides of the equation, i.e., the prosecution and the defendant are the same parties in two separate proceedings. It’s not a duplicate, or double, prosecution if one of those parties is different in another proceeding.

          Fair or not, that’s pretty long-standing law, and it’s what the constitution refers to when it refers to double jeopardy–a prosecution by the same government, not by a different government.

  5. DJG

    Hillary Clinton, economic visionary and daredevil: Clinton’s support for so-called local solutions to the minimum wage, rather than a $15 federal minimum, serves two purposes: First, the continuing race to the bottom cannot be regulated. Whatever jobs are left will continue to move from the north and midwest to Mississippi or South Carolina. Second, the lack of a federal minimum wage will keep the immigration spigot going. I’m certainly in favor of immigration (three of my grandparents were), yet ridiculously cheap labor serves Clinton’s business class buddies. She’s no Emma Lazarus.

    1. jrs

      On much of the most popular roadway there you don’t need a car, tour busses will take you through most of it. And Amtrack will take you to Glacier. So who needs a car to see Glacier national park anyway? Plenty of things in the world may push one to driving a car, that’s not one of them.

  6. craazyman

    Lambert have you ever thought of acquiring a Civil War Union Officer’s uniform, perhaps from one of the Maine Cavalry units, to wear when you collect Water Cooler links?

    I think the South can be taken. A cavalry campaign down Route 95 would take only weeks with modern highways and convenience stores. We’d have little problem with supplies and we could use the largesse of liberal sympathizers and buy up all the ammunition at Wal-Mart stores from Texas to Virginia.

    When we arrive at Richmond, we can demand unconditional surrender when the enemy realizes he lacks ammunition and concludes he has been outmaneuvered in advance of any conflict .

    The only problem will be the occupation and what to do with all the horses. We can ride them back North, I suppose and leave the occupation to the management of Progressive strategists.

    P.S. I think the flower pic needs a crop in the upper right to remove the substance of the intruding leaf. But it’s pretty good!

    1. ambrit

      Good sir;
      As the descendant of merchants who sold guns and supplies to both sides of your unfortunate fracas of the 1860s, I can say with confidence that armaments are already stockpiled Down South. Also, your reliance on paved highways will be vigorously used against your “flying” column. The real strength of mobile forces is their ability to leave the well travelled paths behind and forge new paths through the Wilderness. (Do avoid that locale on your trip to the south. It still is one big bear trap.)
      Your application to use archaic uniforms will backfire, quite literally. Not being duly constituted troops, your expedition will be more of a Filibustering intrigue. Uniforms will only make you all conspicuous targets. Something on the order of an Amish ensemble would be better, since Pennsylvania Deutsch country is somewhat North of the Mason and Dixon Line.
      I fear your dependence on the “largesse” of Liberal Sympathizers is mistaken. They are already being tapped out by Hillbot phone banks and mass mailings. I do hope you do not succumb to the tender back stabbing ministrations you will receive at the hands of the “Official” Liberal Establishment. They have long known that their world view is much closer to that of the Tidewater Aristocracy than the seething rabble led by the likes of Mother Jones and Norman Cousins. As we here say every year on Confederate Veterans day; “Prepare to be betrayed. Amen.”
      Your most humble and obedient servant,

      1. craazyman

        sounds like you’d be a good Governur of Louiezianna after they surrender

        Are you prepared to serve?

      1. Jim Haygood

        Unfortunately, the National Helium Reserve is in unfriendly Texas.

        Hot air, though in unlimited supply, just won’t do.

  7. ekstase

    Re: “The Onion” on internet over-activity. I’ve read that our ancestors may have spent much of their time, after the sun set, meditating/staring into space, because it was too dangerous to wander out, and they had no light. Maybe this is an attempt to return to a primitive trance state. And to be fair, how many hours a day of t.v. did some of us imbibe in Pre-Internet Era?

  8. Timmy

    I think one of the important points of “Hedge Funds Gear Up for the Next Big Short” is that investment banks facilitate and market every trade in this arbitrage and I don’t believe the retail investors who will face these liquidity issues really understand what “arms length relationship” means with respect to how these bankers behave towards these retail investors. Here it is: these bankers trade with and finance the asset managers who develop the ETF’s or Alt Mutual Funds, they introduce those asset managers to their retail division (source: extensive direct personal experience), and the retail division markets/sells the funds to individuals. Meanwhile, the same bankers analyze markets, identify arbitragable liquidity issues including those in the article about ETF’s and Alt-Mutual Funds, market these trades to hedge funds and other institutional investors and the facilitate and finance those trades for which the loser on the other side is the retail investor who they sold the fund to. This is the “long con”, whereas marketing a CDO composed of crappy mortgages on purpose is a more direct route.

    1. cnchal

      . . . This is the “long con”, . . .

      This one is getting ripe. The Reuters link explains the retail side of the con.

      John McCormick has been on a mission for the past five years: to bring hedge funds to the masses.

      That may seem like a tough sell. Traditional hedge funds, those lightly regulated investment pools open exclusively to large institutions and rich individuals, have been duds lately, trailing the U.S. stock market’s performance every year since 2009 by an average of 10 percentage points, according to Hedge Fund Research Inc data.

      But already, McCormick, a senior managing director at Blackstone Group LP, has been wildly successful. He has done so as a tireless evangelist for what are called liquid alternative investments, or “liquid alts.” Like hedge funds, they invest in everything from simple stocks and bonds to all sorts of complex derivatives and other “alternative” assets. The main difference is that liquid alts are packaged as mutual funds and marketed to retail investors who can’t invest in traditional hedge funds.

      I would call that expanding the pool of suckers. It’s wildly successful.

      Apparently investors agree. Though critics complain about high fees, opaque strategies and other factors that they say make liquid alts inappropriate for small investors, these products have become one of the fastest-growing types of mutual fund.

      I wonder, why?

      The appeal is not outsize returns: Liquid alts have delivered even less than hedge funds in recent years.


      The reason for their popularity, McCormick said, lies in the 2008 financial crisis and the damage it inflicted on many small investors’ portfolios. “You have baby boomers nearing retirement who experienced a scary event in 2008,” he said. “People who thought they had diversification and didn’t really have it.” The long lists of assets liquid alt funds hold are designed to provide that diversification, he said.

      Now, McCormick is among the scores of fund marketers pushing, to get liquid alts on the menu of options for U.S. workers’ employer-sponsored, tax-deferred 401(k) retirement savings plans – a pool of money that totals $4.4 trillion. To date, these accounts have offered little-to-no exposure to alternative assets like hedge funds, pirate equity and real estate.

      For an idea of what goes into some of these products, consider the Columbia Adaptive Alternatives Fund, a $177 million liquid alt fund launched by Columbia Management in collaboration with Blackstone in January.

      The secret sauce.

      Among the assets it or its underlying funds hold: common stocks; preferred stocks; corporate bonds; foreign and domestic government bonds; bonds issued by agencies run by governments; real-estate investment trusts; exchange-traded funds; exchange-traded notes; residential and commercial mortgage-backed securities; asset-backed securities; credit-default swaps; collateralized bond obligations; collateralized loan obligations; currency swaps; futures; total return swaps; money market funds; and other liquid alternative funds, including one that in turn invests in other hedge funds.

      All that diversity hasn’t yielded much to cheer about. From its launch in late January to mid-July, the Columbia Adaptive Alternatives Fund generated negative returns of about 2 percent, compared with a positive 2 percent for a Morningstar index of comparable funds and a 5 percent gain for the S&P 500 Index.

      The secret sauce is actually a secret sausage.

      The fund isn’t uniquely lackluster. In the five years ended in April, alternative mutual funds in North America delivered an average annual return, after fees, of 5.8 percent, while similar funds in Europe returned 3.4 percent, both below the average 7.6 percent for hedge funds, according to Preqin. On the same basis, the S&P 500 Index returned 11.9 percent, and 14.3 percent including reinvested dividends.

      For those results, investors in liquid alt funds pay a lot. . .

      I wonder if there is a connection.

      McCormick said higher fees reflect the added value of “a layer of professional management.” . . .

      Added value? When the con ripens to fruition, it will be extracted value.

    1. allan

      Amazingly, Palm Beach County, FL, seems to be standing up to Uber more than NYC:

      Uber customers are at risk of losing their local alternative to taxis if Palm Beach County and the popular car service can’t agree on new vehicle-for-hire rules.

      The County Commission Tuesday decided not to ease driver background check requirements and insurance standards to accommodate Uber, Lyft and similar ride-scheduling companies competing with taxis and limos.

  9. Ulysses

    I try to avoid the world of Twitter, but an activist friend of mine sent me this “tweet” from U.S. presidential candidate Sen. Bernie Sanders (independent/Socialist– Vermont)that went out today:

    “This video of the arrest of Sandra Bland shows totally outrageous police behavior. No one should be yanked from her car, thrown to the ground, assaulted and arrested for a minor traffic stop. The result is that three days later she is dead in her jail cell. This video highlights once again why we need real police reform. People should not die for a minor traffic infraction. This type of police abuse has become an all-too-common occurrence for people of color and it must stop.”

    This kind of abuse certainly won’t stop if we continue the status quo by electing a Bush or Clinton again!

  10. Kim Kaufman

    “Quinnipiac poll: “Former Secretary of State Hillary Clinton… people seem willing to vote for her anyhow. Lowered expectations?”

    They will hold their noses and vote “because of the Supreme Court.” It’s the only game she, ultimately, has.

  11. Jay M

    So Blago still sits in the slammer, with a dime + 4, but mere log roller on the senate seat beef (Obama’s I indelicately remind). He gets to summon up a small fortune for a retrial with the feds, what a deal. Got to get that comb over renewed if this all goes back to the cleansing force of sunlight, (our judiciary?).

    1. alex morfesis

      blago just wants what his namesake in the home country got…

      vidoje blagojevic (sorry)….col. vidoje blagojevic was convicted of saying boo to some “brave” dutch soldiers, who then picked up their skirts and blue helmets and left the folks at srebrenica to get raped and pillaged…oh and murdered too…they have identified from dna about 6,000 people who were killed…

      for all that “wilding” the intl tribunal of the un made sure everyone knew they sentenced THAT blago to 18 years in prison…very loudly…make sure everyone knows they mean business…

      and then quietly let col. blago out after only 5 years…

      and our blago wants that kinduvah deal…all blagoze should get equal treatment…its not as though our blago killed 6000 people and forced 35,000 to move…well…ok…if you include the people who died in illinois from the giving out of drivers licences like free samples of candy and not making sure people actually now to drive…ok…but still…the one over there was let out in 5 years…our blago wants all blagoze to treated equally…

  12. Jerry Denim

    “Clinton’s summertime fundraising circuit highlights a central tension of her campaign: how to encourage financial executives to open their wallets for her presidential effort even as she comes out with plans aimed at reining in multimillion-dollar paychecks”

    Ha! That’s rich. Oh the tension must be incredible at these $7000 a plate Clinton fundraisers. The millionaires must be quaking in their Gucci boots. I’m guessing there’s an awful a lot of knee-slapping and hilarity as Hillary tells all of her rich pals to ignore everything she says publicly for the next 470 odd days, but not to worry. A la Obama the great hope and short-changer, she will swaddle them all in a warm cocoon of tax loopholes and fill the Federal government with a bunch of obsequious revolving door careerists ready to protect the customary socialized losses and privatized gains our noble class of “job creators” has come to expect. She just needs their money first.

Comments are closed.