Some Recently Read Material

Sunday, July 30, 2006

Man Group to bypass Exchanges...

Man Group? Who is this you ask? From the Horses mouth:

Man Group plc is a leading global provider of alternative investment products and solutions as well as one of the world's largest futures brokers.

Man Investments is a global leader in alternative investments. It has spent two decades understanding investor requirements, identifying opportunities, and developing leading edge products and tailor-made solutions for private and institutional investors. Each of Man’s core investment managers – AHL, Glenwood, Man Global Strategies and RMF – has distinct expertise in one or more alternative asset classes: hedge funds, leveraged finance and convertible bonds. Man continues to explore opportunities across the alternative investment spectrum in order to enhance its client offerings. Hedge funds are the cornerstone of the business, and Man offers a range of risk/reward profiles through its funds of hedge funds, structured, style products and single manager products. Man Investments manages around $54 billion (as at 1 June 2006) and has a powerful global distribution network.

In the hedge fund asset class, which is the major part of the business today, Man offers funds of hedge funds, structured, style and single manager products. Its track record stretches back two decades and defines the standard for excellence in an industry whose central goal is to provide diversification away from traditional equity and bond investments. Man has a powerful global presence and an extensive network of distribution partners.

Man Financial, the Brokerage division, is one of the world's leading providers of brokerage services. It acts as a broker of futures, options and other equity derivatives for both institutional and private clients and an intermediary in the world's metals, energy and foreign exchange markets with offices in key centres. Man has consistently achieved a leading position on the world's largest futures and options exchanges, with particular strengths in financial futures and the energy markets.


OK, if you don't get the definition work on it. This is one of the largest Hedge Funds on the planet and they are involved in everything. They purchased Refco, the collapsed futures broker in 2005 and have since rebuilt that business substantially. Their portfolio is thus:

Funds under management of $26.1 billion at 31 March 2003, including
$11.1 billion in RMF , which was acquired on 30 May 2002. Excluding
RMF, funds under management were $15.0 billion, up 40% from last year


So what is all the boring detail about? They just nabbed 70% of Eurex US, a really bad name chosen by Deutsche Borse when they tried to create a competitive futures exchange to the CBOT in 2004.

Why is this an issue? Simple, Man will be looking for equity partners from their brethren to join them in essentially doing something quite original; Bypassing the CBOT in the trading of their products.

I am no genius in this area but I smell a big fish. You will have a huge unregulated industry (Hedge Funds) creating its own trading floor to trade its own products.

Grabbing more retail clients and more money is the easy part, avoiding the balance sheet and position limit restrictions that apply in over-the-counter derivatives trading is the hard part. Now it is done.

Who is going to regulate this activity? How in the regulation field has the resources to understand and keep up with this industry? The SEC in the US was just told by US courts to back off the Hedge Fund industry so they are not even allowed to require Hedge Funds to register existence!

Now the Hedge Fund industry is going to MAKE THE RULES for it's own trading in "products" that few outside the industry understand, even fewer understand the implications of failures in this industry and even fewer still have any ability to set limits on what this industry has the capability to do.

Just a note: Notice there is no national orientation mentioned in it's self made description except to note it's primary listing on the London Stock Exchange. Also, note the repeated use of the word "world's" and the reference to "global". These organizations that control about $1.5 trillion (no one actually knows) have NO ALLEGIENCE TO ANY NATION OR CITIZEN other than making money, as much as possible, for the wealthy clients who are allowed by various governments to invest in them.

Open letter to Anheuser Busch...

I heard on the news recently that you are closing the Rolling Rock Brewery in Latrobe, PA and moving the production to New Jersey.

I know that US manufacturers have been shipping manufacturing jobs overseas for decades to cut production costs. They have effectively convinced our impotent government to create every conceivable piece of legislation to aid in this effort and have sold US citizens on the idea that this is required to compete effectively in the production of goods. Anyone who knows anything about the economics of this argument knows the reality, US companies are interested in producing product as cheaply as possible to improve their bottom line and show their stockholders an increase in profits every quarter. Period. They have no concern for the future of their nation or citizens or any of that jingo flag waiving garbage. They only waive the flag when it suits the sale of another idea to improve their bottom line or to make others look like the “bad guy”.

This is evident today. Our impotent government (driven by corporate created “trade” associations and “think tanks”) points to China as the bad guy (like Japan 25 years ago) because of our huge trade deficit with them while conveniently leaving out the reality that every day hundreds of US companies are hiring China manufacturers to produce their goods so they can import them to the US and elsewhere at cheaper costs. China has never been accused of having innovative original thoughts in today’s modern economic reality. They have a central government policy that requires various jurisdictions around the country to import manufacturing and export goods. That is about the extent of it.

In your case we are talking about BEER, a product made from WATER and under no threat from cheap Chinese imports! Your company does not have to follow the model of other manufacturers. You can produce your product in the US and maintain jobs in areas around the country where products have been produced for decades. But it seams you follow the Coca Cola philosophy. Buy, destroy, replace.

When I was a youngster I went to Latrobe frequently. My mother’s side of the family was from the area. Although I don’t remember anyone working directly for Rolling Rock, I do remember the beer as being a local brew consumed by the local people. I have no idea how widely distributed it was back then but I assume it was not very large. The locals however had stories about their beer, jokes about it and generally treated Rolling Rock as part of their “family”, something that hung through the booming industrial years earlier in the century to the post industrial years and was richly integrated in their society.

When I returned to the Washington, DC area from a four year stint in the USAF in 1987 I went to a restaurant / bar downtown with my friend Joe. The first thing the waitress said as she approached the table was “I am sorry but we are out of Rolling Rock today.” I will never forget that moment. I almost fell out of my chair. Was this the same Rolling Rock I remembered from my child hood days in rural parts of Pennsylvania? I could not believe the beer had become so popular.

In the nearly 20 years since the popularity for the brand has waned in the DC area although it is still widely available. I don’t have any statistics on market share or any other measure of the sales of the brand. However I do know to shut down the plant where the beer has been produced for nearly 70 years is to kill Rolling Rock and all it stands for.

Your company obviously follows the same mentality of other conglomerate manufacturers. You have no affinity for history or tradition. You have no respect for the citizens or workers of America. You have no interest in cultural values or real affiliation with products or brands. Your company is run by number crunchers with blinders and all incentives are tied to the bottom line. Your marketing arm will create the “Anheuser-Busch commercial truth” in all of it’s products and blatantly disregard any true history or affiliation with its products.

American companies don’t understand the damage they have done to their own businesses by removing any pride an American worker can have in the production or consumption of goods. They have destroyed all attachment by citizens to the production process, turned us into consumers of products made in humane less factories in foreign nations run by autocrats, dictators and communists. American conglomerate companies are starting to look like mini Socialist Societies essentially carrying out the dehumanizing aspect of capitalism discussed at length by Karl Marx.

You are missing a major point of society, that human thought is partly determined by social and economic forces, particularly those related to the means of production. You are treading on thin ice and will play an important part in the destruction of your own society. I hope you get very rich very fast and figure out how to convert your mass wealth into something other than dollars because the time is near when the reckless acts of American corporations for the last ½ a century are going to bite all of us in the ass and there will be NOTHING to stop it.

You make BEER. Your main ingredient is WATER. You have taken a product with proud production and rich community history and dehumanized it. You may try to “rehumanize” it through some kind of marketing campaign but you cannot deny the destruction of a social and historically significant part of the lives of the people in the Latrobe Pennsylvania area and the history that made Rolling Rock.

I will go out of my way to never consume a product produced by your company again.

Sunday, July 09, 2006

How much is Your Hedge Fund worth?

It seems no one knows. The Wall Street Journal recently reported the industry assets (this is real cash mind you, not the value of their leveraged influence on the financial system) at roughly $2.4 trillion. Then a week later said, "Whoops, we missed the mark." in so many words. The SEC claims $1.2 trillion is closer to reality and the $2.4 trillion total reported previously by the SEC after tallying up some 2500 hedge funds assets came from some "double counting".

OK, so let me get this right. The hedge fund industry has invested $1 trillion dollars in itself! If there is $1.2 trillion dollars in the hedge fund industry but when you count the total dollars that trickle down from hedge fund to hedge fund you get $2.4 trillion something tells me we have a "house of cards". The industry is investing in itself and raking in big fees.

Now the oldest trick on Wall Street is to create a "product" that rises in value faster than the market. Draw in lots of money. Attract the attention of bankers etc. Borrow lots of money. Feed the Lion. Pay out huge rewards to early investors. Run into a "cash squeeze". Default on those loans that helped you to extend the party. Collapse. Don't forget the big one... Leave the founders filthy rich while everyone else scrambles for the crumbs. You might throw an indictment in here and there.

I can rightly say with ease and confidence: Any "industry" that produces nothing tangible and invests some 80% of its money in it's own industry is a scam. Get out now. As I have said before you MAY have till 2008 to party. But as usual everyone will try and scram at the same time and you are likely to get stuck in the door.