The Dark Side of Hedge Funds

An interesting vid detailing the growth in power and influence of the top hedge funds.

I blogged earlier about the incredible wealth generated by the top hedge fund managers.

As can be expected, areas that produce great wealth attract all kinds of people and all moral temperaments.

So what happens when a hedge fund decides to ignore ethics and the law in pursuit of greater gains? They will be eventually pursued by the Government, but as hedge funds are so enormously wealthy and can afford the best legal team in the world, who will win is not so easily determined.

In a world where the law has determined that unlimited campaign contributions are allowed, those with more wealth have increasing influence over political outcomes for better or worse.

An author discusses her book about the inside world of hedge funds and what happens when the US Government went after one of the Top Hedge fund owners for insider trading.

Here’s the shortened version: Interview 1

Here’s the chock full of details interview: Interview 2

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Bitcoin Trading and “Seasteader” Couple face Death Penalty

Bitcoin, trading, seasteading, and the death penalty- four topics that came together in this situation.

Apparently, there’s a movement going on called “seasteading” – where a person constructs a home on a platform located far enough off shore to be declared living in international waters. The belief and goal is to live in an area that is free of jurisdiction of any government, or in other words, be free of all government laws, taxes, and regulations.

At first glance, these ideas always appear to be attractive and innovative to those wishing to escape government jurisdiction. But like in many real world applications, problems arise with scaling up. If one or a few people do it, it looks like a great concept and the people doing it look like geniuses beating the system. Now imagine a horde of people building seastead communities off shore. You could easily imagine the amount of congestion in the open waters affecting commercial shipping, and then there’s the matter of all that raw sewage and waste going straight into the ocean, posing a danger to sea life as well as to beach goers if the tide ever directs it to shore.

Then you have the issue of the governments themselves. It stands to reason they would not be too keen on large communities springing up off their coastline declaring sovereign status where they have no jurisdiction.

Such is the case that happened with the very first actual seastead home built. An American entrepreneur known for his bitcoin trading and his girlfriend built the first seastead home 12 miles off the coast of Thailand. They declared their complete “freedom and autonomy” on their social media accounts and all was well in their lives……

Until, the government of Thailand learned about it and declared them to be threatening the sovereignty of their government – a crime that includes severe punishment up to life imprisonment or the death penalty. ūüėĪ

Faced with those life and death high stakes, the first ever actual seasteading couple decided to hightail it out of there and no one has seen them since as they appear to be in hiding.

The government of Thailand has dismantled their seastead home and brought the materials back to shore.

Article 1: Link1

Article 2: Link2

Trump Forced to Capitulate and Reopen Government, Ending Longest Shutdown in History

In my prior post on this shutdown,  I included the following:

“The most directly impacted are those Federal workers who are not getting paid, and as their situations become more increasingly dire in ALL States, including Republicans ones, and the Dems offering legislation to open the government back up without including the Presidents demanded funding, pressure will increase on Republicans to end the shutdown. “

At the 35 day mark, it wasn’t the plight of the poor federal worker losing their homes, or being forced to suffer the humiliation of going to food banks and surviving off charity and impromptu “Gofundme” campaigns that moved the needle to get Trump to back down. The tone deaf response of Trump and his administration shows they absolutely can’t relate to, or be concerned with the needs of non rich Americans who don’t have much saved and live from paycheck to paycheck:

 

Trump tried to come to the aide of Wilbur Ross’s “Why don’t people just take out a loan instead of going to a food bank?” hole that he dug, and proceeded to make the hole deeper:

 

 

So in Trump’s mind, we all live in small towns like “Mayberry” where people are good friends with the local grocer, doctor, banker, etc, who will cheerfully understand their current no pay predicament and allow them to put all their bills on a “tab” that they can pay off later. Or perhaps he thinks the movie “It’s a Wonderful Life” George Bailey Building and Loan community type of bank exists that will freely front money to all their customers in need.

So clearly it wasn’t empathy that tuned the tide, as they have proven beyond doubt that anything outside of the world of the wealthy is an alternate universe for them.

The answer is 1) His falling ratings among his core supporters.

His lowest approval rating ever.

2) The start of the complete collapse of the airlines.

Funny thing starts to happen when you stop paying people but still require them to come in to work- after several weeks of this, people start getting stressed out and start calling in sick in large numbers. Airports started having increasing major delays/cancellations due to more and more TSA and Air Traffic Controllers calling in sick. There were dire warnings issued that the safety of the airlines was being put at high risk due to these conditions. We were heading for a dramatic contraction/closing of airports that would have crippled businesses nationwide.

3) Republican Senators started leaving his camp and voted for reopening the government without a wall condition.

Trump had no choice but to concede on his demands that Dems fund his wall as a condition of reopening government. For all the Right Wing pundits criticizing him for giving up,¬† if he had continued in the shutdown, the airlines would have basically ground to a halt, and the pressure on Republican Senators would have pushed them to vote to open the government in numbers great enough to override Trump’s threatened veto. For Trump to lose in that fashion would be the biggest loss and embarrassment scenario and perhaps damage his Presidency beyond repair. As it is now, he and the GOP have given Dems plenty of material that can be used against them in the 2020 elections. You can be sure the Wilbur Ross, Lara, and Trump statements showing them to be out of touch with the average wage earner will be featured in commercials against Republicans.

 

Senator Warren Calls Out The GOP SCOTUS Nomination Blockade

The GOP is taking their opposition to Obama to new heights with the decision to not hold any hearings for a Supreme Court nomination. Senate Majority Leader Mitch McConnell and Senate Judiciary Chairman Chuck Grassley are united in their stance to not hold any hearings until a new President is elected.

Some Republicans have attempted to argue that this type of blocking has been done in the past, but in reality this has never been done to a sitting president with close to a year left in office.

What this action does is basically nullify a President’s FULL last year in office, which is a subversion of the will of the people as well as the Constitution in the name of political gaming.

If this action is allowed to stand, it will set a new dark precedent in obstruction when it comes to mixed government. Every two years a “stunt” like this could be pulled¬† by either side with claims that major appointments and bills should be ignored until the election cycle is over. Our already hobbled government would function even worse than ever before.

It’s understandable why the GOP wants to avoid the nomination process- it poses high risk for GOP Senators in purple States if they vote against qualified candidates for no good reason. Meanwhile, their fellow Senators in hard-right leaning States fear getting the boot if they approve any pick from Obama. Those are indeed tough prospects to face, but it’s no excuse to just stop doing their job. All elections have consequences and one can’t just go on a work strike because the election results were not favorable.

 

Senator Elizabeth Warren provides her own scathing commentary on the damages of continued GOP obstruction:

 

 

New Fed Diet Expert Guidelines: Thumbs Up for Coffee,Eggs

breakfast_scrambled_eggs_coffee_heart_bread_ketchup

A panel of nutrition experts hired by the Fed has come up with their diet recommendations/guidelines– and the often vilified coffee and eggs have been welcomed back into the fold.

Apparently even though eggs have a high amount of cholesterol, they can’t find a link between those who eat eggs¬†regularly having a higher incidence of artery/heart disease than those who don’t. They say your ¬†genes play an important role here as some¬†are more genetically susceptible to high cholesterol problems that others. Those who do have health¬†issues with cholesterol¬†as noted by their doc should still refrain from excess.

Meats, especially red/processed meats get a yellow light, meaning we should cut back on this in favor of healthier fare.

The red light goes to sugary processed foods and drinks as high sugar intake is responsible for the rise in obesity, diabetes, and heart disease.

 

Article here: http://www.npr.org/blogs/thesalt/2015/02/19/387517506/nutrition-panel-egg-with-coffee-is-a-ok-but-skip-the-side-of-bacon

 

 

My Experience and Opinons on Obamacare

health reform

The mere mention of the words “ACA” or “Obamacare” can start a flood of comments. There doesn’t seem to be a big middle ground as people are either in support of it or vehemently against it.

As someone who was already getting private insurance before the onset of Obamacare, I can give you my first hand experience and impressions about it.

I was also one of the privately insured who received a notice that my insurance would be cancelled next year due to changes in the health laws. Like others, I was also surprised and not expecting that. I had assumed that I would have a choice to pick a plan under the ACA or stay with my current plan.

Obama took tons of heat from people angry that their insurance got cancelled despite his promise that folks would be able to keep their plans if they want. The thing is, it seems to me Obamacare isn’t the reason the plans were cancelled, as in they were not “ordered” to close, but the insurance companies are using it as a reason to get rid of them. Here is where we see the law of unintended consequences coming into play.

The new law makes it mandatory for everyone to buy insurance. The insurance companies know this. Therefore, they now have a great incentive to get rid of their cheapest plans knowing that they have a guaranteed market of buyers. Now an argument can be made that the Pres and Co. should have realized this would happen and therefor can still be blamed. This is an unfortunate consequence of creating forced demand.

So my next step is to see what is available on the new ACA health exchange. Fortunately I live in California, one of the states that created their own separate exchange so I didn’t have to deal with those huge problems the Healthcare.gov site had.

I guess I should discuss my thoughts about the Healthcare.gov kick off debacle. They blew it- no excuses. Simple as that. I’ve worked on many IT/software development projects and it’s clear the website development team were sorely lacking in organization and accountability. That said, this is how things work – ideally, the company knows in advance how much time is needed for a project by discussing it with their engineers. In reality, many companies just pick an arbitrary date and expect their team to work overtime or do what it takes to get it done. The “reality way” sucks, and is the reason many people wonder why they choose the engineering/IT profession with all the late nights and weekends spent at work.

The next problem is the “moving target” of scope of work. In the beginning there is a cloud of confusion as to what needs to be done and that chews up time. Then finally a plan is developed , and as more information comes in the plans can change dramatically, negating much of the work that was already done. You can be sure that plans were changing constantly with a project of this scope and size. This also consumes lots of time.

At the congressional hearing on what went wrong, they also mentioned that they only spent about two weeks doing end to end testing. This is a joke as even small projects can require months of full testing and one of this size would need far more than just two weeks.

Those in charge should have delayed the start by a month or two and taken the heat from it. The next alternative was to open it to just a few states at first before making it nationwide. Instead they just let it start as scheduled and “hoped” for the best. Terrible decision. It would have been far better to be embarrassed by a delayed start than a software fiasco that makes everyone involved look like dunces.¬† It just gives all the opponents that much more ammo to attack with. There clearly needs to be accountability for the decisions made.

Of course it also needs to be said, the web site is itself not “Obamacare” and a problem with the site doesn’t automatically equate with the law being a failure, despite what all the detractors say. We won’t know if it’s on track for success or failure for at least a year or two.

Okay, so I get on “CoveredCalifornia” via the Cali health exchange and see what I have to do to get insurance.

The required information includes entering my social security number and expected salary for 2014 as well as any known deductions. From that they determine whether one is eligible for Medicaid or ACA coverage.¬† This is a HUGE difference from what was needed for private insurance pre-ACA. The forms I had to fill out before required me to fill out pages and pages of medical history, naming any and every doctor I’ve visited, where they worked, medications taken, procedures done, results of all actions over the last several years. When filling those forms out you were always under the gun to include anything and everything medical because the form also stated that failure to include ALL medical details would be cause for insurance cancellation.

There have been proven cases where someone came down with a serious chronic illness and needed ongoing expensive treatment, and then shortly thereafter, their insurance company researched their past medical records and cancelled their insurance because they failed to write down they had acne when they were a teenager. This is what most people worry about in the world of private insurance – getting cancelled when you need it the most for some spurious reason.

So the easy form to fill out is an immediate plus to me, as well as the fact that I know I can’t be kicked off my insurance or denied as a result of companies trying to cut costs.

Now I get to choose from the insurance packages being offered and compare the new prices to what I’m currently paying under the old private system. My current insurance is known as “catastrophic”, meaning that I will pay for all medical expenses until costs exceed the deductible which is about $5K, then my insurance covers everything else. However, the yearly check up and vaccinations are included and the deductible is waived for those. The high deductible allowed me to get lower cost monthly payments.

I can opt for this since I haven’t required many visits to the doctor and am counting on the trend to continue. Now some who are unfamiliar with insurance might argue why am I willing to pay for insurance when I still have to pay for medical expenses up to five thousand dollars. The answer is risk management – I’m only risking a maximum of $5k in medical expenses per year versus my life savings and assets if I should get seriously ill or injured and require medical treatment exceeding $5k. For those unfamiliar with medical costs, I had to go to the emergency room once, and I saw my insurance (full coverage at the time and not private) paid out $11K to the hospital. That’s just one visit. Extended stays in the hospital and surgery can run into the tens and hundreds of thousands of dollars. By not being insured properly, one is risking their financial livelihoods.

The new private insurance plans now being offered runs more expensive than my current plan, but they also include a lot more coverage. A visit to the doctor now has a fixed lower cost for the first 3 visits, as well as emergency room, urgent care, and other operations like x-rays. My out of pocket expenses now have some cushioning. My total deductible is now higher at over $6K, but the fixed lower costs of visits and procedures more than make up for it. Knowing the costs in advance makes it easier to figure out expenses than the unknown of what the costs would be. In the past, I’d try to call to get prices of doctor visits out of pocket, and no one would know the answer- or at least they kept their lips sealed- so there was always a worry a trip to the doc would be big bucks.

I selected my plan, and the first attempt to finalize failed as the system output an error message. The data was saved, so I tried again, and got the same error message. I was going to call, but I figure I’d try a day later first, since my data was saved with my log on account. When I tried it the next day, success!

So overall, the process of signing up wasn’t that bad at all, and in my opinion, the benefits of the new system are great and much superior to the much more complicated multiple page medical information required under the old system.

Another argument I’ve been seeing online that makes no sense is that doctors will reject insurance under Obamacare. It makes no sense because I’m buying private insurance under the system, so there’s no way any doctor can tell how your insurance is obtained. The argument is really referring to Medicaid, which is different, but folks are conflating the two either by mistake or deliberately as a false attack.

The software glitches will eventually(hopefully) be fully resolved and then the real proof will be if costs are controlled.

As an entrepreneur, I think this new system is great because it finally lets people get decent private insurance at more affordable costs. The biggest fear most people have with leaving the office job and striking out on their own is the loss of insurance benefits from their company. The ACA removes that problem.

Coming down with a preexisiting condition like diabetes or cancer meant you were trapped to the insurance company you were currently with, and if they kicked you out or left your state, you were out of luck. Now you have a full selection of insurance companies to pick with no fear of rejection due to a preexisting condition. This is also a huge plus.

Government Shut Down and Debt Ceiling Limit 101

There’s a lot of misconceptions and finger pointing over the government shut down and debt ceiling limit- so here’s my attempt at adding some non biased clarity:

The reason why this “crisis” is allowed to happen is due to the strange process of how the government manages its budget- they have a separate process for taking on debt obligations and another one for actually paying for them.

If you think about it, it really makes no sense to do it this way. It’s like you going out to buy a house and car, sign up for the mortgage and car payments, only to then later decide if you’re going to pay the recurring bills or not. Yeah, some people actually operate this way, but it’s typically associated with fraud and criminal activities. Law abiding people honor their commitments and pay their bills.

So when the debt ceiling needs to be raised, it’s associated with prior approved spending that requires the ceiling to be raised. The key to remember here is the ceiling isn’t raised to allow the government to approve new spending, but to pay the bills of the spending that was ALREADY APPROVED. This is where many people get confused, they think raising the ceiling encourages more spending, but what it actually does is just pay for past spending obligations, not new ones.

Once upon a time the two processes were tied together, requiring the debt ceiling to be raised at the same time new spending was approved, so you couldn’t have one without the other. This was known as the Gephardt Rule, named after its proponent and creator congressman Dick Gephardt.

The rule combining the two steps was waived by Republicans after they took the House and Senate back in 1994. I don’t fault Republicans for doing this, as this was a political maneuver that either side would likely do when they don’t have the Presidency. It becomes a nice weapon to use against the opposing party President about over spending. We can be fairly certain that if the Republicans controlled the Senate, House, and Presidency like the Dems had, they would have kept using the Gephardt rule to their advantage.

Of course using this “funding” weapon can lead to government shutdowns. This is nothing new and we’ve have several of them over the years between the two parties.

The big difference now is no party in recent history has ever threatened to not raise the debt ceiling and allow the country to default on its debts. The first time this occurred was in 2011 with the arrival of the Tea Party Republicans. The ensuing debt limit standoff between the President and the House resulted in the lowering of our national credit rating for the first time in history, which sent the markets in a spin.

Typically in the past neither party was thought to ever be willing to force a default by not raising the ceiling, but used the opportunity for the vote to humiliate the President of the opposing party as being an out of control spender.  There would be some grand standing and speeches, but the ceiling was raised without needing a countdown clock to Armageddon.  This time things are different with the advent of the Tea Party elected politicians being willing to raise the bar to making the threat of an actual default a negotiation tool.