So, this is my first post here. I was originally going to write a rant about the state of U.S. Consumer Culture. Instead I am going to just post a link that I think speaks for itself:
…to feel better about the direction of humanity.
Today we learn that:
The Irish are getting along
http://www.nytimes.com/2007/03/27/opinion/27tue3.html
Cruelty against animals may no longer be chic in corporate America
http://www.nytimes.com/2007/03/28/business/28burger.html?hp
New York has beaten back the Wal-Mart monolith
http://www.nytimes.com/2007/03/28/business/28retail.html?hp
and…
The White House is running scared from what appear to be its own lies
http://www.nytimes.com/2007/03/27/opinion/27tue1.html
The Government: Working for you (unless it’s not).
There is a database maintained by the Securities and Exchange Commission that goes to sleep at night. If you visit this site after a certain hour the page reads: “Investment Adviser Public Disclosure is currently unavailable. Please revisit the site during operational hours.”
I’m glad that the database can get dinner, go home, kiss the kids, get some shut eye. This is every night, mind you.
The Securities and Exchange Commission maintains this publicly accessible web site to disseminate information about Registered Investment Advisors (basically firms that manage money and agree to SEC oversight of their businesses. More complete definition here: http://en.wikipedia.org/wiki/Registered_Investment_Advisor).
I can only think that they close the site to dissuade hackers. Perhaps the SEC staff can’t monitor this database at 3am. But neither can an investor in Asia (e.g., Japan: 13 hours ahead of EST) check up on money managers at this hour. Why not?
We’re in a global economy and a sleepy web site strikes me as very odd. Am I nuts or is this just bizarre?
Warren Buffett, from his February 28, 2007 letter to the shareholders of Berkshire Hathaway (Available here, page 20).
In last year’s report I allegorically described the Gotrocks family – a clan that owned all of America’s businesses and that counterproductively attempted to increase its investment returns by paying ever-greater commissions and fees to “helpers.” Sad to say, the “family” continued its self-destructive ways in 2006.
In part the family persists in this folly because it harbors unrealistic expectations about obtainable returns. Sometimes these delusions are self-serving. For example, private pension plans can temporarily overstate their earnings, and public pension plans can defer the need for increased taxes, by using investment assumptions that are likely to be out of reach. Actuaries and auditors go along with these tactics, and it can be decades before the chickens come home to roost (at which point the CEO or public official who misled the world is apt to be gone).
Meanwhile, Wall Street’s Pied Pipers of Performance will have encouraged the futile hopes of the family. The hapless Gotrocks will be assured that they all can achieve above-average investment performance – but only by paying ever-higher fees. Call this promise the adult version of Lake Woebegon.
In 2006, promises and fees hit new highs. A flood of money went from institutional investors to the 2-and-20 crowd. For those innocent of this arrangement, let me explain: It’s a lopsided system whereby 2% of your principal is paid each year to the manager even if he accomplishes nothing – or, for that matter, loses you a bundle – and, additionally, 20% of your profit is paid to him if he succeeds, even if his success is due simply to a rising tide. For example, a manager who achieves a gross return of 10% in a year will keep 3.6 percentage points – two points off the top plus 20% of the residual 8 points – leaving only 6.4 percentage points for his investors. On a $3 billion fund, this 6.4% net “performance” will deliver the manager a cool $108 million. He will receive this bonanza even though an index fund might have returned 15% to investors in the same period and charged them only a token fee.
The inexorable math of this grotesque arrangement is certain to make the Gotrocks family poorer over time than it would have been had it never heard of these “hyper-helpers.” Even so, the 2-and-20 action spreads. Its effects bring to mind the old adage: When someone with experience proposes a deal to someone with money, too often the fellow with money ends up with the experience, and the fellow with experience ends up with the money.
Match.com’s slogan is “Get what you’re looking for.”
Please, ladies, tell me if this clip art-worthy specimen of masculinity is what you’re looking for:
The white spikey hair. The obsene grin. Wait…could it be? Max Hedroom’s son, anyone?
I mean, really.
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