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The Biz Roundup December 12

We elected you to do nothing. So get to work! :: Republicans argue that their rejection Thursday evening of a $14 billion loan package came in response to the concerns of angry taxpayers . . . Sen. Jim DeMint (R-S.C.) . . . noted, “politically, I think Republicans can show a real difference [with Democrats] here.” (Politico, December 12) Okay, okay, before everyone gets in a tizzy about the wrong side of history and “Herbert Hoover time” (Dick Cheny said that, no less!), remember Alfred Hitchcock’s ticking bomb rule. The Republicans have decided to sit and chitchat few a few more minutes while the bomb ticks away. It just wouldn’t be worth the price of a ticket now otherwise, would it?

While our elected officials do nothing, perhaps they should read this fun but wholesome article to pass the time. :: Even as the bailout package for Detroit’s automakers remains a question, automakers in Europe and Asia are lining up for handouts. “It’s a foregone conclusion that governments around the world are going to aid these companies,” Dennis DesRosiers, an independent auto analyst in Toronto, said. “It’s just a matter of working through the politics.” (New York Times, December 12) But, in the party-pooper department, you could easily argue that the difference is this: the Europeans and the Asians will probably get their money back.

Remember what Shakespeare said about great stones rolling downhill . . . :: On the surface, Madoff’s funds were supposed to be low risk investments. His largest fund reported steady returns, usually gaining a percentage point or two a month. The funds’ stated strategy was to buy large cap stocks and supplement those investments with related stock-option strategies. . . . But sometime in 2005, according to the SEC suit, Madoff’s investment advisory business morphed into a ponzi scheme, taking new money from investors to pay off existing clients who wanted to cash out. (Time, December 12) I have met Madoff briefly on two occasions. I do not have words strong enough to describe how well respected he was; this was one of the highest reputation hedge funds run by one of the most highly respected guys on Wall Street. Since I brought up Shakespeare, Timon of Athens said, “Let my grave-stone by your oracle.” Here’s what to expect over the next few months. First, massive draw-downs from the hedge funds as investors burn their shoes on the pavement running to get their money out. This is like a stick of dynamite thrown into a fishing hole: pop pop pop as dead hedge funds go belly up to the surface. Since alot of these doods hold tons of derivatives contracts, expect the credit markets to sieze up even more. Second, the high-flying days of the unregulated hedge funds are now over. Congress and just about every other government agency is going to step in to increase accountability and investor security. Again, since hedge funds own a pretty big chunk, if not the lion’s share, of credit derivatives, expect more bad things as their wheelings and dealings, previously hid in the shadows, come to light.

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