Can we put a bullet in Economists yet?

Heard on Bloomberg radio this morning as stated by Chris Whalen of Institutional Risk Analytics:  "The Fed is full of economists.  They know nothing.  They need our help.  Let's help them understand that putting more money into the banks will not do anything to help our economy."  (Or words to that effect.)

Yes, brother, yes!

If this gets ugly...

It could get...er...real ugly.

Check this out.

Surprise! Hedge Funds trade with inside information. Whocoudanowd?!

Arthur Samberg, the CEO and Chairman of Pequot, a giant hedge fund is coming close to being the guy who rips the band-aid off the fact that hedge funds use inside information to generate their returns.  A complex Portfolio.com article outlines how he uses inside information gained from a contractor to trade Microsoft's earnings to great success (+$12MM).  This could be the match that lights the tinder of the fact that a lot more of the hedge industry uses inside information than you would believe.  Gerson Lehrman, a firm that sets up conference calls between "industry consultants" and hedge fund investors, has built a multi-hundred million dollar business based on this model.  They have been finding people within companies for years and brokering calls with hedge funds.  Hedge funds pay big money for these calls because they can usually pump the industry consultants -- people who work in big companies but are moonlighting on the side who may or may not know they're being pumped for information.

It's an offense to all of the other investors who are just trying to play the game fairly.  And at some point, this scheme will be revealed.  Maybe.

Satyam's Fraud Just the Latest Cockroach To Emerge

So, apparently the exportation of America's culture is alive and well.  It just has a bit of a lag.  Satyam's founder disclosed that he had been falsifying accounts in a yarn that starts to smell a lot like Enron.  (Eww, smelly yarn.)  And why not?  So many people got so rich doing it in the U.S., why not try it in countries that have weaker regulatory and legal structures?

We'll be seeing much more of this as time goes on and the repression starts to uncover the warts that a bull market tends to hide.  In investing it's called the cockroach theory.  Financial mistatements and fraud are like cockroaches, once you see one, you can bet there is happy family of a thousand or so living snugly somewhere under your cabinets.  You'll be a stomping, pesticide-spraying fool for months to come!

Michael Hirschorn at the Atlantic Does Not Have A Clue

You know, I just get done praising an excellent article in the New York Times and then something comes along which strengthens my belief that the Mainstream Media is out of their mind.

I just don't get how journalists don't get why they're being disrupted in a wholesale way.  The Atlantic just published an article by Michael Hirschorn that demonstrates he clearly doesn't have a clue.  Not only does not have a clue, the ideas he does have are so totally off-base, it would be amusing if it weren't sad.  Journalists think they are, quite literally, gods gift to the world. Without them, there is no possible way that people can understand what is going on.  The world NEEDS people who don't have any experience in the topics they write about to explaing things to them because clearly only someone without experience will truly understand a complex topic.

Some winner quotes:

The collapse of daily print journalism will mean many things. For those of us old enough to still care about going out on a Sunday morning for our doorstop edition of The Times, it will mean the end of a certain kind of civilized ritual that has defined most of our adult lives. It will also mean the end of a certain kind of quasi-bohemian urban existence for the thousands of smart middle-class writers, journalists, and public intellectuals who have, until now, lived semi-charmed kinds of lives of the mind. And it will seriously damage the press’s ability to serve as a bulwark of democracy.

Uh, did he just say that the loss of newspapers will remove both furious widespread mental masturbation AND the "bulwark of democracy"?!  Seriously, newspapers lack of capability to find and tell the real stories of how things are is one of the reasons why our democracy is in danger.  Newspapers haven't bulwarked much of anything except the P.R. agency which plays them like little bitches.  Bulwarks my ass.

This prompted Henry Blodget, whose Web site, Silicon Alley Insider, has offered the smartest ongoing analysis of the company’s travails, to write: “‘We expect that we will be able to manage’? Translation: There’s a possibility that we won’t be able to manage.”

Really, did the bulwark defender just quote from a blog that has "the smartest ongoing analysis"? Wait until you read the next quote.  This is a classic.

Internet purists may maintain that the Web will throw up a new pro-am class of citizen journalists to fill the void, but for now, at least, there’s no online substitute for institutions that can marshal years of well-developed sourcing and reporting experience—not to mention the resources to, say, send journalists leapfrogging between Mumbai and Islamabad to decode the complexities of the India-Pakistan conflict.

Seriously, I can't write a better hypocritical statement if I tried.  The best part of those two quotes above is that they're actually the first and second half of one paragraph.  If he's not being funny then he's Exhibit A in Why Mainstream Media Sucks Ass.  He doesn't get that the reason why no one values sourcing and reporting is because the sources ARE MAKING THEMSELVES HEARD DIRECTLY ON THE INTERNET THROUGH BLOGGING.  I've been a source for reporters a few times and my experience is that they have no clue, take quotes completely out of context and are filling out predetermined outlines they've already created.  Seriously, they come to interview me because I'm the supposed expert on a certain topic and then they tell me to give them a "killer quote" about the topic that fits their outline.  Wha???  The American readership has picked up on this perversion of information and is now voting with their attention.  They're not voting for professional journalism.

The conundrum, of course, is that those 1 million print readers, who pay actual cash money for the privilege of consuming the paper, and who are worth about five figures a page to advertisers, are far more profitable than the 20 million unique Web users, who don’t and aren’t. Common estimates suggest that a Web-driven product could support only 20 percent of the current staff; such a drop in personnel would (in the short run) devastate The Times’ news-gathering capacity.

Really?  Because I have a friend that used to work for a prestigious newspaper and they would tell me about how they had scads of six-figure reporters who they were lucky to see in the office twice a year to file two stories.  Give me that job!  It's a license to steal and that's what journos have been doing and now that they've been caught with their hands in the cookie jar, they're...well...f'd.

The Internet has done much to encourage lazy news consumption, while virtually eradicating the meaningful distinctions among newspaper brands. The story from Beijing that pops up in my Google alert could have come from anywhere.

Really?  Because I have about 140 feeds into my RSS reader and they all come from sources that have proven to me that they have value in terms of knowing WTF they are talking about and consistently writing about topics that are valuable to me.  I have to spend a lot of time keeping up with this news flow but it's worth it.  I'm consistently in front of critical trends and with critical information, which is...well...critical to my job.  Oh and the thing about the story from Beijing being from anywhere -- WTF?  See, this is the root of what is happening:  Journalism has become so dumbed down and believes that their readers are idiots.  Guess what, it doesn't take much to figure out when you're reading bad info.  Besides, it probably beats the crap that newspapers have been feeding us for years.

The article goes on and on about this crap for a long time, and eventually he starts opining about what strategy the NYT should use.  Listen, show me a journalist that understands strategy and I'll show you someone who left mainstream media awhile ago and started a blog network.  Rafat Ali understands strategy.  Light Reading understands strategy.  Nick Denton understands strategy.  I'll even choke down a shout out to Kevin Rose and Gabe Rivera -- although the jury is out as to whether they understand strategy or if they just lucked out by one of the million monkeys to accidentally type Shakespeare's works.

Here's the article.  Go visit it so that we can help this guy out as he'll clearly be out of a job soon.

Lewis and Einhorn Nail It

Unbelievably correct article from the NYT.  If you're wondering how our financial markets got so fucked up, then read this.  Even if you're just ignoring financial news because you can't handle how crappy it is, read it.  There is very, very little accurate commentary or analysis out there about how we got here that you owe it to yourself to read the pieces that nail it like a roofing gun.

It's titled: "The End of the Financial World as We Know It".  I'm not going to say I told you so...oops.

Select quotes:

"In the “Highly Likely” scenario, wrote Mr. Markopolos, “Madoff Securities is the world’s largest Ponzi Scheme.” Which, as we now know, it was.  Harry Markopolos sent his report to the S.E.C. on Nov. 7, 2005 — more than three years before Mr. Madoff was finally exposed — but he had been trying to explain the fraud to them since 1999."...

"Indeed, one of the great social benefits of the Madoff scandal may be to finally reveal the S.E.C. for what it has become.  Created to protect investors from financial predators, the commission has somehow evolved into a mechanism for protecting financial predators with political clout from investors."...

"How does this happen? How can the person in charge of assessing Wall Street firms not have the tools to understand them? Is the S.E.C. that inept? Perhaps, but the problem inside the commission is far worse — because inept people can be replaced. The problem is systemic."

And then read the next story they wrote titled:  How to Repair A Broken Financial World

New theme alert: U.S. as a restart/reboot

Two great articles/blog posts that highlight that the U.S. needs a fundamental restructuring.  It's not that we're going through a 'bad time', it's that our systems are broken.  This is more than a simple fix and taking a page from the classic business playbook (I differentiate from the isanity that has lately been called business) the U.S. needs to restructure by improving its systems and replacing the management team.

Peter Rip's post talking about the U.S. as a "Restart" (which benefits him because I suspect that he is positioning his VC firm as specialists in restarts, especially given the money he made on the earlier cycle with the Yipes restart).

Interesting quote:

The USA looks like a classic Restart “opportunity.”  What happens in a restart?  First, existing stakeholders get wiped out; The $7T of ‘new money’ is accomplishing that. Second, management gets changed.  November 4 did that.  We now have new managers who have a four year ‘vest’ and, probably, a ~100 day cliff.   They don’t have a new incentive model – that’s a problem – and we have a tier of managers, called Congress, closely resembling the old group, except for some changes at the edges among the most junior members.

There there is Tom Friedman's "Reboot America", his article in the NYT:

For all these reasons, our present crisis is not just a financial meltdown crying out for a cash injection. We are in much deeper trouble. In fact, we as a country have become General Motors — as a result of our national drift. Look in the mirror: G.M. is us.

Glad to see that others are jumping on the train of realizing that our problems are fundamental which means they'll require some deep fixes.