The underlying problem with financial advice—besides the fact that most of it is wrong, conflicted (in the conflict of interest sense), or covert marketing—is that, even in the best case, it rarely works.
I have previously written about (here, for example) what I call economism, or excessive belief in the little bit that you remember from Economics 101. The problem is twofold. First, Economics 101 usually paints a highly stylized, … Continue reading →
The Wall Street machinery was back in business thanks to the Fed’s policies, David Stockman writes. When Extended Stay America exited bankruptcy, its new owner was, well, Blackstone – which had done the LBO. To underscore that speculators h…
Wachovia and other banks funded the $7.4 billion debt portion of the Extended Stay LBO, knowing the company was worth only $4.8 billion at the most. The loan was then rolled into structured finance securities – “designed to turn a sow’s ear…
“One of the hallmarks of financial manias is that propositions which are perfectly absurd nevertheless get widely embraced by those caught up in the excitement,” writes David Stockman – in this case, Blackstone’s LBO of Extended Stay Hotels…
Budget Director under President Reagan, then partner at private-equity firm Blackstone Group, and author of bestseller THE GREAT DEFORMATION: THE CORRUPTION OF CAPITALISM IN AMERICA, David…
David Stockman, Budget Director under President Reagan and then a partner at private-equity firm Blackstone Group, has graciously permitted me to post excerpts from his…
“At junctures of extreme financial stress, the high level of carry trade funding” that hedge funds use during bubbles “results in violent market reversals,” David Stockman writes. “Wholesale funding evaporates and involuntary asset sales cascade into a bidless abyss.” Hence the collapse of 2000–2003 (45%) and 2008–2009 (55%). Now they’re doing it again.
“As the Fed transformed Wall Street into a casino,” wrote David Stockman, “arrangements for insider speculation took on massive size,” with “hedge fund footings” soaring from $150 billion in 1990 to $3 trillion by the 2007–2008 peak. Trading books of Wall Street banks grew even more explosively. Together, they formed “the fast money complex.”
Unlike mortgage equity withdrawal by households, where the cash windfall was distributed across the middle class, corporate equity withdrawal through buybacks, buyouts, and takeovers resulted in cash distributions to the very top of the economic ladder…
