There is no other place on this planet as sophisticated and resourceful where you can make big money and get fleeced without leaving your armchair. The money craze on Wall Street has called attention to a new era for investors.
"Yessiree, step right up and play the game everybody loves! You sir, yes you with the big bear tee shirt. This is your lucky day! I'll tell you what I'm going to do for you. Give me a half million dollars and I will guarantee that your investment earns twenty percent per year EVERY YEAR for the next five years and longer. Trust me.
(Pitch continued...) "This investment is one of a kind and we only offer it to special investors who seek above average returns. I'm giving you our confidential brochure documenting the returns over the past ten years. As you can clearly see from the charts and the sincere look in my eye (doesn't matter which one), this is a phenomenal opportunity backed by our proven history of outperforming the markets."Now, who in their right mind would fall for a scam like the one described above. You? If not you, who?
The shell game on Wall Street has been marketed in various forms.If you didn't quite like the cologne worn by the scam artist offering you twenty percent on your money, you probably gave a huge fraction of your assets to a giant institution brandishing a recognizable logo for the last fifty years. I'm referring to Merrill Lynch. You sounded like a bug snug in a rug when you told your house guests or close friends (OR ME), "I'm with Merrill."
For decades, Merrill Lynch posed as a monolith owning a legacy of strength and integrity.Who knew the benchmark of investment banking was so reckless while strutting its bullish messages in more tabloids than any financial institution in the world? I had only a small clue, going back twenty years; but I had no idea the company was casting a shadow across the markets that ten times larger than its true size. Imagine, a global investment bank being swallowed up by a bank (Bank Of America, NYSE: BAC)! Think about that for a couple of minutes.
Being Rich Has New Meaning
"The rich get richer" is an old adage that we have all heard for most of our lives. Forget it. These days the rich are becoming more corrupt by the hour, losing their integrity to the lure of money an preying on investors that need the money the most. It's about time we all learned that any service or series of transactions that require new capital to be successful is a virtual Ponzi scheme!
Roughly three decades ago, Woody Allen described a stockbroker as someone who invested your money until there was none left. In the past decade, distributions of wealth have been a one-way system that benefits corporate executives more than any other class in the United States; and we taxpayers are now asked to take a flying leap of faith in hopes that our government will put the brakes on the inequities of Wall Street. Unfortunately, it hasn't happened, yet.
While Democrats and Republicans debate who's right and who's wrong, the swindler's beat goes on. Unjustifiable use of company jets, lavish junkets to softer climes and additional perks to the best dressed executives will continue until President Obama finds a way to pull the plug. In my view, he is somewhat intimidated by the likes of Nancy Pelosi and Barney Frank. Who wouldn't be? Those two bureaucrats began hobnobbing on Capitol Hill before Mr. Obama left law school. In my opinion, they represent the monkey wrench (think pork) in the recovery program.
About Hope
I believe no one doubts that our greatest commodity is hope.
Government, being what it is, will grind through waste to achieve the economic restoration this country needs, albeit in a much longer time frame than actually necessary. Supposedly, the buck will stop at the Oval Office, and hard-nosed decisions from the top will be exercised.I think of the solution to our financial crisis can be characterized a a gigantic jigsaw puzzle.
The banks have to be reclassified and refurbished, jobs must be secured and looting of investors' pockets must cease, all within a singe time frame. Progress in these areas has to be achieved quickly in order to keep the glimmer of hope alive around the world.
If there was ever an opportunity for a U.S. President to be lionized as a the champion of America's future, now is the time - a feat that would be registered as one more magnificent moment in history.
Hudster
Sunday, March 1, 2009
Thursday, January 15, 2009
Madoff, American Piranha
I am an ex-convict, as of January 15, 2002. The prefix is permanent, but the root word is not. I was fortunate enough to get the message during my first week in prison. Although I was sentenced to six years’ confinement in a correctional facility, there was no way I could have survived the stark change in my environment. I appealed to the superior court to be re-sentenced to a shorter term was successful. I served a total of seven months on a farm in South Jersey and will never return to the prison system.
My mind is totally changed. The corruption that evolved in my thinking has been replaced with a permanent commitment to be a benefactor to society for the rest of my life.
I wish I could say the same for Bernard Madoff, but I cannot. He is a much different kind of animal.
A reporter called me about a week ago. After he introduced himself as a member of a global news organization, he said he was working on a story about Bernie Madoff and would like to know what I thought of the man. My immediate reaction was to recoil with a complaint I had been harboring about the local newspaper that included my name in a caustic report, sparking the reporter’s interest. After making it clear to the caller that Madoff and I had nothing in common, except for gender, was given an opportunity to describe the quality of advising I performed for nearly twelve years, prior to succumbing to a gambling addiction.
My overall answer to the reporter’s initial inquiry was probably too brief, in retrospect. I said Madoff is an evil person with little or no self-respect. Today, I could easily expand my assessment. This man began an adventure that was based on a desire to steal from the rich. His commitment was so strong, it allowed him to become extremely successful in his pursuit. So much for Bernie Madoff.
The Other Half of the Equation.
Some investors (and corporate managers) are the greediest people on earth, a point that I make in my book, Stock Power. In order to run a successful ponzi scheme, you need to have a sizeable market of gullible participants, just like you need both buyers and sellers in the stock market.
It’s most unfortunate that some of Madoff’s victims were captive investors along for the ride; but a decision maker who is persuaded to make an egregious pledge without verification of the validity of the return on investment is a fool. Regardless of the impression a solicitor makes with references and facades of extreme success, the age-old principal still stands. A sucker is born every day (P.T. Barnum). Apparently, wealth isn’t necessarily the modifier.
Since the late eighties, major markets have crumbled when investors pursued false promises of extraordinary gains. In the 1987, it was the junk bond market. Some twenty years later it was the housing markets. Meanwhile, con artists, large and small, have preyed upon hapless and hopeful zealots who might still believe in the Fairy Godmother.
True Story
In 1995, I discovered a timber producing company called Rayonier Timberlands, LP (NYSE: RYN), operating in several countries including the U.S. At the time of my discovery the stock was paying a dividend of approximately 1% per year along with a monthly payout of approximately 30% (annualized) that represented return of principal. My research revealed that the company would continue to make similar payouts until January 2000. The key caveat was to beware of any early downturn in the company’s revenue streams. The value of the stock increased by 11% from January thru December of 1995, and I think I know why.
Every one of my clients to whom I introduced this investment was told about the risk of the investment. Therefore, they understood why they were getting an annual rate of over 30% while conventional dividend stocks paid 8. A handful of investors did not question why the stock was paying an incredible annual income but still wanted to participate. I told them how the investment worked, regardless, and they thanked me. That’s how my reputation continued to rise in the mid-nineties.
Even in today’s environment, there are several investment vehicles that will provide an annual return of 10% or better. Well advised investors know about these opportunities and will prosper if they allocate the right fraction of their total holdings. Why anyone would abandon the age-old principles of asset allocation is a mystery to me, except to say that money can skew the senses.
So, we wait and watch, in unprecedented disbelief, while this sordid sage about a horrible caper plays out. I hope Bernard Madoff is served the maximum penalty for his crime and that his soul is redeemed.
Hudster
My mind is totally changed. The corruption that evolved in my thinking has been replaced with a permanent commitment to be a benefactor to society for the rest of my life.
I wish I could say the same for Bernard Madoff, but I cannot. He is a much different kind of animal.
A reporter called me about a week ago. After he introduced himself as a member of a global news organization, he said he was working on a story about Bernie Madoff and would like to know what I thought of the man. My immediate reaction was to recoil with a complaint I had been harboring about the local newspaper that included my name in a caustic report, sparking the reporter’s interest. After making it clear to the caller that Madoff and I had nothing in common, except for gender, was given an opportunity to describe the quality of advising I performed for nearly twelve years, prior to succumbing to a gambling addiction.
My overall answer to the reporter’s initial inquiry was probably too brief, in retrospect. I said Madoff is an evil person with little or no self-respect. Today, I could easily expand my assessment. This man began an adventure that was based on a desire to steal from the rich. His commitment was so strong, it allowed him to become extremely successful in his pursuit. So much for Bernie Madoff.
The Other Half of the Equation.
Some investors (and corporate managers) are the greediest people on earth, a point that I make in my book, Stock Power. In order to run a successful ponzi scheme, you need to have a sizeable market of gullible participants, just like you need both buyers and sellers in the stock market.
It’s most unfortunate that some of Madoff’s victims were captive investors along for the ride; but a decision maker who is persuaded to make an egregious pledge without verification of the validity of the return on investment is a fool. Regardless of the impression a solicitor makes with references and facades of extreme success, the age-old principal still stands. A sucker is born every day (P.T. Barnum). Apparently, wealth isn’t necessarily the modifier.
Since the late eighties, major markets have crumbled when investors pursued false promises of extraordinary gains. In the 1987, it was the junk bond market. Some twenty years later it was the housing markets. Meanwhile, con artists, large and small, have preyed upon hapless and hopeful zealots who might still believe in the Fairy Godmother.
True Story
In 1995, I discovered a timber producing company called Rayonier Timberlands, LP (NYSE: RYN), operating in several countries including the U.S. At the time of my discovery the stock was paying a dividend of approximately 1% per year along with a monthly payout of approximately 30% (annualized) that represented return of principal. My research revealed that the company would continue to make similar payouts until January 2000. The key caveat was to beware of any early downturn in the company’s revenue streams. The value of the stock increased by 11% from January thru December of 1995, and I think I know why.
Every one of my clients to whom I introduced this investment was told about the risk of the investment. Therefore, they understood why they were getting an annual rate of over 30% while conventional dividend stocks paid 8. A handful of investors did not question why the stock was paying an incredible annual income but still wanted to participate. I told them how the investment worked, regardless, and they thanked me. That’s how my reputation continued to rise in the mid-nineties.
Even in today’s environment, there are several investment vehicles that will provide an annual return of 10% or better. Well advised investors know about these opportunities and will prosper if they allocate the right fraction of their total holdings. Why anyone would abandon the age-old principles of asset allocation is a mystery to me, except to say that money can skew the senses.
So, we wait and watch, in unprecedented disbelief, while this sordid sage about a horrible caper plays out. I hope Bernard Madoff is served the maximum penalty for his crime and that his soul is redeemed.
Hudster
Thursday, October 9, 2008
Elite Council On Economic Leadership
Call it a special government sponsored think tank, if you will.
It's not clear to me that any one body of legislators or representatives of Wall Street's deep bench of analysts is prepared to propose a solution to the current financial crisis. There is plenty of talent out there, in the corporate world, at least, and I suspect that there is a lot of jockeying for position once the mythical 'bottom' is reached.
In the absense of evidence that a viable plan for reshaping America's financial condidtion, I propose that the government should sanction an elite commission made up of the smartest people in the country to formulate a plan for an economic recovery. This idea should not be too difficult to implement. There are smart people at Princeton University, M.I.T., Columbia University, Morgan Stanley, Goldman Sachs and even in Congress that should be tapped to meet this challenge.
My Kinda Guy
It's not clear to me that any one body of legislators or representatives of Wall Street's deep bench of analysts is prepared to propose a solution to the current financial crisis. There is plenty of talent out there, in the corporate world, at least, and I suspect that there is a lot of jockeying for position once the mythical 'bottom' is reached.
In the absense of evidence that a viable plan for reshaping America's financial condidtion, I propose that the government should sanction an elite commission made up of the smartest people in the country to formulate a plan for an economic recovery. This idea should not be too difficult to implement. There are smart people at Princeton University, M.I.T., Columbia University, Morgan Stanley, Goldman Sachs and even in Congress that should be tapped to meet this challenge.
My Kinda Guy
Today (Thurs. Oct. 16, 2008), John Mack, CEO of Morgan Stanley was interviewed in an extensive discourse on factors that have caused the current financial crisis. When Mack was asked by the reporter if he thought the U.S. was heading for a recession, he said, "We are already in a recession. I would have said the same thing if you asked me nine months ago."
Now, that kind of stuff impresses me. More than half the world insists on taking the shallow position that we 'are' or 'might' or 'will' be going into a recession. That mindset is totally ludicrous, and it is part of the reason we couldn't get out of our own way when the sky caved in. (If it looks like a bear, smells like a bear and hugs like a bear, it probably is a bear.)
I was also gratified to hear Mack say that Morgan Stanley was in the group of investment banks that got carried away with leveraged deals. He did not stutter and his references were basically unconditional. Sure, it's probably safer for him to come clean now than it might have been a few weeks ago. Nonetheless, he offered compelling reasons to believe people with his professed ambition for future reform can make a huge difference in the financial markets.
Mack gave Mr. Paulson too much credit for working toward a solution. That's another argument that I am likely to roll out later this week. Meanwhile, the markets need a handful of experts who can come together and focus on the remedies that can heal our economy. In my opinion, part of the solution is to reduce speed and not try to get the money machines rolling too quickly.
Hudster
Sunday, October 5, 2008
Mortgage Bonds and The Importance of Class
Class in this discussion refers to both the asset and the market makers.
In 1988, I received my first orientation to Government National Mortgage Association(Ginnie Mae) and Federal National Mortgage Association (Fannie Mae). Emphasis was placed on the safety of investments issued by these agencies. I understood the distinction between the two institutions, meaning, GNMA was an agency of the U.S. Government and FNMA was sanctioned by the government and nothing more.
Several weeks of training followed, allowing me the time to understand the importance of a new era in the bond market. Mortage-backed securities, referred to as MBSs, were designed to provide 50 to 100 basis points more than U.S. Treasuries with similar maturities while enjoying the status of a AAA rating. These investments made a lot of sense when they were first introduced to the market. Investing in a security tied to the ownership of a single-family dwelling was probably one of the best ideas since the IRA was introduced in the '70s.
Soon after I learned how the mortgage market worked, the Colleralized Mortgage Obligation (CMO) was born. This concept became the answer to the wide-spread dissatisfaction over the return of principal from standard mortgage bonds. Investors preferred to have their principal earning interest for as long as possible during the life of the bond. No problem.
I joined the charge in touting the superior performance of CMOs, including the liquidity of the iinvestment. My clients learned enough about this opportunity to earn from 7% to 8% on their money during the unforgettable period between 1991 and 1998 without losing one dime of principal! How could they lose in an environment of falling interest rates? It was a wellspring of capital appreciation.
Deja Vu All Over Again!
It is mind boggling to think both Congress and Wall Street have each contributed to a dilemma that would destroy our economy. There was never a way to avoid a financial crisis if curbs were not placed on the kinds of mortgages that could be underwritten and sold to the bond market. Similar to the infamous junk bond market that reaked havoc in the late 1980's, the mortgage industry which presented a golden opportunity to investors during for almost two decades only to take back its rewards in a devastating scenario.
One can become enraged when studying the reasons this crisis has occurred. Greed, among other things allowed a few individuals, both in politics and in business, to capitalize on the rise and fall of the mortgage bond market. I won't spend the energy to cite cases and individuals here, but reader can certainly learn from recent reports on the character of the financial world.
Two respected sources of detailed information about our economic status are Bloomberg and Forbes. Rather than take the easy route and accept the confusion from so-called economic pundits on television, you might want to search for the answers to your personal financial security, independently. After all, you are probably just as smart as anyone you see in a pin-striped suit.
God bless us all!
Hudster
In 1988, I received my first orientation to Government National Mortgage Association(Ginnie Mae) and Federal National Mortgage Association (Fannie Mae). Emphasis was placed on the safety of investments issued by these agencies. I understood the distinction between the two institutions, meaning, GNMA was an agency of the U.S. Government and FNMA was sanctioned by the government and nothing more.
Several weeks of training followed, allowing me the time to understand the importance of a new era in the bond market. Mortage-backed securities, referred to as MBSs, were designed to provide 50 to 100 basis points more than U.S. Treasuries with similar maturities while enjoying the status of a AAA rating. These investments made a lot of sense when they were first introduced to the market. Investing in a security tied to the ownership of a single-family dwelling was probably one of the best ideas since the IRA was introduced in the '70s.
Soon after I learned how the mortgage market worked, the Colleralized Mortgage Obligation (CMO) was born. This concept became the answer to the wide-spread dissatisfaction over the return of principal from standard mortgage bonds. Investors preferred to have their principal earning interest for as long as possible during the life of the bond. No problem.
I joined the charge in touting the superior performance of CMOs, including the liquidity of the iinvestment. My clients learned enough about this opportunity to earn from 7% to 8% on their money during the unforgettable period between 1991 and 1998 without losing one dime of principal! How could they lose in an environment of falling interest rates? It was a wellspring of capital appreciation.
Deja Vu All Over Again!
It is mind boggling to think both Congress and Wall Street have each contributed to a dilemma that would destroy our economy. There was never a way to avoid a financial crisis if curbs were not placed on the kinds of mortgages that could be underwritten and sold to the bond market. Similar to the infamous junk bond market that reaked havoc in the late 1980's, the mortgage industry which presented a golden opportunity to investors during for almost two decades only to take back its rewards in a devastating scenario.
One can become enraged when studying the reasons this crisis has occurred. Greed, among other things allowed a few individuals, both in politics and in business, to capitalize on the rise and fall of the mortgage bond market. I won't spend the energy to cite cases and individuals here, but reader can certainly learn from recent reports on the character of the financial world.
Two respected sources of detailed information about our economic status are Bloomberg and Forbes. Rather than take the easy route and accept the confusion from so-called economic pundits on television, you might want to search for the answers to your personal financial security, independently. After all, you are probably just as smart as anyone you see in a pin-striped suit.
God bless us all!
Hudster
Friday, July 18, 2008
Why I Wrote "Stock Power"
Most people I meet ask me why I wrote my first novel, "Stock Power". The answer is two-fold. I needed a means of telling a handful of investors how sorry I am for committing a crime that caused me to leave the industry and that I intend to reimburse them 100%. On the other hand, I wanted to give book lovers a story that shows what happens to an ambitious stockbroker when he ignores the rules when success goes to his head.
Bill Haydon, the story's central character, sets out for Wall Street's cornucopia of finance in order to make more money - a perfectly admirable and logical ambition. His basis for seeking an exclusive niche in the market was his acute analytical skills and his desire to outperform in his field. He achieves both of these goals. The reader can follow Haydon through this colorful drama as he struggles with conflicts about his values and beliefs while advising wealthy people on what to do with their money.
Successful investing on Wall Street and a workaholic's addictions to money are the two main themes of this novel. Readers will be rewarded with both a glance at how to think about investing and also what to do about their own destiny. This book is likely to create a sense of urgency about personal finances for readers across North America. I expect it will take me about a year to get the word out. In the meantime, I would like to see the press get a little bit more interested in this project.
Bill Hudley
Bill Haydon, the story's central character, sets out for Wall Street's cornucopia of finance in order to make more money - a perfectly admirable and logical ambition. His basis for seeking an exclusive niche in the market was his acute analytical skills and his desire to outperform in his field. He achieves both of these goals. The reader can follow Haydon through this colorful drama as he struggles with conflicts about his values and beliefs while advising wealthy people on what to do with their money.
Successful investing on Wall Street and a workaholic's addictions to money are the two main themes of this novel. Readers will be rewarded with both a glance at how to think about investing and also what to do about their own destiny. This book is likely to create a sense of urgency about personal finances for readers across North America. I expect it will take me about a year to get the word out. In the meantime, I would like to see the press get a little bit more interested in this project.
Bill Hudley
Saturday, May 31, 2008
Stock Power (The Novel) Just Released!
After several months of constant editing and technical challenges, Stock Power (The Novel) was published by Infinity Publishing on Friday, May 30 2008.
Stock Power is commercial fiction (based on the author's life) about a stockbroker who earns the trust of hundreds of investors and acquires a comfortable lifestyle until his morality begins to drift. Ambition and greed set the stage for a horrible termination to his career.
The book is in paperback format only, at present, and is more than 500 pages in length. Price: $23.95.
Stock Power can be purchased at the Publisher's website from its BuyBooks bookstore. To locate the book, please use the following link:
http://www.bbotw.com/Search.aspx?kw=stock%20power&typ=Title
You may also visit the website that is dedicated to the book at:
http://www.stockpower-thenovel.com
Enjoy!
Bill Hudley, Author
Stock Power is commercial fiction (based on the author's life) about a stockbroker who earns the trust of hundreds of investors and acquires a comfortable lifestyle until his morality begins to drift. Ambition and greed set the stage for a horrible termination to his career.
The book is in paperback format only, at present, and is more than 500 pages in length. Price: $23.95.
Stock Power can be purchased at the Publisher's website from its BuyBooks bookstore. To locate the book, please use the following link:
http://www.bbotw.com/Search.aspx?kw=stock%20power&typ=Title
You may also visit the website that is dedicated to the book at:
http://www.stockpower-thenovel.com
Enjoy!
Bill Hudley, Author
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