Steve Gelsi, NYFWA president for 2008
December 20, 2008 - Financial journalists did their part to blow the whistle on yet another major financial scandal. Erin Arvedlund has drawn well-deserved attention in recent days for her 2001 Barron's story about Bernie Madoff's split-strike conversion strategy in the options market. The returns on his Fairfield Sentry Limited fund had been raising eyebrows among traders on the American Stock Exchange. In her "Don't Ask Don't Tell" story, she interviewed more than 100 people about the debunked money manager and reported speculation on Wall Street at the time that "Madoff's market-making operation subsidizes and smooths his hedge-fund returns."
That's just one example on how financial journalists raised red flags ahead of the monolithic meltdown this year.
One other thought on Bernie Madoff...
Everyone is reporting that he stole $50 billion, but is it really that much? Who knows exactly what the figure is? Maybe it's really one tenth of that. I suspect that the $50 billion figure comes from Madoff himself, once again inflating the results to show that he's the biggest white collar criminal of all time. Anyway, we have seen reports that at least hundreds of millions is missing, so I'm not sure what the actual total stands at the moment.
As 2008 comes to a close, it's good riddance for some of the worst Bear Market conditions since the 1930s, when the New York Financial Writers Association was founded. 2009 promises to be a year of FDR-like moves from the U.S. government under Barack Obama. Hopefully, his $1 trillion stimulus package will do the trick without burdening our children too much.
Among the many things to mourne in 2008 is the number one billion. The figure used to carry so much impact, so much importance. Now the number $1 trillion is rising to take its place. We had a nearly $1 trillion Troubled Asset Relief Program passed by U.S. Congress, and another $1 trillion waiting under the upcoming Obama plan. The war in Iraq cost us $1 trillion and we have very little to show for it.
As financial journalists take up their pens for 2009, the U.S. will likely be faced by some of the biggest challenges since the start of World War II. While the Greatest Generation handled it all in stride, I hope we're up for it. Maybe the way to get through the upcoming crisis was already laid out by the now 80-year-old plus crowd of the 1930s and 1940s. Tighten your belt, conserve, work hard, and turn the thermostat down. Recycle everything. It used to be American to be lean and mean before the consumer crazed years that followed. Somehow it's become more patriotic to buy oil from the Arabs and give them another $1 trillion dollars every year by buying gas guzzling cars, for example. We need to retool the economy, get things rolling again. Maybe add some green collar jobs? Wall Street will be revived by the estimated $1 trillion or so carbon trading market. Just watch out for the next bubble. If totally real assets like land can cause financial meltdowns, what'll happen when the carbon market bubble bursts? Of course it's all years away, and by that time we'll be working on the number one quadrillion, I guess.
Have a great holiday season folks, and a healthy 2009.
Werner Renberg: It is ironic that in a well-intentioned, appreciated message in which you raise a question about facts in the Madoff case you should commit a factual error yourself when, paralleling comments by politicians, editorial writers and others, you refer to buying oil from "the Arabs" at a pace of $1 trillion a year.
Checking the latest USG data for September, I found that we imported 42,942,000 barrels of crude and/or products from Saudi Arabia, the principal Arab source. If you multiply that by 12 you have us importing 515,304,000 barrels a year. Multiply that by, say, $50 a barrel--well above Friday's closing quotes--you have us shelling out $25.8 billion--billion with a "b"--a year.
Even more significant, that was ONLY ABOUT ONE THIRD of the volume imported in September from within our own Western Hemisphere: Canada, Venezuela, and Mexico.
Unless I erred in placing my decimal points, ALL of our crude & product imports from Arabs, Latin Americans, Anglo Saxons, Slavs, and others don't come to $1 trillion a year.
PS It was very thoughtful of you to give a well-deserved compliment to Erin and the friendly folks at Barron's.
Bruce Fraser: Thanks for this message. A lot of truth and meat in this...Most of it my sentiments as well. Happy Holidays...
Jon Jacobs: Regarding the diminished significance of "billion," one of the legion of Internet trolls posting anonymously on some newspaper's reader comment threads, went to some length urging journalists to replace the word with "thousand million," a phrase he thought more likely to move the public to the outrage he felt is needed. (An example he gave went something like this: "Goldman Sachs, the crooked bank formerly headed by the corrupt Bush Treasury Secretary, disclosed today that it threw dirt in the faces of the American taxpayers by rewarding its thieving executives and staff with nearly ELEVEN THOUSAND MILLION dollars of compensation and benefits this past year, not long after the bank had accepted EIGHT THOUSAND MILLION dollars of taxpayer assistance to keep itself afloat.")
This goofball even went so far as to label the very word, "billion," a PR-man's invention aimed at muffling public outrage (can you spell, "solipsism"??) -- and to label the whole financial media "corporate toadies" for routinely using the word!
Sad to say, he seems to represent majority opinion among the general public....especially when it comes to public discussion of compensation issues and bailouts.
So, while journalists (financial and other) have done good work inspiring justified outrage over the years, we should also be mindful that our job entails educating the public about issues that more often than not are too complex to fit on a bumper-sticker. Judging from the raw material we're starting with (the public's apparent educational level at the moment); we face quite a challenge in that regard.
November 21, 2008 -In more than 11 years now as a financial reporter, 2008 takes the cake for the most number of comparisons to the GREAT DEPRESSION that I've seen in my journalistic work. Every few years or so -- like 1987, or 2001 -- the bubble bursts, the market swoons, and comparisons to the 1929 crash well up.
I don't know if this downturn just seems worse because it always seems worse when you're in the middle of a vicious bear market. But it really does seem worse.
So, as we celebrate the New York Financial Writer's Association's 70th annual Financial Follies this year, let's party like its 1929. Let's hope this downturn isn't followed by 16 years of severe unemployment, economic hardship and a world war. At any rate, it's high time we all blew off some steam.
The esteemed Financial Follies Book Committee of Josh Friedlander and Imogen Rose-Smith had plenty of material to work with this year -- the financial crisis, the demise of Lehman and Bear Stearns, the $700 billion bailout package, and the demise of Eliot Spitzer to name a few.
As for the Follies Show, thanks again to all who volunteered their time to be in the cast including past NYFWA Presidents Sheila Mullan and Britt Tunick, as well as Board of Governors Vice President Conway Gittens, and fellow board member Barry Rehfeld. Our Executive Manager Jane Reilly made it all possible by selling the tables and overall running the show flawlessly. Laura Josepher once again provided her expert talent as the director of the show. Thanks also to Myron Kandel for setting up the video portion of the presentation.
In putting my own silly two-minute Follies gag newsreel together, I looked for American icons to depict and settled on Elvis Presly, Johnny Cash and Uncle Sam. While writing about Fannie Mae and Freddie Mac this year, the two company names always reminded me of the Motown hit song "Jimmy Mack" by Martha and the Vendellas. It thought it would be funny to play Elvis singing in his trademark voice about the two Macs. After horseback riding this year and singing cowboy songs, I got the idea to have Johnny Cash singing one of the most famous Western songs, "Ghost Riders of the Sky", with an easy substitute about 2008's Ghost Bankers of Wall Street. Finally, to try and not just do songs that are twice as old as most of the audience at the Follies, I looked around for the hottest song I could find of this year and selected "I KISSED A GIRL" by Katy Perry. It made sense to have Uncle Sam singing about how we in the U.S. kissed the boys of Wall Street -- Hank Paulson, Ben Bernanke, Jamie Dimon, Lloyd Blankfein and I guess George Bush too -- with the $700 billion bailout package.
MarketWatch video producer Chris Morino did a great job on the video, providing a computer-generated sets of Heaven and Hell, complete with flames shooting off Uncle Sam's head.
Well, I'm sure I'm forgetting someone to thank, but this has got to end some time. Have a great 2009 and hang in there folks!
September 11, 2008 -Miracle stairway on 7th anniversary of Sept. 11 attack.
PATH commuters approaching the World Trade Center have long been treated to a view comparable to a Disney ride as the train circles the former footings of the Twin Towers on its arrival into the station. As the nation marks the seventh anniversary today of the disaster that claimed nearly 3,000 lives, a new element has been added to the bottom of the 70-foot-deep basin that will one day house a Sept. 11 memorial. In recent weeks, steel workers framed a flight of stairs -- the only above-ground structure to remain standing after the massive collapse and subsequent demolition effort that followed -- and moved it from its original spot on the north side of the site to the bottom of the truck ramp often seen in news coverage and used by dignitaries. A tattered flag hangs from the stairs, now dwarfed by the rising structure of the Freedom Tower nearby and obscured by a growing collection of construction materials.
Although the economy recovered in the years after Sept. 11, we're now facing the darkest period on Wall Street since then. Lehman Brothers, which kept its revenue flowing by taking over a midtown hotel and also opening up shop in Jersey City just across the river after the Twin Towers came down, is fighting for survival once again. This time the bank may not make it. Still, life in the financial sector moves on with private equity, insurance and other players like Goldman Sachs and Bank of America remaining somewhat healthy thus far. While the nation remembers the fallen on Sept. 11, we must not forget the new casualties of the Wall Street meltdown -- from laid off bankers to people across the country stuck with mortgages that exceed the market value of their homes. Seven years after the jets slammed into the Twin Towers, it'll be interesting to see what survives the current collapse of the financial markets. Hopefully it'll be more than just a stairway.
July 18, 2008 - Robert Frank, author of Richistan, made a star appearance at the July Drinks Night at the Playwrights II bar on Eighth Ave. More than 40 people showed up so it was a great turnout. Thanks to all who attended for coming and making the night a success.
Frank, a star reporter at The Wall Street Journal who more than paid his dues as a foreign business correspondent, applied his reporting prowess in more than 100 interviews with people with $10 million or more in investable assets. He formed a composite profile of the ranks of the today's wealthy as the basis for Richistan.
The bottom line: the super rich regard themselves as very much unlike the classic image of the idle rich as portrayed by Thurston Howell in the TV show Gilligan's Island. In one telling statistic unearthed by Frank, about 85% of Rolls Royce owners now drive their own cars. The reverse was true a generation ago. Most of the rich folks that he met made their money themselves and still have many of the middle class working values that they had when they were schlumps like the rest of us.
They're usually entrepreneurs who are worried about how complicated their lives have become and whether they can still continue to make money and keep their lives relevant. Despite their wealth, they're actually miserable most of the time -- just like us. And worst of all, their kids appear to be totally incapable of grasping the challenges of surviving outside of their bubble world and will likely let all the family money run through their hands like sand.
So in the long run, big collections of personal wealth don't often last more than a generation or two and then the rest of us get it all back.
As I said in my introduction, Frank is definitely one of the best journalists out there and it's good to see that his huge talent was recognized by the marketplace through healthy sales of Richistan, which is now out in paperback and sold in countries all over the world. It seems to have become a staple of the wealth management biz where everyone is trying to figure out what makes the rich tick.
Frank isn't sure what his next book project will be. Maybe he should do a book about super yachts, along the lines of his last front page story in The Wall Street Journal this week. That would be cool.