The Tangerine Latrine's Shit Show

Man, this mess is worse than even I thought it would be.  The Tangerine Latrine, the Muskrat, and their merry mob of thugs aren't interested in just taking power.  They're intent on a full-on rape and run.  They're playing this as End Game, and at the rate they're going, they may make it happen.  We're about to live Game of Oligarchs, but with climate change looming in the background, so we may end up living Fallout.  But these goons don't care because they're all convinced they're Enclave.  I hope I live long enough to see them realize there isn't enough room for all of them and start picnicking on one another.

It's our own damned fault, really.  We didn't do the heavy lifting necessary to make the system work for us, certainly not since WWII.  We didn't replace the Constitution, even though it needed replacing from the start.  We acted like Mormons, pretending the thing was divinely inspired, rather than admitting it was just an ugly compromise between slave owners masquerading as farmers and land speculators masquerading as merchants to keep all real power in the hands of white, propertied, Christian men while pretending to share it.  And we never corrected this, the result being the 1% made sure we couldn't have nice things.  The barest in civil rights.  The minimum in employment, workplace, and personal autonomy laws.  Hells, even Obamacare barely passed muster under this Constitution according to the Extreme Court.  And they cemented it all with Citizens United, which opened the money gates.

And now even our vaunted rule of law is being exposed for what colonized peoples have always known it to be: a device to protect and preserve the position and power of the 1%.

Another Post For Idiots To Ignore

As I have noted elsewhere (and many other elsewheres too), I started blowing the whistle on the real estate bubble in December 2005.  The market was too hot, there was obvious fraud, mortgage rates were going up, etc.  I didn't know when the bubble would pop because I had not yet identified the forces driving it, but I figured it had to be soon, say in the next year or so.  Frankly it should have, and I guess I'll relate that tale whilst I am at it.

Thanksgiving 2006 Wells Fargo and JP Morgan Chase froze a pile of business lines of credit and converted them to straight loans with 60-month amortizations.  When I contacted Chase, not one but two EVP/AGCs informed me Chase had done this pursuant to a clause in the LOC agreement that had been fully disclosed.  While the clause did exist, the allegation it had been in any way disclosed was patently false.  I then knew something strange was going on, but I did not yet know what.  It took me awhile to dig up the puzzle pieces and fit them together.  What was happening was that the levels of fraud in the mortgage market had become so obvious it was no longer politically feasible to continue ignoring them, and so the regulators had been awakened from their previously mandated slumbers and were now on the move.  Wells, Chase, Goldman Sachs, and all the other players needed to spread some chicken feed to keep the regulators distracted while they got on with the business of lining up a nice collection of marks (AIG, Bear Stearns, Lehman Bros., pension funds, and mortal schmucks who believed the rating agencies were playing a straight game) to take the garbage off their books.  The regulators pounced on the chicken feed in Spring 2007, which gave the players enough time to keep playing.  And then in 2008 everything conveniently hit the fan.  Wells got a seat at the big-boy table via taking over Wachovia, Chase got a new lease on life via its sandbag takeover of Washington Mutual and its sweetheart takeover of Bear (I imagine Barclays wishes it had gotten a deal like that for Lehman,), those with cash (And in spite of, or more likely because of, all the illiquidity, certain players had piles of cash.) snapped up piles of assets on the cheap (Because after all the purpose of bubbles is to pop them to allow further asset concentration in the hands of Those Who Matter.), and we hit the reset button for the next bubble.  So the evidence indicates the bubble pop was delayed by over a year to protect certain players that had created the bubble in the first place.

Anyway.  In the middle of all this, August 2006 to be precise, Peter Schiff concluded the real estate party was over and things were heading down.  In December he noted the market had peaked the prior December (Now when was it again that I called my shot?) and would crash in 2007.  It's apparent he was just looking at market fundamentals (as was I) and thought the market would behave according to those fundamentals (as did I), having no real knowledge of the market manipulation going on that would stall the inevitable for over a year (knowledge I did not have either).  But unlike me, Schiff became a major talking head and got lots of influence and money.  But I'm not bitter.  At least not much.  Because I can point to Schiff as an example of how even a broken clock is right twice a day.

Because since then he has a record of being spectacularly wrong.  He thinks Medicare should be slashed, demonstrating a fundamental ignorance of how Medicare works, how it could work if expanded, and how it would be better than our current system of no one seeking medical care and when they do they have to file bankruptcy.  He thinks we should replace the current income tax system with either a sales tax (which would be regressive and hit hardest those least able to afford it) or a flat tax (which would be little better).  And in a doozy of pretzel logic, the US went from being a creditor nation to a debtor nation in the 1970s because people stopped saving.  Yes, that must be it.  Let's ignore the October 1973 OPEC embargo that ended the US's energy price advantage that had kept its products competitive around the world.  Let's ignore the resulting recession that destroyed millions of jobs.  Let's ignore that most people had no options allowing them to adapt to this new normal because our entire society was based on urban sprawl and the automobile.  Let's ignore that productivity kept increasing, but instead of any of that gain going to wages, it was all syphoned off to pad corporate profits.  Let's ignore that in spite of the recession, expenses were still going up even though wages weren't.  Let's ignore that families had to get second, third, and fourth incomes to try and make ends meet.  Let's ignore that that didn't work any better then than it does now.  And let's ignore that people stopped saving simply because there was nothing left over to save.  Schiff's positions are designed to keep moving public and private money from all of us to the 1%.  He ought to change his name from "Schiff" to "Shill".

But he must be getting desperate, because with his latest move, he has outdone himself.  He has teamed up with none other than Jim Rickards.  I've noted the credibility, or lack of same, of Rickards's "financial advice" elsewhere.  Now they've partnered up and doubled down.  And what they're selling is no better than ever.  As I've said more times than I care to count, just because you've seen somebody on TV or YouTube doesn't mean you should listen to them.

"Investment Advisors"

Among my activities as a lawyer is being an arbitrator for FINRA, the entity that regulates financial advisors and brokers.  In fact I'm rated to chair arbitration panels.  There hasn't been much activity of late, which I chalk up to two things: 1) There hasn't been a big downturn in which a bunch of people lost their shirts and want to blame (often with good reason) their financial advisor, and 2) I have blasted both investors and advisors, so counsel doesn't where my biases lie (In truth I have a reality bias, i.e. I go where the facts lead because, as John Adams said in his statement to the jury in his successful defense of the Boston Massacre soldiers, "Facts are stubborn things." [which, btw, has the opposite meaning of Reagan's misquote].).  Which is a long way of saying that, if I issue a warning about someone purporting to be offering financial advice, I know something about the topic, and I'm not acting out of some grudge.

That said, the source of this entry is all the snake-oil salesmen who are purporting to offer financial advice.  I'm going to lay out some warning signs, and I'm going to use one outfit as an example, because it seems to hit the major points.

Agora Financial is a major player in this field.  I've been receiving multiple pieces of spam from them and their assorted affiliates daily for years, so I've been able to watch them over time.  I've done the research so you don't have to (Just another service I provide.).  The principal players are Porter Stansberry and Jim Rickards, with long-time hanger-on James Altucher, and new hanger-on Robert Kiyosaki.

1. The first thing you should ask before you take someone's financial advice is, "Who are these people?"

Stansberry, to put it charitably, is a publisher and commentator.  He is a gold bug, which is never a good sign (Gold is a perpetual underachiever as an investment, and anyone who promotes gold-backed currency doesn't understand how money works and is campaigning for a level of deflation that would return us to the 14th Century.).  If he has ever held a financial advisor's or broker's license, he doesn't advertise it, and real financial advisors are obligated to disclose this information.  Another thing he doesn't disclose but would have to if he were legit is that the SEC nailed him about 15 years ago for lying about his advising record in order to promote his stock tip newsletters and also lying about the risks present in the tips (The fact that Karen Martinez and her mob here in the Salt Lake SEC office pulled this off just shows how ham-fisted Stansberry was, because as I have commented before, Martinez led The Gang That Couldn't Shoot Straight.).

Rickards actually has some credentials.  He held several FINRA-regulated licenses (Series 3, 7, 24, 30, and 63) but apparently no longer does.  He has a JD, an LLM in tax, and an MA in international economics.  OK so far.  Then you start seeing things that make you shake your head.  He's another gold bug.  He was general counsel for Long-Term Capital Management, yet another "smartest guys in the room" operation that went disastrously belly-up 20 years ago.  As general counsel he must have been in on everything that mattered, and if he was as prescient as he now claims to be, he would have seen things were going extraordinarily wrong.  But all we know about his role is that he negotiated the government bail-out (i.e. created an exit strategy for the guys who created the problem at taxpayer expense).  He makes noise now about how he has testified before Congress, which he did, 10 years ago.  And it wasn't before one of the financial committees; it was before a subcommittee of the Science and Technology Committee, where he was talking about financial modeling.  I've read the transcript, and it's 14 pages of impressive-sounding blather.  Lately he's been holding himself out as "a high-ranking member of the US Intelligence Community" and "the CIA's Financial Threat and Asymmetric Warfare Advisor".  Let me tell you about folks who claim to be high up in the CIA without actually being in the Company.  They're like those guys who claim to have been Special Ops in Vietnam but it was all secret so they can't tell you about it, but trust them, they earned six Purple Hearts and three Medals of Honor at places like Muk Wah and Sin Loi, it's just that their file is all sealed up in the Pentagon.

James Altucher first blipped on my radar 10 years ago with a bit of total lunacy on Huffington Post claiming the economy had already turned around and to keep it going we needed to ignore several well-founded rules of financial and economic management.  I won't go into details here, but I savaged his position at the time as being perfect if you wanted to replace the economy with a kleptocracy, and it's been his MO ever since.  If I were writing the piece today, I'd start by channeling Luke Skywalker, "Impressive.  Everything you just said is wrong."  He used to say cryptocurrencies were a scam but now heavily promotes them, probably because the winds of hot money shifted (FWIW, I've always considered cryptocurrencies, as presented, a scam.  They aren't currencies, they're securities of a sort, they aren't terribly useful as either investments or wealth storage, and Heaven help these pyramids and the folks inside them when the regulators finally decide to descend on them, but that won't be until all the players have left the building and the only ones left are the marks who bought in because BLOCKCHAIN!).  I'll just leave the rest to someone who has actually dealt with him.

Kiyosaki is a special case.  He has admitted that Rich Dad, Poor Dad is made up, but people keep buying it and keep attending those seminars (Which he never attends.  He just lets his name and smiling face be plastered on them.  For a fee.  BRANDING!).  He bankrupted one of his companies to avoid paying a judgment debt.  The debt was about 1/20 the alleged annual revenue of the company.  With a revenue stream like that, obtaining financing to pay the debt would have been easy, far easier than filing bankruptcy, which means there were only two reasons for filing: Either he just plain wasn't going to pay (no guarantee of that in a Chapter 11 reorganization) or he couldn't get the financing because the revenue stream wasn't as represented.  Neither looks good for a financial advisor.

2. What are they selling?

A financial advisor provides a particular service: Set up an account with an advisor, and the advisor will manage it, the level of management depending on the specifics of your account terms.  And they're obligated to disclose to you how successful they've been.

Agora and companies like it don't sell management services.  They sell tip sheets and seminars ostensibly telling you how to manage your own investments.  And they don't disclose a thing about how successful they have been.  The SEC nailed Stansberry for misrepresenting his track record.  His crystal ball since then hasn't been any better.  Rickards's history is no better.  Altucher?  Go reread the link to Steemit above.  Kiyosaki?  It's all a pitch for "investment courses" that will cost more than any return you can possibly realize.  Run a cost-benefit analysis, and buying what they're selling makes no sense.

3. How are they selling it?

A legitimate advisor wants you to make money and will advise you accordingly.  He or she wants you to make informed decisions about your investments.  If the markets are heading down, the advisor will have you move into hedge positions to protect yourself.

Agora and the like play on fear and bias.  They constantly preach the imminent collapse of the economy.  They've been doing it for years.  They even keep recycling the same pitches, with obvious voiceovers changing the date the collapse is supposed to happen.  And they've been wrong every time (Interestingly, they reject the one thing that could actually bring about the collapse they keep predicting: climate change.).  Fear is a good way to sell snakeoil to marks, but it isn't a good basis for investing.

Neither is bias.  The most noticeable one is political.  These folks are all fans of President Trump, perhaps in part from sincere beliefs, but also in large measure because they are targeting a certain audience.  Nothing inherently wrong with that, unless it colors the advice they're selling.  Which it does.  Currently, they loudly broadcast that Trump is trying to do X, Y, and Z, that these moves are all brilliant, and that they will save everything if Trump is allowed to implement them.  But five years ago they were claiming Obama was trying to do the same things, except that if he did them, they would bring about immediate collapse.  Identical actions tend not to bring about opposite results.  Claiming they do?  I'll let you decide what to call that.

Misrepresenting the "opportunities" you're presenting is not a good advising method either.  Rickards has a doozy where he's holding Trump's budget proposal and says that on a certain page is a plan that will make you scads of money.  I got the document and looked at the page.  It's Trump's proposal for rebuilding national infrastructure (which hasn't happened but desperately needs to because about every aspect of our infrastructure is a wreck).  So if you're a construction contractor, you can bid on government contracts, perform them, and get paid.  That's their "investment" tip.  Another is an "obscure" law that will have the government paying you all sorts of money for your property.  If you look it up, what it says is that if you have a building, and the government decides to lease it, they'll pay you rent.  Another great tip.  A final example I'll give is a mysterious type of trust that will pay you piles of money.  They call it an Eisenhower Trust, undoubtedly just to invoke his name.  What they're really talking about are real estate investment trusts or REITs.  So if you invest in one, you'll get a piece of the return.  More great investment advice that is surely worth its cost.  I would note that REITs were the vehicles that held all the mortgage-backed securities and were the core of the financial crisis in 2008, so a return on your investment might not be such a guarantee.

4. Do they have "affiliates", and are they dodgy?

Legitimate advisors do not have affiliates, other businesses they have advertising and referral arrangements with.  An advisor may know lawyers or CPAs or real estate agents who can help you with certain issues, but the advisor is not in any kind of pay-for-referral relationship with any of them.  There are many good reasons for this, but probably the biggest is that they are illegal.

Agora and the like have piles of affiliates because that allows cross-platform promotion and getting your pitch in front of more people.  And are these affiliates dodgy.  Let facts be placed before a candid world.  One claims campaigning against sexual harassment is a threat to men.  Another claims it has herbal cures for cancer and diabetes.  One argues you should be able to carry firearms even if you've been found judicially incompetent.  And another one claims that Mexico is sending all those illegal immigrants across the border in a deliberate plan to undo the Treaty of Guadalupe Hidalgo and take back the southwestern US.  I'm not making any of this up.

If someone wants to be your financial advisor and flunks one of these tests, you probably ought to give them a pass.  If they flunk them all, well....

Free Capitalist No Longer Free

OMG, they finally nailed Rick Koerber to the wall.  It ought to be amazing it took so long, but given Utah's track record in such cases, I guess the miracle is that the case was prosecuted at all (Note that it required bringing in an outside judge to finally make this fly.).  Now I hope the Tenth Circuit doesn't bollocks the inevitable appeal.

Q2 GDP

And then there is the latest GDP report, showing growth of over 4%.  Trump of course crowed about how fantastic the figures are and how they will keep going up.  I can only hope that on some level he realizes that simply isn't true.  The markets reacted with a predictable "Meh" and slid some, probably for the wrong reasons, including that this wasn't as high as projected.  Personally, I think it's bilge.

"Why?" you ask.  Well, first, GDP really isn't a terribly good measure of economic health, especially in times like these where wealth is accumulating at the extreme top end of the scale.  99% of the population could be living like Bronze Age goatherders, but so long as the top 1% is making it and spending it, GDP says the economy is great.  Let's put it this way: If the economy is doing so well, where is the job growth, where is the wage growth.  They simply aren't happening.

Second, Q2 figures are probably gamed, even more than usual.  The "tax reform" refunds arrived, and while the overwhelming majority of people didn't receive enough extra to matter (My taxes actually went up, thank you very much.), the folks on top received piles, which they spent, thus increasing GDP.  Also, everyone knew tariff wars were coming with Q3, so they packed as much buying and selling as possible in Q2 to avoid them.  Finally, everyone knew the Fed would continue to hike interest rates in Q3, so everyone got their financing and cut their deal in Q2.

In other words, expect Q3 GDP to drop, probably be quite a bit.

Sears Drops the Other Shoe

Didn't have to wait long for this.  As I predicted, Sears is shutting down the Ivy place K-Mart.  Another big dead space in the middle of things.  Retail is truly a mess, and that means that, in spite of all the Class A office space being slapped up to house the 1%'s service industries (law firms, CPAs, investment houses, etc.), the economy is hollowing out.  What to do?  Good question given that we are marching in the exact opposite direction from anything that could solve any of this.  If I were a bright boy at Goldman Sachs, though, I would be creating funding vehicles for redeveloping these parcels.  Into what?  I have no idea.  Caviar shops and Rolls Royce dealerships.  You have to shift the properties to the people who are still buying.  Because what's obvious is that the people these properties were targeting aren't buying anymore.

I Come Here to Bury, not to Praise

And unlike Marc Antony, I mean it.  Karen Martinez has retired as local counsel for the SEC, and the hagiographies are everywhere.  Pardon me if I don't join in.

As I've said numerous times on this blog, its companion, and elsewhere, the 2007 crash was an obvious thing, and it happened because the regulators were ignoring what was going on.  Of course, the regulators had been ignoring most things since Reagan took office, ratcheted it up several notches with the introduction of derivatives in the late 80s, and went into full snooze mode after the repeal of Glass-Steagall.  By 2005, there were billboards and radio and TV ads for straw buyers, no doc liars' loans were everywhere, appraisers were making up values, and rating agencies were making up risk levels.  The banks knew their game was crooked, but they were making to much in commissions and fees to stop it.  I have no doubt they also gave orders to the regulators to look the other way.

Then in Fall 2007 the banks figured out the merry-go-round was coming to a halt, so they woke up Martinez and everyone like her, pulled a Louis Renault, "We're shocked, SHOCKED to find that mortgage fraud is going on here," threw them some of their own people as sacrificial lambs, pointed them to the smaller players and ordered them to crack down on the small graft because it was interfering with large graft, and reminded them to leave the large graft alone.  And Martinez and everyone like her dutifully obeyed.  And along the way they slandered me all over the territory because they had decided I was the kingpin of one operation because they flunked Corporations 101 by not being able to tell the difference between a registered agent and a principal.

Now she's retired with her federal pension.  I wish I were compensated so well for accomplishing so little.  So I shall not be praising Caesar, now or any time in the foreseeable future.

New Comments

Several new comments.  First, over at Credit Slips, I commented on how Chapter 11 is a fail train for small business reorganization because of the hammerlock lenders force on small businesses.  Next, a pair over over at Naked Capitalism.  First, a reply to Calgacus's claim that Right historically wins over Might (My experience is that Right has won a few battles, but Might keeps winning the wars.).  Then a comment on Lambert Strether's article on deflation noting the historic uses of deflation to protect the 1%.

More Neoliberal Crap

Edmund Phelps, in his recent column in the Financial Times, once again trots out the bull pucky that "regulation" is the cause of our economic problems.  Post-WWII regulation slowed down innovation, and that loss of innovation has caused the centrifuging of wealth we have seen over the last 30 years.

First, Ed, the years since WWII have been the most phenomenally innovative in history.  I guess you missed the memos on the space programs, computers, and biotech.  All of which, I would add, were significantly assisted by government money.

Second, Ed, don't you find it at all odd that this centrifuging has focused in the last 30 years, a period of massive deregulation?  Of course facts never get in the way of an Austro-Chicago tool like you.

Bottom line, Ed: The rich and powerful paid to have regulations dismantled and then went out to get a big return on their investment by running roughshod over everyone else.  The result of that deregulation has been less protection for the folks who do the actual production work, less protection for the real innovators (as opposed to the corporations who own them), less protection for ordinary investors, less protection for everyone without a lot of spare cash to buy protection.

Oh, and Ed, the big innovations your deregulation has created have been the financial Frankensteins, the multi-level derivatives and synthetics that have created the bubbole-manic, boom-and-bust system we now have.  Congratulations.

It's the Middle Class, Stupid

Or rather the lack of same.  The financial pundits on both sides of the Atlantic are beginning to admit that most people aren't recovering a thing in this recovery.  Given that there no longer is a recognizable economy that can support a middle class, this comes as a surprise only to those who don't actually have to work for a living.  The rest of us see jobs disappearing, businesses going dark, and concerted attacks on the few remaining things that make survival possible (The DC Circuit's recent ruling on the Affordable Care Act is nothing short of criminal, the only way to save affordable healthcare is single-payer, and we need to start removing judges, starting with the Fascist Five on the SCOTUS.), and every time we turn around, those of us in business are expected to work for free (I'm not talking about paying taxes.  I'm talking about doing free work for "marketing" or for "social responsibility."  When our wonderful Bar Association expects me to do pro bono work to help the "image of lawyers," I have to laugh.  I do pro bono constantly, along with a lot of reduced rate work, as well as holding up my end re professional image.  I'd tell them to go talk to the Big Firm people, but since those are the folks who own and operate the Bar....).  No, there's no recovery going on; quite the contrary.

But what are the pundits worried about?  That Democrats and Labour are making noise other than Austro-Chicago orthodoxy (Horrors!).  Janan Ganesh recently took issue with Ed Milliband in the Financial Times because the Labour leader is behaving, well, like a Labour leader instead of Tory Lite.  Ganesh thinks Millibrand should be proposing new ideas, which would be nice, but Ganesh defines "new ideas" as the same old free market fraud his club has been pounding since Maggie installed her throne at No. 10.  Earth to Janan: Your neoliberal dreack has gotten us into this mess, with a growing pool of hopelessness and no security for anyone other than the 1%.

Speaking of Tory Lite, Tony Blair keeps trying to absolve himself of the current mess in the Middle East.  He continues to claim that removing Saddam Hussein did not create the current crisis.  Facially that statement is true, but not in the way Blair tries to claim.  What caused the crisis was putting Saddam (and all the other tin pot, self-medaled dictators around the world) in power in the first place.  We made modernization look like a tool of Western control.  It's no wonder the fundamentalists attracted an entire generation that was fed up to the gills with our meddling.

What else is worrying the pundits?  How about the end of the USD as the world's reserve currency as a result of a conspiracy led by Russia and China and including France?  Please.  While it would be bad if the Yankee dollah were no longer the world's currency, news of its demise is way premature.  There simply isn't anyone in a position to step up and take over.  Not China, not Russia, not the Eurozone.  This is just another pseudo-crisis intended to distract us from the reality of our inequitable, unproductive global economy.

Any other "crises" to distract the masses while they're being led to slaughter?  Is a pig's backside pork?  According to Martin Wolf, Europe will be without gas and oil unless we all march straight in the Ukraine and push Putin back to Moscow.  Martin has apparently never heard the bit of wisdom about never fighting a land war in Asia, especially against the Russians on Russian soil.  He might want to look into how much success others have had with that.

What other lunacy is flying about?  One need look no farther than the ever-reliable Robin Harding, who has never met a Randian delusion he didn't try to have a long-term, intimate relationship with.  His latest shovel-full is that house prices are artificially high because of, wait for it, zoning laws.  I realize that conservatives believe that, in the words of their Blessed St. Ronnie, "Facts are stupid things, " but let us nevertheless put facts before a candid world.  First, housing prices are not artificially high; they're pretty depressed here in the US, albeit over-encumbered by toxic mortgages that the likes of Harding once touted as the next great bit of free market brilliance, and while prices have risen recently in the UK, that was a product of loose money that will soon be going away, so expect a correction on that front soon.  Second, housing zoning these days is focused on affordability: multi-family, townhouses, in-fill.  This shift became necessary if for no other reason than that the old model created an infrastructure that was unsupportable.  Suburban sprawl created too much street, too many miles of utility lines, too much area for fire and police to cover, etc.  That Harding believes zoning still promotes acres of lawns and miles of picket fence has more to do with where he and his friends live than with reality.  Finally, Harding, true to his creed, ignores the 409-kilo gorilla in the room: People can't buy houses regardless of the price because 1%ers he is so stridently defending have created a system in which very few of the 99% have sufficient economic security to enter into a mortgage.

It's the middle class, stupid.  People who work for a living can no longer even hope for stable enough incomes for a house, a new car, and college educations for the kids.  They may be making it this month, but it could all be gone next.  This is what the 1% has pushed us into.  This isn't a recipe for independent, economic actors; it's a recipe for serfdom.

Blockbuster on the Rocks

Well, I suppose it was inevitable: Dish Networks has pulled the plug on Blockbuster.  Changing markets and business models left the movie rental stores in the dust.  This means a lot more dark space in a lot of strip malls.  Another chunk of the service sector gone, along with its jobs, such as they were.  I think I'll keep my Blockbuster card as a memento of a bygone era.  Still have my Hollywood Video card squirreled away somewhere.

Add to that the fact that oldest daughter just informed me the store she works in is closing.  Not only can we not manufacture anything anymore, we apparently can't even sell or rent anything.  I keep seeing reports that the economy is recovering, but that only seems to apply to the Over-a-Quarter-Mill-Per-Year crowd.

Paying for "Influence"

The Wall Street Journal reports on a recent investigation by the Department of Justice on attorneys' fees in bankruptcy, and publishes a schedule of rates charged by Gibson, Dunn & Crutcher.  Antonin Scalia's son Eugene bills $980.  Ted Olson, former Solicitor General, bills a mind-blowing $1,800.


But believe it or not, the numbers themselves aren't the most disturbing parts of this article.  First, there's the fact that I've seen very good attorneys get ripped by DOJ and bankruptcy courts for billing one-third these rates.  The only discernible difference was that their clients were mortals, not Olympians.

Second, there's Justice Scalia's remark about paying extra for those who are "just a little bit brighter."  If that's all the better understanding he has of paying a premium at the margin, then he needs to stop pretending he has any understanding whatsoever of economics and leave that sort of thing to Posner.

Third, Some Perspective's comment shows me he/she should just go sing "Kumbaya" around a campfire.  OK, sometimes these kids have to work all night.  Earth to No Perspective: So do I (Ask my wife.).  So does any litigator.  That doesn't mean I expect to be billing out at $500 any time soon.

Finally, the most disturbing part: NALFA's statement that Olson's rate is simply free market economics.  What do you buy for a rate like Olson's or Scalia's?  Are their legal skills so inordinate?  No.  You're buying their influence.  You're buying their phone lists, and country club memberships, whom they lunch and dine and golf with, whom they share board memberships and alumni committees with.  And they work those contacts for you to bring pressure on decision-makers.  If a normal joe like a restaurant owner pays another normal joe like a beat cop fifty bucks a week to make sure he passes the health and safety inspections, that's a felony on both sides.  If a 1%er pays another 1%er to make sure a regulation isn't passed or is only "selectively" enforced, that's just the old boy network in action.

And that stinks like last week's diapers.

Big Boys of BK

Lots of Chapter 11 news today.


Kodak finally filed last night.  It had been in trouble for a long time (I think I'm one of the few fossils remaining who uses film.), but it was trying to reshape itself as a printer company.  To do so, it was relying on a revenue stream from its patent portfolio (At one time that portfolio rivaled the likes of Bell Labs and IBM.).  Unfortunately, Kodak didn't account for aggressive (i.e. predatory) behavior by some major license users, including Apple and Research in Motion (I have to say I don't use much of anything from Apple.  I hate black boxes, so I didn't care much for the products, and I didn't care for the culture, either.  Seemed too much like a religious cult.  I see people walking around festooned with 500 i-Crap products, and I wonder why anyone needs to be so simultaneously plugged-in and cocooned from the world.  They remind me of Neo in The Matrix before he's released from his pod.  RIM, though, hurts.  I've rocked the Crackberry for over a half-dozen years now.).  The big users decided to stop paying for the licenses, forcing Kodak to litigate.  They wouldn't buy the patents outright, either, at least not for more than a dime on the dollar.  So Kodak is in Chapter 11, where it might be able to force a few things.



American Airlines, on the other hand, might be getting forced.  It's nearly two months since it filed, and American has barely gotten off square one.  As I blogged the day it filed, American's big motivation was to take down the labor contracts and pensions.  It hasn't, and everyone (including Your Truly) is confused about the delay.  Confused about it, but still willing to take advantage of it.  Delta and US Airways are making noises about rival bids, and others are getting into the game.  If American doesn't have a reorganization plan in front of creditors in two months, it's looking at getting parted out.



And of course we can't let the day go by without some more mess from MF Global, this time with a heapin' helpin' of JPMorgan Chase.  It seems that back in October, right before it filed, MF Global was selling piles of assets to raise cash.  Problem was, it was selling them through JPMorgan, which decided to do a by-the-book slowdown of the transactions.  Consequently, MF Global had neither the assets nor the cash and couldn't meet the inevitable margin calls.  Welcome to bankruptcy.  Now the creditors and trustee are finally getting around to asking JPMorgan where the money went, because it certainly hasn't been turned over.



JPMorgan's involvement in "where did it go" scenarios is getting to be a habit, and it's long past time someone pulled the curtain back and took a look.  Somebody needs to look at where Washington Mutual's assets went, because they were there until JPMorgan stepped in.  And unless something drastic has happened this week, JPMorgan is still sitting on piles of cash involved in investment schemes from five and six years ago (I have to be careful here.  I've had two, executive-VP-level in-house counsel lie to me about the creation and handling of those accounts, so it's hard to say what the "official" records look like any more.  And I've had outside counsel threaten me with bar discipline for daring to represent anyone opposing JPMorgan.  But then that's SOP for Utah.  The Bar doesn't care if an attorney makes a groundless threat like that so long as he is representing a 1% client and he makes it against an attorney with a 99% client.).  Any wonder I refer to the place as "JPMorgoth"?  We'll see if anybody decides to use the big microscope this time or if JPMorgan skates again.

Some Recovery

Things have slowed down in bankruptcy world, and now I have an idea why: People are too broke to care.  The latest census report shows that nearly half the population is either "in poverty" or "low income".  In other words, half the country either can't afford to file or has so little worth that filing is pointless.  When exactly was it the recession ended?


Of course the Heritage Foundation (The only "heritage" that foundation has is shilling for the 1%.  Just saying.) trots out its "poverty expert" Robert Rector (Oh, it's such a strain not to do naughty puns on his name.) to say that they're not really poor (by Mumbai standards), that we do enough for them already (Look at all the taxes rich people have to pay.), and that we just need to teach them how to be "self-sufficient."  Of course, this toady has been shoveling this line for decades.  Don't believe me?  Google him.  Or look at this article from 11 years ago where he's claiming the gap between rich and poor isn't so bad because of all the poverty programs the rich have to pay for (First, note how he conflates "income gap", which is bad enough, with "wealth gap", which is more accurate and is absolutely obscene.  Second, note that the gap has only gotten worse, due in large part to policies the Heritage Foundation promotes.  Don't believe me?  I'll let those Commies over at Forbes lay it out for you.  And while I'm over at Forbes, took a look at this article on 1% wheels.  Don't you love that remark by the Bugatti CEO, "The crisis cannot keep a Bugatti buyer away from buying a car for financial reasons”?).  Or this article, in which he claims the poor don't need more food because so many are already overweight (conflating "underfed" and "undernourished").  Or how about his remarks to the New York Times saying all but a very few people are merely "constrained" in the type of food they buy, so there is no hunger problem.  Just to show you you what level of dinkage this guy operates on, he's also the Heritage Foundation's "expert" on abstinence-only sex "education".  News flash:  That's the kind of sex education we had when I was a kid and on before that, and ignorance really wasn't a terribly effective contraceptive.  The difference is that, back then, a 17-year-old could get a job that could support the girl and baby.  Those jobs are gone, and the Heritage Foundation led the charge to destroy them.



OK, rant over.  The bottom line is that things are not improving.  If unemployment figures are going down, it's because people have dropped out of the work force or are holding jobs that barely qualify as jobs.  People are hungry and cold and desperate, regardless what the paid shills say.  And it's getting worse, not better.