Monday, July 08, 2013

Paulson’s Gold Fund Down 65% This Year

Many hedge fund managers, Wall Street traders and the like  made a name for themselves by minting money in the last two decades when renter or financial capitalism really gained eminence thanks to Reagan, Clinton and Bush II.   Making big bets regarding the future is the only way Wall Street firms are able to actually produce outsized profits.  But the reason they have been successful in this strategy is that they front-run liquidity provided by the Federal Reserve, which is essentially a privileged insider’s racket, they manipulate financial markets through state-endorsed corruption and they front-run policy changes in Washington that are intended to produce outsized financial rewards.  They are able to front-run policy changes in Washington because their endless political bribery allows them to write the policies.   Maybe John Paulson earned his money the old-fashioned way.  But he and most others are starting to look rather dull in the last handful of years. 

Now that we are in a nonlinear world crony capitalism and insider information no longer is reliable form of generating profits because Washington, the Federal Reserve and Wall Street no longer have any control over the economy.   A long-time thesis on here is that the hedge fund industry is going the way of the Dodo bird.   Without all of that free money served up on a platter by politicians and central banks, that would have already happened.  It’s only a matter of time.

Anyone can make money when the game is rigged in their favor and they are handed endless supplies of free money.  But without cronyism and the insider’s game, the real abilities of Wall Street are starting to shine through.  Our emperors have no clothes.

Bloomberg story here.

posted by TimingLogic at 12:23 PM

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