Political Idol Worship

In my Facebook feed, I have lots of friends that have a picture of the First Family as a way to honor them and show their love for our previous president. I suppose their reasoning is that the Obama’s are a great example of what a family should be. Sorry, but the whole notion disgusts me.

The whole adoration of a President and his family sickens me because it implies that they are somehow superior to us, know more than us and should therefore be granted more privileges to govern in a manner they see fit. The fact is all tyrants believe they are somehow superior to the people and, once given unlimited power, tend to act in the cruelest and most oppressive manners.

It reminds me of the British propensity for endlessly fawning over the royal family. It takes no hard earned talent to become a royal. It a simple case of winning the genetic lottery. At least today it is. In centuries past, to become and remain a member of the royal family, one had to be willing to be ruthless, deceitful and the willing to use unrestrained physical force. The members of the royal family today are the direct descendants of some of the most vile people to have ever governed. They lived and prospered off the backs and works of others by benefiting from their ability to control, kill and enslave. Think I’m wrong? Henry VIII was just one example. He ruled England from 1509-1547 and was directly responsible for over 72,000 executions during his reign. This number does not include the numerous citizens he killed during wars with France.  Ironically, the premise of the television show  “Game of Thrones” is how European houses ruled their countries. The show’s popularity is partially based on the cruelty and depravity of its rulers.  Still, the British love their royals!

In the U.S, there is a movement called “reparations” which demands that African-Americans  be compensated for the crimes committed against them by their government. The hard part of reparations is determining a suitable payment plan for a group of immigrants with no long lineage to speak of.  Yet in England, there is no call for “reparations” even though those alleging wrongdoing could, in fact, trace their own lineage and that of their oppressors, back to some past King or Queen who committed great atrocities. There are no calls by the British people or their heirs for lands or lives lost as a result of the actions of past royals. There is only love for their descendants because the British people are committed to tradition and awed by the mystique of royalty.

The irony of political power is that people who would be best at its use avoid it like the plague…while those who seek it tend to be flawed, twisted individuals such as Hitler, Stalin and Castro: leaders who killed millions of their own through misuse and abuse of power. In modern U.S. history, aside from perhaps Ronald Reagan, Harry Truman or Dwight Eisenhower who I would argue were called to power, the majority of U.S. Presidents have taken steps within the political system to amass, deploy and in some cases, hold on to power during and after leaving office. (Obama is so soon after office globe trotting for hundreds of thousands of dollars in speaking fees in order to remain in the limelight and keep a firm grasp on the illusions of fame and relevance). Returning to a life of ordinary citizen, as exemplified by George Washington, is simply not in Obama’s playbook.

My outlook, generally, on politicians is that they tend to be some of the most unprincipled and immoral people around. Bill Clinton remains beloved by Democrats but I doubt any of them would leave their teenage daughter alone in a room with him. What bothers me are the rose-colored lenses with which the Left looks upon its chosen leaders, especially Obama.

Like any other political operative, Obama should be closely watched and monitored lest he destroy our country even now, out of office.  When he first ran for the U.S. Senate in 2004, his competitor Jack Ryan, had his sealed divorce records mysteriously released and was forced to withdraw from the race as a result. During his time as a community organizer, Obama spent most of his time working with Acorn; but, that organization had to be dissolved once they were caught engaging in major voter fraud. These are actions we should we should condemn, not condone, and certainly not ignore. Yet, for the Left nothing negative can be associated with Obama lest it be racist…and nothing negative about him gets media traction.

People have mistaken me as a Republican based upon my criticisms of Obama; but, I am not a Republican.. I am for any politician that believes in my Constitutionally protected freedoms, less regulation and less taxation.  Given that criteria, I am able to support very few politicians.

Barack Obama’s treatment of the Tea Party, the Justice Department’s investigations into their tax status and his use of the IRS to silence his critics makes Richard Nixon’s crimes pale by comparison. For many, Nixon will always be considered a pariah while Obama continues to be cast as a saint. Both of them should have been treated with scorn for their abuse of power. Yet, the Left’s vision is obscured by blinders as it continues to adore a President who ignored the Constitution, used government agencies as political weapons, and set back race relations to the 1950’s.

The Tea Party was created as a grass roots movement to stop many of the policies Obama wanted to implement. In Kim Strassel’s book , The Intimidation Game, the author details the vigorous enforcement and harassment of individuals who tried to create legally permissible political action committees supporting The Tea Party between 2010-2012.  Political Action Committees (PAC’s) are the best way for citizens to address their grievances towards the government. It is the ultimate check upon public servants by individuals. The effective silencing of the Right during this period essentially shut down The Tea Party. Kim Strassel’s conclusion is that Obama silenced them because they represented a real threat to his reelection. Had they been allowed to freely operate, the 2012 election might have turned out differently.

We live in challenging times of radical and rapid change.  We also live in sad times when the Left can view The Tea Party as being more of a danger to their well being than the threats posed by radical Islam. This fact alone should tell you how far we have fallen.

If we are unwilling to view all politicians, regardless of party affiliation, with a general sense of distrust and confer upon them the degree of scrutiny they deserve from us, we may well look back upon these difficult times as having been “the good old days.”




“Get Out” – Movie Review

Some horror films have been great in adding a spice of social commentary to the genre. The Stepford Wives was a poignant film about the feminist movement and its male backlash. District 9, which centers around the living conditions of Aliens living on earth really addressed the plight of living conditions for many blacks in South Africa. The latest in this line of cinematic social commentary is Get Out.  It lifts the veil of “post-racial” America to reveal its underlying ugliness. The dialogue is sharp and pointed…culminating in a daring portrait of American society

The story centers around Chris and his girlfriend, Rose, who are going home to meet Rose’s parents for the first time. In any budding romance the trip would be a rite of passage; but, Get Out has an added dimension: Chris is black and Rose is white. While she thinks nothing of the trip but Chris is clearly worried about what her family’s reaction might be.

Upon meeting Chris, her father seems a bit too hip, immediately addressing Chris as “my man” and making sure to point out that he “loved Obama” and “would have voted for Obama for a third term.” The father’s continued efforts to appear “not racist” makes him seem foolish. The mother, a hypnotist, seems unaffected by race but is eager to get her hands on Chris in order to hypnotize him.

The family has two housekeepers, both black. This clearly makes Chris even more uncomfortable. Both of them seem quite out of place, They are extremely subdued in their expressions and attitudes, which seem completely out of place.

Chris’s growing concern throughout the weekend becomes more heightened when a slew of people descend the second day for the family’s annual party. For the most part, the party goers are all white, successful and the take quite a liking to Chris. He is prodded and poked by the guests about typical black stereotypes such as his prowess in bed and his enhanced physical prowess to the point of absurdity.

While the director could have taken the easier and more oft-taken Hollywood route of exposing the racism of rednecks, Christians and Conservatives, he decided to target the underlying bigotry of rich, white liberals. In doing so he has made a bold and original movie. The guests don’t consider themselves racists; but, their incessant comments about how much they like Tiger Woods, Jesse Owens and Barack Obama expose how they view the world along racial lines.

As all of these incidents begin to add up, Chris decides to leave the party. In some ways , Chris’s  experience becomes a sampling of what many Black people experience in their daily lives. But the director isn’t interested in purely making a point, he’s out to make a horror film and he doesn’t disappoint. Chris, by his nature and disposition, calmly and glumly accepts the rampant racism around him before letting his anger take over. NO SPOILER here. But, the film’s combination of racism and control of others is at the heart of this horror movie.

Get Out mentions the presidency of Barack Obama repeatedly and so I want to address the director’s vision of it. Obama was elected, in some ways, as a symbolic gesture to show how far America had come…that we could elect a Black president in a post-racial society. The dialogue in the movie pokes fun at this idea through by the many comments people make about how they voted for Obama and, therefore, can’t be racist.

Some might chuckle and view the comments and message of Get Out as simplistic and far-fetched. In reality they are all too common. A few years ago when I accompanied a rich, white liberal from Boston to meet an Indian client, the head of the financial desk where we worked had to tell the salesman, “For God’s sake Billy don’t tell the client you can relate to him because you saw Slum Dog Millionaire.

Here is the irony: thinking and voting for a candidate because of his color as a testimony to your lack of concern about it. If they (we) were truly color blind, Obama’s policies would have been the deciding factor, not his race. Here is where liberal America fell short while at the other end of the political spectrum even his detractors were afraid of being called racist if  they opposed him on substantive matters.

We were so busy denying racism we made fools of ourselves committing it.

Get Out is a clever movie that speaks to all the subtle forms of racism to which we remain blind and that we dare not mention. In the end, the horror of this horror film is the real, unaddressed discomfort between races and the twisted lengths to which we go to prove it doesn’t exist.



Women: Its Time To Sign Up For The Draft

As society continues to push the notion of  equality between the sexes, the feminist finally got their wish granted with our armed forces opening up all combat positions to women. Until now, all males age eighteen and older must register for the selective service, the precursor to the draft.  However, with women now eligible for combat positions, I anticipate that they too will have to register in the near future upon turning eighteen.

women in combat

Given the United States penchant for war, along with our global commitments, there is a continual demand for more bodies. This establishes the need for more soldiers; hence, the decision to open our armed services to women.  I believe the general public does not fully comprehend the ramifications of this policy.  Only when we begin to see women maimed and killed on the battlefield will the public finally understand the end to which the feminist movement has led us.

Only a small percentage of the population (about 1%) has ever served in the military so most people have no idea what it entails. They see the commercials and news reports and think they understand military life. They don’t.  Any veteran who has ever served in harm’s way will tell you that real evil exits in the world.

A lot of people navigate the world in deliberate ignorance of the evil that surrounds them. Veterans know it’s out there because they have seen it . . . and shot it in the face. They believe in the adage that ‘the only thing necessary for evil to triumph is for good men to do nothing’ because they’ve seen it happen. They are willing to go to great lengths to make sure that evil can’t touch something that they love.

In the sake of gender equality, the U.S government is willing to sacrifice our teenage girls to the horrors of war. Our daughters, sisters and future mothers and wives are going to be sacrificed at the alter of gender equality.

My daughters, all five of them, will never serve.

I am a former Marine. I was an Infantry officer and fought in the first Gulf War. My father was a Marine Officer and was stationed in Okinawa as a Tank commander prior to the Vietnam War.  My uncle was a Marine who served in Korea. I can say with full confidence, the Clark family has done its part in serving its country

Now older and wiser and and a father of five girls, I would never ever want them to join the military or, for that matter, the Marines. War is a brutal business and the U.S continually pounds the drum looking for more conflict.  While we have not fought a battle on our homeland in over one hundred years, we none-the-less export our young people to foreign lands and ask them to do the politician’s bidding.

During the oath of office, all Marines are sworn to uphold the Constitution from all enemies foreign and domestic. But just look at our southern border. We have no troops there. We are not protecting our borders from enemies intent on crossing them to do harm. We have a small contingent of border agents with a massive border as illegals continue to flood into the country. We have no way effective means of vetting friend or foe, as the invasion continues.

A safe border is clearly a national security issue and one that our military is equipped to meet and enforce yet we aren’t allowing them to do their job. Instead, we have elected to have massive military bases in Germany and Korea to protect their borders but not our own.  Let’s not forget that those bases were built for wars that ended sixty years ago.

If you go to any foreign country and ask the generals how they would defend their country, they will explain how to defend the terrain, the key choke points, as well as the easiest places to defend. They can do so because that is how they have been trained: to protect their country. Now, go ask any U.S general how they would defend this nation from an enemy invasion and I guarantee you they would have no idea because it is not mentioned or taught in any of the three branches of the service. But ask them, how they would invade Russia, Iran, Iraq, etc.. and they will have a  plan to do so. That is what we do and how we train our military: to attack not defend. The whole notion is so absurd and irresponsible that were it not so disastrous it would be comedic. Under the guise of gender equality we are going to export our female citizens to attack other countries.

The fact is that the U.S engages in wars with no hope of winning or justification for so doing.  Personally I do not trust the leadership in Washington to know how to fight or protect the troops once engaged in combat.  Just look at the rules of engagement that our troops are burdened with and the countless limbs and lives that have been lost because of them.  General McCrystal, U.S.Commander in Afghanistan, had a minor mutiny on his hands when we he explained the rules of engagement to his troops (as detailed in the book The Operators).

Additionally, we have a real disconnect between the leaders in Washington and the military. Bill Clinton actively evaded the draft but had no problem sending other people’s children off to war. The fantastic film Black Hawk Down will give you a good idea of the sacrifices made by the troops he sent to do battle. George Bush and Dick Cheney led us into Iraq and Afghanistan, yet both found ways to avoid going to Vietnam.  I find it totally inappropriate that our leaders spend time golfing and vacationing while our troops are at war. President Obama has been the worst of the bunch. To his credit, George W. Bush actually quit playing golf once the Iraq war began.

While the law mandating registration for females has not yet been changed, it seems inevitable that it will be.  For some reason, there has been very little coverage  and therefore, little or no outrage.  Part of me thinks that people are not connecting the dots. The depth of our government sickness continues to show no limits. It is an unspeakable disgrace that our country would be prepared to send young girls off to fight. Pondering this latest intention by our government has lead me to the point where I have lost all faith in our leaders and those who serve their administrations at every level. Military leaders know this plan to be absurd. The Marine Corps has gone on record saying it thinks this plan is insane and have yet to find one female able to complete the Marine Corps Infantry Officer program. The Navy has been integrating women onto their ships for years with disastrous results.  It is common knowledge within the Navy the integration of men and women on ships has resulted in an untold and under-reported number of pregnancies. It is not uncommon for war ships to make continuous stops to send back impregnated women to the States for treatment.  Aside from the pregnancies, yet more children will end up being born to single mothers; the economically and socially most disadvantaged demographic.

The old adage of “women and children first” was a siren song to protect our most valuable assets in times of emergency or war. Yet we stand on the precipice of sending that treasure not only into battle but also on the front lines of combat.  They will be sent not to protect our freedoms but to attack our latest enemy.

The feminists and their ilk who promote this nonsense will never be on the front lines. Neither will the privileged political class. Do you really think the Clinton or Obama daughters will ever join the military? It will be my daughters and your daughters who take up those battles and whose lives will be forever and irrevocably altered.  My daughters are not feminists and have not asked for this reality. But it will be them who will be told to pay the price.

This time, the Clark family will not be going.



Politics and the Death of Friendship

We have become a nation divided because we no longer have common ground.

Red States Blue States

I grew up in the liberal Northeast and, for the most part, the circles in which I traveled were mostly liberal and Jewish. To many of my peers, I was a bit of an anomaly as I was, and still am, Catholic and conservative. Although we did not see eye to eye politically we all got along superbly well. Given that we went to the same high schools and shared many of the same concerns over our community, our political differences  never really mattered. Sadly, over the years, we have become a nation where every point, argument and opinion has become politicized… drawing intractable lines between “us” and “them.”

I started to notice an uptick in the harshness of political discourse during the Clinton Presidency. Then again, maybe it was there all along and about that time I just became more sensitive to it.  One day in the early 1990’s, I was walking in New York City and the nation was nearing an election. A well dressed, attractive female pollster asked me to sign a ballot for some candidate. The only criteria for signing was that I needed to be a registered Democrat. I informed the pollster that I was not a Democrat, thanked her for her time and continued to walk home. The next thing I knew, she began to follow me, extolling the virtues of being a Democrat and the evils of the Republican party. Again, I tried to end the conversation politely and continue my walk. But she started yelling at me and berating me for being such a fool. The harassment got so bad that a crowd of onlookers started to gawk at her. Once she realized the spectacle she was creating, she blushed and abruptly stormed off. Never once during the conversation had I claimed I was a Republican nor offered any criticism of the Democratic party. It was what I represented that unhinged her.

Since then,  as my political beliefs became more well know by my colleagues and friends, I became a magnet for all the political crazies. I recall when, at one particular party, a friend of mine deliberately sought me ought and tried to debate me on the virtues of gun control. Knowing where this conversation could end up, I responded curtly and succinctly that I believed in the Second Amendment and the right to bear arms. Well, no sooner had I made my opinion known when my friend became enrage against the policies of the National Rifle Association (NRA) and started to attack me for my beliefs. His vitriol was so vulgar and obnoxious that I responded that a holiday party was neither the time nor the place for such conversations.  I shook his hand and moved on to talk to the other guests. Mind you, I never engaged in or debated my point, I just simply stated my belief. The conversation completely unhinged my friend as he could not fathom that someone could actually believe that people should have the right to gun ownership

I think because I was a bit unusual to many in the communities and circles I ran in, people sought me out and always looked to engage me on political issues. Although I lived in New York City and worked on Wall Street I was an outsider in many ways.. I had not gone to an Ivy League university as many of my co-workers and friends had. Unlike them, I had been in the  military so I was able to speak at length about military issues, political issues and foreign affairs with a perspective they lacked. In one particular encounter, a colleague of mine asked to opine about the rules of engagement in Iraq and how was it possible that U.S soldiers were committing  s0 many atrocities? When I explained the facts as I knew them to be and that many journalist reported the stories lacking context of combat operations he flew into a rage. My friend started to yell at the top of his lungs about these “atrocities.” A friend of his grabbed his arm and tried to calm him down. She said ” Michael get a hold of yourself. You are yelling in Steve’s face.”  This seemed to immediately bring him out of his fit of madness. He looked at me and apologized for his actions.

These outbursts of political insanity have become more and more frequent. Truth be told, I rarely engage people about their political beliefs because I have found that in the political realm, people believe what they want to believe. For many, political beliefs are akin to religious beliefs and any argument that counters their world view can cause great distress.

Which leads me to the issue of Donald Trump’s candidacy.

The political discourse no longer happens at parties or on the street but on the internet. Facebook posts, Instagram quotes and the likes are where people now share their thoughts and feelings. I have been completely fascinated by the Trump candidacy because it has literally caused people to become unhinged. A high school friend of mine posted on his Facebook feed that he was completely depressed by the positive reaction Trump was getting in the polls. He said he could not take it any more. He had made a personal decision that he would not and could not be friends with anybody who liked or supported Trump. He stated that his “friends” were supposed to tell him their positions on  Trump so he could un-friend them and, also, left the door open for people to un-friend him. The gestures, kind words and experiences that made up his friendships were now to be forever cut…never to be repaired because of how someone viewed a political candidate..in this case Trump.

The Trump campaign spectacle has unveiled to me a whole new level of ideology and beliefs that I knew existed, but never fully comprehended. I really believe our whole societal structure came tumbling down with the death of religion in the West. The U.S used to be bound by a sense of shared commonalities. A common border, a common language and national culture. In some ways I have a special appreciation and feel more American than many others as my mother was a legal immigrant who became a U.S citizen.  My wife, as well, is an immigrant to the U.S, so I understand personally and deeply what it means to be an American. The joke in many immigrant communities is that they are more Americans than American themselves. The reason being is that having lived in corrupt and Communist countries, they fully embrace the American way of life and appreciate it more deeply than a native born American.  Most Americans lack the context to compare America to anything else. They only know the American experience.

Which leads me back to this death of commonality and shared beliefs of the American experience. Even the media  understands this fracture and now defines the U.S by blue states vs red states.

We  live in a culture that has become politicized.  Every aspect of the culture is now viewed through a political lens.  Once we lost the  commonality that joined us, it seems people defaulted to defining themselves by their politics. For example, if someone is against gay marriage, that person is now considered a homophobe and a fool. There is no longer any room for nuance or other points of view. There is an inability to understand, and intolerance about, how someone could hold an opposing or different viewpoint.  Or take the issue of global warming / climate change. If your are deemed a skeptic of the movement, there have actually  been recent calls to impose prison sentences on climate deniers!  We are now at a point where we plan to criminalize beliefs.  Where does it end? I am not sure. But I can tell you that we’ve at least gotten far enough that if you like Trump its grounds to terminate a friendship.

Trump’s candidacy exists because Obama created the vacuum for Trump to become relevant. When Obama boasts how well the economy is doing, applauding his low unemployment number at 5%, the public knows something is amiss. With over 90 million people out of the workforce (1 in 3 Americans) Americans know the economy is not doing well.  Trump’s pro business policies resonate with the American people because they have not taken part in the fictitious Obama economy that he continues to sell.  When the President talks about his record on defeating ISIS and leaving Iraq, arguing that America has made the world a better place, Americans feel less secure not more secure..and the attacks on Paris and California have only heightened that insecurity.

As the media continues to support the Obama narrative, they are perplexed as to why Trump is doing so well. It is not that Trump is such a great candidate. Its that Americans instinctively know Trump is telling the truth and in his own way trying to “Make America Great Again.”

If we continue to allow ourselves to be played by the dividers among us, with separation and hostility as the norm, it will not matter who the next President will be. A people divided among itself will not stand… regardless of which political party prevails. If that happens politics, the yardstick we now brandish, will be irrelevant.

Survival will be all that matters.




Interest Rates Turn Negative

We are fast approaching the point where banks are going to start charging depositors the right to deposit money in their own bank accounts. Let me explain

Money Losing Its Value

The economic growth over the last few years has barely moved, even though in 2008 the government flooded the markets with money and stimulus spending. The U.S economy should be doing much better; but it isn’t.

In a nutshell, what the Administration and the Federal Reserve tried to do was print a ton of money and have that huge influx of money raise the prices of everything. They believed that by doing so the banks, as well as the consumers, would be better off.  Because the banks were underwater on their real estate loans during this time, the governments plan was to inflate the prices of everything, including housing which would make the loans look better. So, if a bank had a loan on their books for $1,000,000 but the property was only worth $800,000, the banks were showing a loss of $200,00. In the Fed’s printing of money scheme, the hope was that the same property, for example, would inflate to $1,300,000 while still having the original loan of $800,000. Like magic, the banks would now be making money!

So, even though the banks’ balance sheets have improved, economic activity remains stagnant. The reason nobody wants to talk about is very simple: people are not spending money. Neither companies nor individuals are parting with their money. This results in the velocity of money  (the speed at which money circulates through the economy) being quite low.

When an economy and market are healthy, people will invest and spend. Consumers are willing to spend and invest more because they know they will be able to benefit from that spending. They are confident that their business prospects will be better in the future. But since individual and businesses know the economy is morbid, they are holding on to every dollar.

After all the changes since 2008, and the amount of money creation by the Fed, there is still very low turnover in money. Increased regulations in the banking sector as a result of the Dodd-Frank law, combined with the passage of Obamacare, has increased the regulatory burden for everyone and added to this problem.

These regulations, along with the thousands of others already on the book, are making it harder and harder for the economy to move forward. One way to think of the economy is to think of it analagous to a massive machine with many gears. Prices and economic activity move the gears in an efficient manner. But onerous regulations and rules are like pouring gallons of thick syrup onto the gears. The machine still works… but with drastically reduced efficiency and at a much slower rate. As that activity slows, the flow of money slows down as well.

This slowdown in the movement of money as well as the increased regulatory environment, is not only happening here but in the global economy as well. Interest rates have plunged across the globe, as banks have been flooded with cash from the creation of dollars. The banks, not wanting that money have begun to offer negative interest rates. For example Sweden has negative interest rates. In Sweden, when you deposit $100 into your the account, one year later you will have $99 dollars in that same account. They’re not paying you to save…they’re charging you to save!

Global governments are facing the same problem. Banks flooded with cash, consumers who won’t spend and poor economic activity. The “solution” rapidly approaching is to start charging consumers for their deposits so they are forced to take their money out of the banks.The hope behind this idea is that if they push all of this cash into the consumers’ hands they will start to spend it. An increase in the velocity of money will follow. Many economists fear this approach will result in explosive inflation.

The scenario laid out is that once consumers start to realize that inflation is rising, they will start to convert their dollars into hard assets such as homes, durable goods for example. They will figure out that its better to own an asset that is increasing in value rather than a dollar that is depreciating in value. The solution of changing dollars for hard assets will be their only protection against rapidly increasing prices.

Given the expansion of the size and power of governments throughout the world there is a corresponding need for them to control all aspects of our lives. From the printing of trillions of dollars to the heavy hand of government regulations, we are getting close to a tipping point that could have dire consequences.

The reduction of government regulations and a return to sound fiscal policies would do wonders for everyone everywhere. However it seems the likelihood of such a common sense approach slips further and further away each day as politicians’ egos seem to have inflated well in advance of currency.




The Devil Is in the Details

“We need to pass the bill to see what’s in the bill.” Nancy Pelosi lobbying members of Congress why we needed to pass ObamaCare.

“You can read the Obama Trade bill after we pass it.” Paul Ryan commenting to the press on why they have not seen the details of the bill.

imagesCA27GPLZWe are all stressed. We all have too much to do. Life is so complicated that we don’t even have time to do the basics of our jobs….like Congressional Representatives actually reading the bills they plan to pass.

I get it. I used to sell new issues to my clients without reading the prospectus. (a prospectus is the document that governs the new issue).  In reality, nobody reads them and anybody who works on Wall Street will tell you that nobody reads them. I used to be  a salesperson at a bank and relied on the capital markets team to make sure that our governmental compliance was correct and accurate.

However, just as there is reason for Congress to read bills before they make them law, there is reason for traders and investors to read a prospectus before issuing or investing: there is money to be made by reading a prospectus.

Whenever a company issues a stock or a bond, a “prospectus” is attached that explains everything about the issue. These documents are thick with tiny print, boring, dull and obtuse. No one bothers to pore over the detail in them.  That is, until a deal goes bad. Then the prospectus become required reading for the professional speculator. When I worked on a trading desk, I would often have to price three deals per week. Doing a new deal is time consuming and entails the following actions:

  • Going on road shows;
  • Doing conference calls;
  • Talking to the different analysts;
  • Talking to portfolio managers;
  • Calling clients;
  • Looking at the financials;
  • Coordinating with the syndicate desk;
  • Pricing and trading the deal.

Its a lot of work and the whole structure of the deal is encapsulated in the prospectus.

The capital markets team, which brought the deals together, would be responsible for negotiating the terms and getting the legal documents together to build the prospectus. Given that the capital markets team was also overworked and pitching tons of deals, they would often use standard documentation forms from prior transactions to get the prospectus done. Think of a high-end “cut and paste” job.

If the deals were from the U.S that approach might present less of a problem. However, I worked in emerging markets where bonds were issued by different countries, in different languages, with different governing laws and an assortment of legal jurisdictions that governed the deal.

As long as the company paid its interest and principal no one would read the prospectus. But if the company fell in arrears, the first call we would get would be from the owners of the bonds requesting a copy of the prospectus. Suddenly, the fund managers, lawyers and traders found time to look at the intricate details of the issue they owned. They did so as a matter of protection.

Once a company was behind in its payments, vulture funds would circle around to see how they could pick at the carcass. Vulture funds were always looking at ways to buy assets on the cheap. For example, a typical prospectus might contain a clause stating that all the assets had to be sold to pay off all their bondholders. If the bonds were trading at 20 cents on the dollar, and the company could be liquidated for 30 cents on the dollar, a vulture fund might buy as many bonds as they could to make a quick profit.

To give you an idea as to what type of person and mindset you need to read prospectuses, take a look at a great book by Michael Lewis called “The Big Short.Lewis goes into great detail about how Michael Burry, an ex-neurologist with Aspergers Syndrome, would pour over the prospectus of arcane real estate structures. He locked himself in a room for hours on end for six months to understand what these issues were about. Only by doing so was he able to fully understand how these deals worked.

After reading the prospectus, he formed a fund and sold short many of the real estate instruments that were being issued by Wall Street banks. Many of his colleagues, peers and the bank themselves, thought he was crazy. The irony was that he had read the prospectus in its totality and knew more about the instruments than the banks that were issuing them!  The end result? Burry made millions of dollars.

He knew that the business of the banks is more transactional in nature and more orientated towards generating commissions. The salespeople were overwhelmed by the amount of deals they were doing and did not have the time to look at the minutia of the deals. Part of the reason that many salespeople did not understand the products is because the financial instruments were never fully explained to the professionals who sold them.

How does this happen?

Money is made in the financial markets by possessing knowledge that others don’t have. Even employees at the same firms will withhold information from each other. To the extent one trader can make more money than another trader, he will do so knowing that his take home pay will be greater. Because of this, employees at the same firm are not keen to share their trade secrets with their co-workers.

I have been in meetings where a firm would try to sell massive issues yet only give the barest minimum of information. Never were any of the intricacies of the deal  offered up. The presentation would be filled with acronyms and code language that made it virtually impossible for anyone to decipher.  If anyone asked a question, often times that person would be ridiculed for being stupid and not understanding what had just been explained and “clearly” understood by everybody else in the room.

Maybe that is why, in the end, all of the banks went under. They had no idea what they were selling. If the banks knew what they were selling, people like Michael Burry could not have made his millions.

Which gets me back to the quotes from Nancy Pelosi and Paul Ryan. Congress passes bills into law without even reading them. This is no different than what happened, and still happens, on Wall Street. It was only through one thoughtful man taking the time to actually do the research that was there for all to see that caused change to come to Wall Street.

If we don’t start taking the time to read the bills we’re passing, it won’t be a bank that goes under. It will be the whole country.