JR Snell Capital Management, LLC

This is fairly succint and seems to sum up pretty well what my big-picture concerns are about not just the economy, but society… at present. (I am an optimist/realist.)

“You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it.”

Dr. Adrian Rogers, 1931

A couple of months before I started writing blog entries, I “looked into the abyss” on my own personal trading screens here at the office.  It was mid-September or so, right after the Fed let Lehman fail and before the significance of what just happened was really felt by anyone but a few… yet.

Early the morning of the 15th of September as I look at my screens, I’m thinking that I’m seeing a “blip”… you know, a data error, an internet outage, the ghost in the machine… whatever.

Specifically, what’s confusing is that the couple of trust preferreds that I follow (like bonds, but traded on exchanges in $25 hunks rather than the off-Broadway $1000 chunks that a regular bond trades), traded at around $15.00 or so a minute ago and now many of them are now being “bid” at an odd $.50 or so. For a few minutes, I thought the system totally freaked. After a while the 50 cent bids finally were replaced by 3 to 5 dollar bids… then up to about 7 to 8 bucks… finally settling in at about two-thirds of what was bid the day before.

Of course today, I now know it wasn’t the ghost in the machine… it was the abyss. I had looked “over the edge”. I had seen the financial “white light”.

And apparently Hank had seen it too. He met with Congress, made the talk show rounds (white as a ghost, btw) and said SOMETHING to Congress and they gave him the money. So, what was the SOMETHING that scared him so badly?

OK, so thanks to Representative Kanjorski of Pennsylvania (maybe he was talking out of school??), we’ve got a pretty decent idea what happened that day. He says that…

“On Thursday, September 15, 2008 at roughly 11 a.m., the Federal Reserve noticed a tremendous draw-down of  money market accounts in the USA to the tune of $550 Billion dollars in a matter of an hour or two. Money was being removed electronically.

The treasury tried to help with $150 billion. But could not stem the tide. It was an electronic run on the banks The Treasury intervened, but, had they not closed down the accounts, they estimated that by 2 p.m. that afternoon. Within 3 hours. $5.5 trillion would have been withdrawn and collapsed within 24 hours the world economy.”

Watch the video, his explanation starts at about 2 minutes and 20 seconds into it. I also double-checked some additional congressional testimony tapes where Rep. Kanjorski questions Mr. Paulson about this very thing because I didn’t want to foist some “conspiracy theory” crap off on my loyal readers. In the tapes, Mr. Paulson does not deny what happened.

[[He also mentions that there was only the 'lone gunman' and there was no alien autopsy.... Sorry gang.]]

Now we know.

Mug Shot of Charles Ponzi

Mug Shot of Arthur Fonzie

As the Madoff situation continues to ripple through the investing world, I’m absolutely personally incredulous that some VERY sophisticated investors simply put on the blinders to another investment that was “too good to be true”… and probably definitely was.

This investing “thing” is difficult… very difficult… I mean VERY VERY VERY DIFFICULT. This idea that someone, somewhere has a “secret”, or a magic touch, or the ability to defy the odds… well, it’s not possible, never has been possible and never will be possible. If someone is showing you an investment that can’t lose, or has never lost, or will never lose… they are telling you that they have defied the laws of physics. Be smart and know this isn’t possible.

Mug Shot of Bernie Madoff?

Ripping Off Investors

When you read in the paper about investors getting ripped off by a scam artist running a Ponzi scheme and you wonder about how it happened and how anyone could be so “gullible”, here’s your answer: Promises of outsized returns and impossibly unsustainable income projections should immediately sound off all kinds of alarms and warnings in the head of any investor with at least a little tertiary knowledge of what is real and realistic in the investment arena. Those who get ripped off are usually those that refuse to do their homework.

The old adage, “If it seems to good to be true, it probably is”, is more true in the investment business than in any other situation you are likely to come across. Trust me when I tell you that nobody cares about your money more than you do.