On Rajat Gutpa, and the Hubris of Money, Power, and Success

Rajat Gutpa, the embattled, and indicted, former Chairman of McKinsey Inc., is now threatening to testify and take the witness stand in his own defense. You may remember that Gupta is charged with providing inside information to the now convicted felon, and former Galleon Hedge Fund chief, Raj Rajarathnam. 

The Prosecution in US v. Rajat Gupta has wire tap recordings of phone calls between Gupta and Rajarathnam, and the tapes were allowed into evidence despite the Gupta legal team's vigorous attempts to block them.

Gupta tipped off Rajarathnam of impending positive news (Warren Buffet's decision to invest $5 billion in GS, to SAVE Goldman from suffering the same fate as Lehman Brothers and Bear Stearns; and you can stop groaning Lloyd, after all, you did take the money, for whatever it was worth!) from Goldman Sachs, a few minutes prior to market close, and a couple of minutes after a Goldman Board meeting. Gupta was on Goldman's Board of Directors. The same wire tap call also helped to convict Rajarathnam.

This is USA. Anyone charged with a crime is entitled to a swift jury trial. Juries take their civic duty conscientiously. And, every defendant is protected by the 5th amendment to the US constitution - not even the US government can force a defendant to testify, if the defendant does not want to, under any circumstance. Protection against Self incrimination is a constitutional right. The accusers have the burden of proof.

Leftover hubris of the guilty (one can tell yours truly would not be a good juror), but highly successful, often makes them believe in their own invincibility, during battles for personal and professional survival. Bernie Ebbers (WorldComm & MCI), Jeffery Skilling (Enron), and Dennis Kozlowski (Tyco), are but a few in recent memory, who took a chance on their ability to beguile the jury. All three are serving long term sentences for their crimes.

Dear Rajat Gupta, the court room is not your private offices at McKinsey Inc., where you were heard, and obeyed,  without any questions or doubts. No, the information you relayed to your Wall Street pals, that you now claim was already in "Public Domain" was actually NOT.  Nice try though.  Your attorneys are obliged to fight hard on your behalf.  That is their duty to you, the client.  Preet Bharra, and Co. will fight back equally hard.  That Sir, is their duty to the Nation, and to We the People.  They will surgically disembowel your claims of innocence. 

Your bravado will fail to charm the jurors, and you run the risk of getting the maximum sentence for each count you are likely to be convicted for. Stay away from taking the stand, and cling tightly to the modicum of your dignity that may still be intact. 

You need to go to the Big House, either way.  Anil Kumar, your one time underling and friend, is eagerly awaiting your arrival.

On Republican Rock Stars that Matter in the 2012 US Presidential Election 

The song goes "Rumor Has it, Rumor Has it..." It was a recent Top 100 track. With America's fascination for rumor and nuanced innuendo, in politics, it is time to talk about some other rumors:

Rumor is that when they tried to measure John's Stewart's IQ, in 3rd grade, the "Simon-Binet" scale (aka the Stanford-Binet IQ score; note how we Americans always have the last laugh over the French) blew-up.

The rumor is puzzling, since the same scale imploded when George W. Bush was tested, as a college Senior - huh? did W'ya even graduate? That is a whole another topic of conversation, not unlike some other myths that surround W'Ya - his Air Reserve Guard Service (did he actually serve, or not?) during Vietnam, or was W'Ya guilty of DUI or not? or did Papa Bush intervene to save the Prodigal Son's proverbial rear-end? Or, are rumors of all the Global achievements from W'Ya's exhilirating 2 term rent free life at 1600 Pennsylvania Avenue, where instead of merely redecorating the West Wing, DumYa (sorry, that's a typo, I swear) focussed on redecorating the World (with a blanket permission, and a blank check, granted by our very own US Congress, with the exception of, amongst others, the current occupant of 1600, and a majority Blessing of the Truly Impotent - aka, The UN) true? Yeeeehaw!.

Why aim for anything less than a series of Texas sized accomplishments when one can Shock and Awe, Grin, Holler, and then Grin some more, and, land aboard USS Abraham Lincoln (It's gonna be OK Mr. President, stop turning in the grave. Its all good. The Union is still together. As of today.), in a two seater Lockheed S-3 Viking fighter jet flown by the other guy (Lt. Ryan Phillips), in full fighter pilot regalia. Perhaps W'Ya did serve after all - he remembered how to put the gravity suit on. See, I am a reasonable man, and will always err on the side of granting the benefit of doubt, unless someone, anyone, even the Rovester, can create reasonable doubt - that is how high the bar should be, for such National Security matters, and for the human body that sits in the chair in the Oval Office, with keys to our collective Nucear arsenal (another type, I am sorry). Mission Accomplished. Indeed Mr. Texas Rangers. You succeeded in creating Jaw-Dropping Shock, and Eyebrow Raising Awe with your temerity, and Executive spending of Pentagon funds. You ended "Major Combat Operations" on May 1, 2003. Without capturing Osama Bin Laden, Dead or Alive (Its all good, Bon Jovi). I know, I know - you left detailed instructions, for your successor, on how to get Osama, and 8 years after your selfless risk taking, as Commander in Chief, with the aircraft carrier landing, HE got it done. Finally. I know right? - What took him 3 years into his first term to capture and kill America's Enemy number One and FBI's number one Most Wanted? Well that, DumYa, is the reason the Stanford-Binet scale imploded in the first place. Meanwhile, Tom Cruise is still contemplating those copyright infringement charges. How un-American. How un-Scientific.

Dick, Bless-His-New-Heart, Cheney, meanwhile, argues that even though he hauled his hind end to Canada (Canada? Really?? Fine, let's not talk of the 'Looney', it was simply closest to land-locked Casper, Wyoming, by way of Billings, Helena, and Great Falls. There is no proof though, that a Robert Bruce Cheney crossed the international line via the land border, but merely an informed guess, since Dick's father was, of all things, a not-so-highly-paid soil conservation agent for the US Department of Agriculture - talk about having a Big Government, and an EPA like Agency, even back in 1941), to beat the draft during Vietnam. We accept, without an iota of doubt, your claim, that Vancouver, BC, was not 'Hunting' Central, though there were multiple sightings of Weapons of mass Destruction, in Canada, that you had been covertly tasked by ____ (covert, you see), by an unnamed (covert, again) Federal Agency. In your defense, though, Carl Rove has been pointing out that J. Edgar Hoover was secretly a CIA operative. That's code for Agent. And that J. Edgar was Gay. That is Carl Rove just being Carl Rove.

Finally, Mitt 'the-money-man' Romney. I am not sure where to start - that he served as a missionary for his faith, in France, spreading the Mormon word, while Americans were coming home in body-bags, or with mangled bodies, if at all, during the time our French friends (why is it that France is always the party-spoiler?) was enjoying one of the finest runs of Burgundy seasons in its history. Or, should I begin with his Leveraged Buy-Out deals, as head of Bain Capital, that he is trying so hard to recast, and sell, as a 100,000+ job creation Venture Capitalist tenure. Never mind, that a paltry 2.5 million investment in Staples counts today as having created 42,000 jobs. Feel the Shock, Staples? Feel the Awe emanating from the audacity of the lie? Or, should I merely mention how many Americans were fired, and families destroyed, after Bain took control of each of those LBO target companies, leveraged those Balance Sheets to the Hilt, thereby Bankrupting viable businesses that had previously had a history of profitable operations, and that Bain, and Mitt, made their fortunes (read, hundreds of Millions of Greenbacks) in the process.

I can continue, but Zuckerberg called last night, if I remember the foggy 1AM call right, and asked if I would stop sending him not-so-nice-emails regarding his IPO, and keep my Status Updates to the mundane, like most of his 900 million plus users. But then, I digress.

There is no doubt you have some brains, Mitt. 2 degrees from Harvard, despite being burdened with a former Governor as Dad. You have money, and that is amply clear in how you like your cookies, and from your having examined your full tax-disclosures, as presumptive nominee.

But you Mitt forget one thing - the 'Other' guy can shoot 3 pointers, from downtown, and around your sun soaked celebrity looks. Yes, 'White Men Can't Jump' was a real movie. I also hear he can also drive them straight down the fairways. Nothing like Bubba Watson from Iraq, FL, can, but long enough. And always straight. Well, at least that's his intent. No fades. No Draws. No Flips and No Flops. And without even an Etch a Sketch layout of the golf course. Just straight. I hear that is the only way you like them anyways.

Incidentally though, he also has a degree from Harvard. Sponsored by his single 'parent' grandmother.

What was that Mitt? Birth Certificate? Yes, he has one, an Original from the hospital in Hawaii where he was born. You do know that Hawaii became our 50th Great State before August 4, 1961, right? Or are you simply confused about the dates? Fine, that was on August 21, 1959. Darn, missed by just shy of 2 years!

November 2012 is not about any Republican. It is about the soul of America, and its Heart. And, it is about to be ripped out, leveraged and sold in Bankruptcy courts, if the Republican Men have their way.  In the interest of full-disclosure, I am a registered independent in FL.  That is why I was unable to vote for any one of the clowns on the GOP slate.  Not that I would have.

Yours truly.

PS: Upon looking up VP biden's IQ scores from his college days, we discovered that the scale wasn't around prior to World War I. I am serious.

On Our Government Protecting And Helping US Citizens in Need Abroad

NOTE: Caution is advised against expletives. Do not read any further if they bother you.
I was recently in Cancun, Mexico. I will be writing, soon, about my take on Mexico and its tourism business elsewhere on this blog. Here, I want to highlight what I faced, and what other US Citizens are likely to experience, under severe distress in a foreign country.

I has a serious, potentially life threatening situation on my hands, on Monday, May 14th, starting at about 4PM local time in Cancun. It had already taken us an hour to get to the hospital via boat, and ambulance.

The tour operator, its insurance company, and the private medical facility I was at, in Cancun, were all negotiating on "how-much-to-pay", as my friend lay waiting in their ER, waiting for emergency surgery. The tour operator was telling me they would have to move us to a different (read, Mexican public government hospital) hospital. The Surgeon, a jovial, and kind man (bought me a double espresso because I did not have my wallet on me) would not tell me what his total costs would be. Needless to say, their main concern was money. Formally, I was being told that the whole surgical team was present and ready to go, waiting for the anesthesiologist to arrive, and for about 2 hours, the "sleep-man" was about "10 minutes away". Well, that doctor was on-site at all times! The hospital did not want to have to deal with a US insurance company, after the fact, and even though the tour operator ultimately stepped up to its responsibilities, it wasn't until after 7PM that they took my friend into surgery - after the hospital received a faxed confirmation from the operator's insurance company!

Here, in the US, we have a Patient Bill of Rights - a hospital or other health services provider MUST provide ALL services necessary and within the facility's capacity, to save the patients life in an emergency, even if the patient does not have ANY medical insurance. Human life is valued more than the issue of who will pay the doctors and the hospital.

I was severely disturbed at these local customs. While the hospital itself looked clean and sterile, human life did not seem to warrant the same level of urgency as it does here in the US. I reached out to a friend back home, who suggested I contact the US Department of State in Washington, DC. Around 8PM local time (9PM Eastern, US) I called the State Department - looking for help, to be airlifted back to Miami. After a couple of automated phone attendants, I got through a live operator, and she suggested that she transfer my call to the "On Call Duty Officer" at the US Consulate in Cancun.

It took me 30 minutes to explain, to this Duty Officer, what had happened. You see, she was "On Call", Monday night, but her voice was slurred. Booze? Drugs? I do not know. I hope not. But it is possible she was - we were, after all, in the World Party Capital city. By Indian standards, I do not have a complicated name - she could not get my name (not that that has ever been an issue). She was having a hard time believing me, that a "Jha" is a US Citizen. Kept asking me "so you are a US Citizen?". At the end of our call, this officer asked me if the accident had happened during "fishing".

No you dumb-high-off-your-ass-US-civil-servant, I did not Fucking say fishing at any time.

Bottom line - She told me that the United State Government, to whom we all duly pay taxes to, and that espouses the motto "For One We Will Go To War", COULD DO NOTHING TO HELP US. A US Government assisted airlift was OUT OF THE QUESTION. Unlikely she was in any condition to drive to the hospital, and did not offer that.

But, she had the temerity to ask me to call her back the next day and POST HER ON OUR STATUS. For Fucking what? So she could fill out a meaningless incident report and add to her files as yet another achievement? FUCK-OFF, not going to do it.

The airlift would have cost roughly $15,000, probably less at fair rates!

Why I am writing this - as a cautionary tale, for any US Citizens traveling abroad: YOU ARE ON YOUR OWN. DO NOT EXPECT YOUR GOVERNMENT TO HELP YOU IN AN EMERGENCY. IT WILL BE SAD, BUT MERELY A STATISTIC IF YOU RETURN HOME IN A BODY BAG. 


IN GOD WE TRUST, AND SO SHOULD YOU.

On Why Conservative Republican Politics are Just Plain Wrong

Monetary policy is a useful too in targeting inflation and stable growth during good economic times. It provides the gas, and the brakes, to economic growth as needed.

But, Monetary policy is ill suited to shake nations out of broad, and severe economic downturns, for the Federal Reserve (Central Banks) has a limited toolbox when it comes to matters of expansionary policies.

The Fed can target short term borrowing rates down to zero. Which is nearly where US Fed Funds rate (the primary monetary control mechanism, and the inter-bank overnight unsecured lending rate) has been for 3+ years now.

Then there are the so called repurchase agreements - Fed buys large swaths of securities from primary dealer banks, thus injecting more money (money supply) into the economy - and they have not helped. Banks are happy to hoard the cheap money. They are scared of lending. Banks have been demanding egregious levels of collateral securing new lending. Not that there is a robust demand for new loans.

The Fed's last resort, and I hope it is never executed, is printing money. Literally. We are familiar with such 'experiments' in Argentina, and elsewhere. Monetary inflation is the firestorm of economic destruction. It makes everything we own, and have, including money, worthless. Ten Thousand Dollars for a cup of coffee is not a palatable option.

The 'Fed", collectively Mr. Bernanke and his fellow governors of US Federal Reserve Banks, is now, and has been for some time, at the point of impotence. No amount of monetary Viagra (excuse the mixed metaphor) will help get a rise (pun is intended) out of this US economy.

Federal 'austerity' programs, during recesscionary times, are a recipe for economic disaster. The US experimented with it in the pre-Great Depression of 1930s years, and the consequences are known to all. The way out, looking into the economic rear view mirror, was the New Deal - a Federal spending program of enormous proportions. It built the Hoover Dam, and the US Interstate highway system, among others. It created millions of jobs, putting families back on their feet, and the US on track to become the largest global economy.

The US is mired, has been so for 3+ years, in economic depression. Yes folks, it is a depression for millions are unemployed, and have lost everything. Millions are unable to find employment. Some, and that is in the hundreds of thousands, have quit looking for jobs. While politicians will jump on every good economic data release coming out of the Bureau of Labor Statistics, it is a fact the the American economy is stalled, and depressed.

Yet, the Right Wing 'nut jobs' of the Tea Party, and the Conservative Republicans (forced by right wing nut jobs of the Tea Party) keep beating the drums of fiscal austerity - cutting fiscal spending. Rep. Paul Ryan, Erik Cantor, Speaker Boehner, and even the presumptive Republican nominee - Mitt Romney - are prescribing severe fiscal spending cuts as elixir. At the same time these Conservatives are proposing further tax incentives and tax cuts for USA Inc., for the wealthy, and for high income families. The rhetoric, that spending cuts (savings) should be deployed into tax cuts for the rich (spending), for the rich are job creators is asinine. Hiring a few more chauffeurs is not going to do it.

For the US to bootstrap itself out of this economic depression, we need gigantic fiscal spending. By the US Federal Government.

Austerity be gone. Else we will.

Mother India


India has come a long way since I left in 1991. Liberalization of the license Raj, a legacy left behind by the Colonial rule of 200+ years, alongside a systematic deconstruction of Nehru's decision to be a State dominated republic, and the incredible resourcefulness and hard-work of Indians have contributed to the stunning economic growth. Rising tides lift many boats, and is also true in India. The economy has created an enormous swath of hungry consumers, with pockets that can afford even prices that will shock many in the Western Worlds. A 3BR apartment (or flat) that costs USD 1,000,000 is not uncommon in metro areas. Given its continuing growth, and despite the global financial crisis, property values did not suffer as much (as in the US, for example). I have seen projections that call for India becoming the 2nd largest global economy, in 30 to 40 years. At that horizon, arguing about the potential rank does not have a definitive answer. To be candid, it really does not matter wether its #1 or #2. Well done folks, well done.

I am a US Citizen now, and have been one for many years. This does not, in any way, diminish my sense of pride. Most of my family is still in India, and my heritage gives me a unique perspective. I love India as much as I love the US.

Despite the astronomical leap of economic progress, or perhaps because of this very phenomenon, there are deeply rooted social issues that have not changed much, if at all. What follows is NOT a sweeping indictment of the nation, or of every man in India. Please do not slam me with hostile fire, for this commentary is not aimed at anyone. It is based on my observations.

Amidst all the glamor, glitter and boom time success stories, the singularity that stands out is how poorly Indian women continue to be treated.

While some Indian women have also achieved very high educational, professional and economic success, many (and in my mind even 1 is one too many) are regularly abused at home, or at work by a man - a boss, a brother, a father, a husband, or a son. Abuse comes in many shades, physical and emotional being the foremost forms. Some have a support network, and are able to walk away. Others do not, or can not. So, thousands of women suffer in silent agony each day, resigned to their fate. Or, waiting for the day they can walk away. At times that fate is paying 'the ultimate' price.

No one likes to talk about 'dark' issues. We have a propensity to bottle up, and not acknowledge that which is ugly in our lives. We want to pretend all is well when it is not. This is what we tend to do - compartmentalize.

I doubt India will ever achieve true greatness, until it faces the plight of its women. As a nation. Laws that provide protection to women exist, but we know that parliamentary (congressional) dictate, in it of itself, is acutely incapable of social reform. That has to come from within, one household at a time.

I long for the day. Always have, and will continue to do so. I have hope.

PS - I am all too familiar with violence against women in America. It is flagrant. And, it is rampant. It is a shame, and neither forgiven, nor ignored. I am also aware of the flip side of this coin, where men are the abused in a relationship. Regardless, real men do not abuse the women in their lives. Cowards do.

Gas Prices

In a past life I spent some time trading derivatives on Wall Street. It was a highly lucrative, and a very eye opening experience. Wall Street was meant to help companies raise funds, go public through IPOs, and help us John Qs with our investments and retirements. Over time, that business model expanded into a few higher margin areas - mortgage securitization, risk management, aka hedging risk, proprietary trading, private equity investing, and prime brokerage services.

We are all to aware of how the Securitization business wreaked havoc - the US housing and financial crisis - personal bankruptcies, foreclosures, blighted communities , among its side-effects (makes securitization look like was a dangerous, new social Rx medicine). But Wall Street's lust for originating, buying, and securitizing low documentation, low documentation, no income proof - collectively known as Liar Loans - into Mortgage Backed Securities, and selling them around the world also led to Wall Street being (temporarily) brought to its knees.

As mortgage payment default rates soared, starting mid 2006, greed kept the Street from paying attention. Fraught with inertia, and the propensity to worship money making, Wall Street kept amassing raw inventory of "Alt-A" liar loans, until our marked to market regime blew the cover off the House. Among the many high profile people, and investment banks, that lost the shirt off their backs were several bank CEOs, Bear Stearns, Lehman Brothers, Wachovia Bank, Washington Mutual Bank, and Merrill Lynch. All were iconic companies in the US. Gone, over a period of 12 months. 100s of billions of Dollars of shareholder capital lost. 10s of thousands of low and mid level jobs lost (I have no sympathy for the highly paid superstars of Wall Street who lost their jobs too).

The attentive reader may, by now, be thinking that this rant has nothing to do with Gas Prices! It does. I just have a fondness for the scenic route.

Prop Trading, as in trading for the House, on Wall Street is very large. There are no sane, internal leverage limits for money spinning businesses. Prop traders can take extremely large positions (buy and sell) in anything they want. Prop trading is pure speculation at its core (I wanted to say heart, but they don't have one).

Prime Brokerage was meant to settle and clear trades for independent traders. Then, Hedge Funds got involved, and Wall Street was more than happy to provide the leverage and liquidity to Hedge Funds. Most hedge funds are pure speculators. Some readers may remember the spectacular demise of LTCM (Long Term Capital Management), in 1997, which was the largest hedge fund of its time. Ironic how short the Long Term was. John Merriwether, and his band of traders at LTCM, including the Nobel Laureate Myron Scholes (of the Black-Scholes option pricing model fame), leveraged their fund in excess of 100:1 ($100 of borrowed money, for each $ of capital) to bet on World Convergence. Then, Russia defaulted on its debt obligations, and that default set off a chain reaction of World Divergence that blew LTCM out of the world!

Starting in the mid 2000s, economists and researchers started predicting a major future shortage in global oil supply. A large factor in these projections - the astonishing and continuing growth in Brazil, Russia, India, and China (the BRIC group). Wall Street Prop Traders and Hedge Funds pounced on this as an opportunity to make a lot of money for themselves. The logic actually may have some merit.

Hedge Funds do not disclose their holdings of crude oil, or the size of the open positions in the crude futures prices. Investment Banks do, but in a convoluted manner, buried on page 900 something of their annual disclosure filings. The obfuscation is startling.

It has been reported, elsewhere, that Wall Street owns several hundred million barrels of crude oil, sitting in tankers off the US coast. One report I saw claimed 120 million barrels. That would roughly be 4 days of US's total consumption of oil.

Found an interesting graphic to make my case: http://goo.gl/MyDWC

It shows that crude oil prices collapsed, starting in September 2008. Remember that the weekend of 9/15/2008 was when Lehman Brother failed, and Merrill Lynch was forced into the arms of Bank of America. Within 3 months, gas prices hit $1.60 per gallon in the US. The Bush (junior) Administration bailed out our dear Investment Banks in October 2008.

See a trend in gas prices since then? It is not a coincidence. The cost of producing a barrel of gas has not risen by 100% in the last 4 years. It is Wall Street that is back at its GAME - pump (pun unintended) and dump. In their Prop books, and alongside their Hedge Fund customers!

With unemployment in the high 8%s, and stagnant relative incomes, the John Qs of America are being taken to the cleaners. By Wall Street. And our Congress, including the Administration can do NOTHING about it. Frank Dodd Act, and CFTC's amended powers could have put the brakes on such naked speculative hoarding and trading, BUT the Republican controlled House has effectively blocked Frank Dodd Act, and may infact entirely repeal it. The CFTC meanwhile had its budget severly cut, so the amended powers to monitor and regulate oil speculators was dead on arrival.

America's next NIGHTMARE - Romney @ 1600, combined with John Boehner as Speaker of the House, and a GOP majority, or a close tie in the Senate. If that happens, we are all SCREWED.

About Rudy

Yesterday, 'America's Mayor', aka Rudy Giuliani endorsed Mitt Romney for President.

Forget about the GOP primary debates leading up to the 2008 Presidential elections, and the fact that both sides took nasty swipes at each other then. No matter, that back then, Giuliani dropped out of the race and endorsed the eventual GOP nominee John McCain.
...
Its irrelevant, that In January 2012, Giuliani said "Romney will say anything to become President of United States." He added during an interview: “I’ve never seen a guy change his positions on so many things, so fast, on a dime, on everything. Pro-choice, pro-life. …Then he was pro cap-and-trade. Now he’s against cap-and-trade. He was pro-(health care) mandate for the whole country, then he becomes anti-mandate, and he takes that page out of his book and republishes the book. I could go on and on.”

Today, Giuliani said "Romney has won, fair and square." When asked about polls showing Romney has a "likability" problem (is not likable), Giuliani put the dagger in to his new friend:

"This reminds me of going to a surgeon. If I've got a terrible cancer or something to be operated on -- when I had to be operated on for prostate cancer -- I didn't go to the nicest doctor, I went to the best doctor. The guy could have a great personality and tell great jokes and put the knife in the wrong way."

Let me see if I got this right - Giuliani was endorsing Romney for the Presidency of the United States. And, in this analogy President Obama is the 'nicest doctor', with Romney being the 'best doctor'. The US Presidency is about our country's fate, and its future. Is Giuliani then suggesting United States is the prostate cancer?

Call me slow, but this felt like reluctant dealmaking rather than an endorsement for anything.

Oh, and Mr. Giuliani, you'd be well advised to avoid any metaphors related to cancer, of the prostate, or otherwise. Be a little less of a narcissist.