Hedge Funds for the School Districts

For those who don’t know – Hedge Funds are created investment
tools…simply made out of whole cloth. They are made up in
“the air” for all intense purposes. It goes something like
this: Our best case was Enron and Jeff Skillings when he wanted
to create a Hedge Fund that would bet on how many sunny days
would occur in Washington, D.C. in a year. That idea caught
a few peoples attention. It started making people think…like
…”What in the world do those Enron people do?” That sort of
got the ball rolling and suddenly there was reason to look
further into what Enron was up to.

So, what has been learned by so-called Institutional Investors
since the Enron meltdown? Not much! The Financial Times had
a above the fold front page article today on Citibank and how
the Hedge Fund Managers have their eyes on “whether Citibank
will break up or not. They create a Hedge Fund for that reason
and people basically bet: “If you think Citibank is going to
break into four parts, invest a few million bucks!” If enough
people invest the price of the Hedge Fund share will rise and
you can sell at a terrific profit…probably about 300 percent.
The problem is..if Citibank instead becomes a Merger Target or
decides to acquire other banking interests. Then you basically
lose it all – because no one is going to buy any more. It is
like watching a Raiders/New England football game; finding out
the Raiders won and then trying to get someone to bet that
New England was going to win. But hey, that is why the
Securities and Exchange Commission has attempted to raise the
ante..for people that want to do Hedge Funds. Sadly, the SEC
is moving ahead on this issue at a snail-like pace.

In the meantime, these so-called Institutional Investors
are buying into CALPERS and virtually all the other Public
Employee Pension and Health Funds in America. Rather, those
Employee Pension and Health Funds are buying into Hedge
Funds. Look, a Hedge Fund can be a “bet” on anything. You
could create a Hedge Fund that “bets” that Britany Spears
will get a hair implant on various locations on her body! The
dangers here are immense and these “unsophisticated” (haven’t
got a clue!) Investment Funds and Investment Hedge Fund
Managers are really running a dumping ground for possible
gigantic money laundering schemes. Merrill-Lynch and the major
Institutional Investment Groups have had to jump on board the
“House of Cards” in order to compete with the likes of many
Independent No Name Investment Groups backed by George Soros,
T. Boone Pickins and a variety of other big time players.
Columbian Drug Dealers have been using these forums off-shore
for years. And, they don’t even care if anyone buys into
their Hedge Funds….they only need a dumping ground for cash.
Just ask Tony Montana! (Scarface! – the movie!)

This issue is important because Hedge Funds and Derivatives
(which is an entirely different scam-a-rama!) have taken the
place of “orderly expectations of return on investment”. The
concept is that if interest rates (set by the Fed) are 5% to
borrow….someone intelligent should be able to take a risk
and lend their money at 10% per annum and by that method be
able to – “make a reasonable buck”. With markets skewed with
Hedge Funds and Derivatives….that are offering astronomical
returns….who wants to invest in traditional investment tools?
This concept is designed to reduce volatility in the equity
markets and insure people can make long term loans with some
degree of safety if jumping interest rates, inflation raises
its ugly head. Remember Jimmy Carter? FEDS Gone Wild!

So, now even School Districts are getting into the game. It
traditionally starts at the University and State level and
rolls downhill quickly. These Hedge systems are truly not
safe for Individuals…which of course is the master plan.
They (Banking Interests) want a small, manageable club of
Investor Groups to run up big profits and then have the fund
collapse in a year or two….after everyone can only remember
the phenomenal prior returns. This is a very scary game that
offers too many dangers for the Public sector. We have yet to
hear from either form OC Treasurer and now Supervisor John
Moorlach or OC Treasurer Chriss Street on their Hedge Fund and
Derivative Investment Policies … or whether they even have
established any hard rules. Perhaps they just give Merrill or
other Groups lump sums in the hundreds of millions of dollars
and say their prayers at night. Maybe they even have a money
back guarantee. It would be nice to know if the taxpayers
County and State investment funds – not just Employee Pension
and Health plans are safe and looking for reasonable returns
and not going to fall prey to those Bob Citron divining rods!

Since Hedge Funds are bi-partisan boondoggle it is doubtful if
anyone will have an intelligent response, including those who
are responsible for our Public Funds. “Electeds and Appointeds”
all just want to be able to say: “Hey, we gave them the money
and ‘they invested it’ and ‘they’ lost it.” We think this is
what might be called “Plausible Denial”..which to all should
NOW be – unacceptable!