As I write, the richest people in the world are divesting themselves of long term investments. Paris Hilton's personal fortune, something she probably does not know originated from a loan from John D. Rockefeller, will probably receive a notification that her interest in Hilton Hotels has been sold. She may notice – probably not.
Those who work for folks like Paris are, as you read this, stuffing assets such as Hilton (the corporation, not Paris) into pink dresses and pimping those long profitable but now matured enterprises out for sale. This means prettying up the balance sheet and fluffing the pillows, mostly. Those who do that work will be well compensated.
The Big Money People have left the room.
All of their cash is being carefully sequestered in banks, remote from risk. What the action tells you is to expect that the final segment of a long running con game is going into its final phase. Those in control are drooling in anticipation of one long final suck on the life's blood of America.
The target is your money, the money you thought was safe. The weapons are such Limited Partnerships as Kolberg, Kravitz Roberts & Co (KKR), Blackstone Group LP, and Apollo. This will be a big operation. That is why Blackstone went public last week. This week it is Apollo's turn. Limited Partnerships issue hunting licenses on your wealth you did not know existed. These LPs are opening their eyes, ready to go hunting for those huge repositories of long term capital in which you are probably happily invested.
Your money, tucked into those cozily safe mutual funds, IRAs, 401Ks, annuities or in your company pension plan are squarely in the crosshairs. Think again and familiarize yourself with these terms.
Terms and tiny bits of history you need to know for your own protection
Accredited Investor – Some one presumed to know how to protect themselves in the shark infested waters of finance. Possesses a net worth of at least one million, has an income of over $200,000.00 a year in addition to other wonderful qualities. $300,000.000 if they are married, but that's an entirely different article. More on that later.
Nonaccredited Investor- An individual who, even if they are wealthy, does not meet the sophistication criteria to be classified as accredited. Only 34 of these are supposed to be involved in many high risk Limited Partnership style ventures.
Investor - Along with owning an asset they are also referred to in the financial trade as 'patsies.'
Limited Partnership– A license to play with other people's money (OPM) with virtual impunity. May be started by only one individual. "Two or more partners formed to conduct a business jointly, and in which one or more of the partners is liable only to the extent of the amount of money they have invested, known as the "General Partner". Limited partners do not receive dividends, but enjoy direct access to the flow of income and expenses, if any is left after the GP and his friends get all their fees and commissions."
Mutual Fund – As the name suggests, other people mutually using your money to fund their deals; to you, a way for people to invest who really don't know anything about the world of finance and markets and spread their risk around. Many retirement funds are invested in mutual funds as well as IRAs, 401Ks, annuities, and most corporate pension plans. These are very illiquid and can take up to three days for a sales settlement to occur. Most major stock market drops happen in a few hours leaving those holding these sorts of investments SOL. That is why they are not allowed to invest in risky ventures, such as Limited Partnerships. The Mutual Fund was created as a financial instrument to use small investor capital to prevent a total market collapse. In other words your safe money has been converted into a financial instrument that provides a buffer for hedge funds to manipulate the market without a complete collapse.
The Securities Act of 1933 - After The Crash the Federal government began mandating more transparency in the sale of securities. This was to prevent the con games then associated with the sale of stock and securities. There are a variety of terms used in the industry for these schemes. That article will follow soon.
Grid Business – A business whose profits are guaranteed by using government to deny you choices.
What you should have done was to invest in yourself first – get rid of your debts. But that is hard to do when going into debt is so very inviting. From every point on the chart you are urged to buy – on credit. You see new cars, new clothes, amazing vacations, and enticing luxuries. You hunger and bite.
Consider the case of Mary Swan.
An only child, Mary inherited a home from her mother. When Mrs. Swan bought the place it cost her $11,000.00. When Mrs. Swan died 10 years ago the small home in Iowa was worth $80,000.00. There was no mortgage. Mrs. Swan did not believe in debt.
Mary works in the local Five and Dime Store. A year ago she had the home appraised and low and behold it was worth $160,000.00 and Vitech refinanced the home for her and allowed her to borrow 125% of the value of her home or $200,000.00. Mary bought her first new car and upgraded the house.
She also took a trip to Europe that had always been beyond her means. Mary was sure the house would continue to go up in value. And even if it didn't she invested the rest of the money. She would have enough, she was sure, to make the mortgage payment.
The hard reality is that in two years Mary will be homeless. Unable to make the new mortgage payments on her family's home she will need her job, which pays only $500.00 a week, like never before. But that new car will have finished the cycle of its planned obsolescence; or be repossessed if she cannot make the payments, even if she does it will be worn out. Without the car she will lose her job.
We all want a piece of the Rock, meaning we want financial security; most of us know very little about the mysterious, esoteric world of high finance. So we tend to be conservative about how we invest. We put our money in things like mutual funds so we will never be confronted with a poverty stricken old age, be unable to get our kids through college, or face medical bills that destroy us financially. We want prosperity and the comforts of life and all of us have worked hard to establish that for ourselves.
Mutual Funds and those other kinds of investments, 401Ks, IRAs, pension funds, did not exist in 1929. It was the demand for more secure investments and ordinary investors reluctance to trust the power brokers, that caused them to be brought into existence. The generation that experienced the depression demanded security first, after all they couldn't even trust the federal government and the banks. We entered into a war to shock Americans back into subjection.
It was an all cash no funny money society, You can't multiply cash into a 10 to 20 multiple, especially if it's buried in the back yard.
The problem is that those who run the finance game wanted larger and larger percentages of our blood. We already talked about Short Selling and the SEC in prior articles, now we need to consider what is happening with mutual funds and the like.
The accumulation of real money in mutual funds, IRAs, 401Ks and our pension funds have probably been driving them insane with desire for years now.
Savvy market manipulators see this locked up money as a treasure they must steal before the collapse. You thought no one could get at those funds. Oops. Wrong Again!
If you think you have security because you are invested in mutual funds, possess a hefty bank account and a managed portfolio of stocks you were assured will yield well, and live in a home with substantial equity, you may be on thinner ice than you realize. If you listen carefully, this summer you may well hear the sound of frigid ice of a heartless financial system cracking under your feet.
Those instruments for investment, mutual funds and stock portfolios, are being set up to be sucked dry. When the market goes South the power brokers regular stock holdings can be quickly sold and capital conserved immediately. It's called a "Stop Loss". You can't get a stop loss on a mutual fund... SUCKER!
You thought it was a level playing field, well it's not, and it never will be as long as the grasping gonzos who run Washington are still in power. Who did you think is invested in those Hedge Funds? Hedge Fund Short Sales will manipulate your mutual funds value into virtually nothing. With complete 'security', it's called a "Spread" or a "Straddle". Meanwhile your mutual funds holdings and so-called secure investments take three (3) days AFTER you persuade your investment firm this is what you need done to be converted to cash.
In three days your money will be long gone! Sleeping alongside all those fat cats money in Switzerland.
And now the kicker, demonstrating another fact about those who are sucking us dry.
Look over the holdings of Blackstone Group LP. It is a long list but take some time and just scroll through them. This LP is managed by people who appear not have a clue of what is about to happen in the burgeoning development of the new global infrastructure for communications, connectivity, and the supply of digital information, leave alone the fact that soon there will be 75 MPG automobiles coming from China.
That is the first point. The bulk of the companies in which they hold an equity interest are related to various points on the development chart in the related fields of communication devices, phones, etc., Internet, cable, business applications for the same, satellites, hardware, and enough other points on that development front to tell the informed reader that they are trying to anticipate every conceivable eventuality. You can't bey on every placement on the crap table and walk away a winner. No one knows what is eventually going to dominate the communications market. And remember how many of these start ups are handled by Hedge Funds; just like cattle are herded to the slaughter.
You can expect that most of these holdings, domestic and foreign, will either implode because they were wrong, be chopped up for consumption by Hedge Funds, or be acquired for pennies on the dollar in just a few years without having done more than consume the hopes and expectations of ordinary investors like yourself. That works for high risk businesses like Limited Partnerships. But why is your money there?
Remember that you, the uniformed investor, are not allowed to invest in those risky ventures? The SEC is supposed to ensure that does not happen.
However, that does not mean your professionally managed mutual fund can't and won't do it for you. They are doing just that right now. Blackstone Group, that very Limited Partnership, is a prime example. Now, you might well own a few grains of their sandstone through your so-called 'secure' investments.
I told you those in finance hungered for your funds; they are now preparing to consume.
Many big mutual funds are heavily invested in such LPs right now. Those in charge of those mutual funds are not accountable if there is, gasp, an unexpected loss, remember that.
The SEC, charged since its beginning with ensuring that you, the uninformed investor is protected, is taking no action, just to mention.
As an uniformed investor it is your derrière that is swinging naked over the swampish pit filled with crocs because although you shouldn't be able to invest in high risk securities. But you are just a bloke getting ready to be stung by that cute little pea and a big shell game carefully and strategically ignored by the SEC.
The proven holdings in that portfolio, which run along the lines of a 'grid' business strategy, making their income from matured forms of business, show some of this and that, a stew of businesses that act as scant flavoring with no real direction or sense of the future. These are, like those that formerly belonged to Paris. The prettified Pig wearing that fancy lipstick is now in the portfolio that secures your future – while Paris's money takes a hiatus in the Rivera in a the highest security venue possible. Oh, and in a currency backed by GOLD not the ability to print worthless greenback into infinity.
Someone's interests are being protected. That someone is not you, my friend.
Everyone involved is gambling with your money. Nice trick when it works, right?
All of this leads to several natural questions. Why has the SEC ignored the risk to uniformed investors? A word from the SEC could have stopped operations that clearly violate both the intention and word of the law. Which leads us to wonder where Chris Cox's doubtless significant coffers are cached.
If Blackstone Group and their LP friends makes you feel secure then grab that anchor and try floating. One thing to remember is that "There's Old Money and Bold Money, but there's no old bold money!