George Soros and Toxicity
So yesterday we ran a news item about George Soros’ comments on banker pay (he thinks regulators should have a say) and credit default swaps (he called them “toxic instruments”). Soros made these comments at a banking conference on southern England.
Apart from being amused at my own thought that I was surprised England even lets Soros into the country these days, I didn’t really give the item much thought. After all, few people would know more about excessive compensation than George Soros.
Then this morning I got an email from John Wartman, principal at Huntsman Consulting, with the subject line: “Soros should talk.” He took issue with Soros’ contention that credit default swapsâ€”essentially insurance purchased against debt defaultâ€”should be subject to greater regulatory oversight. I can’t make the case any more eloquently than Wartman:
“Soros was responsible for causing havoc in the currency markets in the 1980â€™s when his traders sold billions of pounds in the less liquid early Asian markets. Talk about a disrupting force in the markets that should be reigned in. He made hundreds of millions screwing global markets. Why donâ€™t you remind him of that?”
After trading emails this afternoon, I thanked Wartman for letting me use his observation here. His last email to me: “I hope he [Soros] doesn’t put a hit out on me.”
Nah, that’s not Soros’ style. No money in it. I think you’re safe, Mr. Wartman.
He’s got His
Another example of this sort of what I think I’ll call “discouraging the mountain climbers from the top of the mountain” came from General Electric Chief Executive Jeffrey Immelt. The Financial Times quoted Immelt, speaking at West Point, as saying:
“We are at the end of a difficult generation of business leadership … tough-mindedness, a good trait, was replaced by meanness and greed, both terrible traits.
“The bottom 25 per cent of the American population is poorer than they were 25 years ago. That is just wrong. Ethically, leaders do share a common responsibility to narrow the gap between the weak and the strong.â€ť
Under the guise of walking the talk, I suppose it should be pointed out that Immelt declined his bonus in 2008. Yet, as BusinessWeek pointed out at the time, Immelt wasn’t exactly taking a vow of poverty. His $3.3 million salary was more than twice that of the average CEO of an S&P 500 company.
$3.3 million is a figure many readers of this blog probably don’t find excessive at all. But when Immelt is talking about the “bottom 25 percent” of the American population, he’s talking about people making four figures in annual income. If you’re making $9,000 or even $10,000 a year, you can’t relate to Jeff Immelt. You likely donâ€™t even know Jeff Immelt is talking about you.
Most rationally-thinking people can come to some kind of agreement on what constitutes meanness, but greed is completely relative.
You ever do a Google search for your own name? Or your company? On occasion I do a search for “hedge fund,” just to see what comes up in the various sections. The top return from a straight web search is, not surprisingly, the Wikipedia entry for “hedge fund.” If you map “hedge fund,” you get a bizarre Manhattan address of “1095 51st Ave.” in the 10017 Zip Code. If you zoom in far enough on the “A” point on the map, it turns out to be a location on 45th Street, between 5th and 6th Avenues. On the satellite view, it appears that “hedge fund” is a Holiday Inn Express. That joke practically writes itself. If you click on the street view, you’re suddenly outside a New York Sports Clubs location on the south side of the street and something called “Brands for Less Ladies Warehouse Sale” on the north side of the street.
This stock photo image is the second entry in Google Images for “hedge fund.” It accompanies an article titled, “Start Your Own Hedge Fund.” There’s something to be said for truth in advertising, eh? Except that’s probably not the hedge fund manager; it’s a service provider.
The Always Entertaining Jim Rogers
I just saw Jim Rogers interviewed by Maria Bartiromo on CNBC. Whenever I see Rogers, I recall the time I interviewed him at his Upper West Side home and he gave me some fairly specific advice that, for some unknown reason, I’ve never followed.
Rogers was doing publicity for his book Adventure Capitalist: The Ultimate Road Trip. During our interview, he wore blue jeans, brown loafers and a pink sweater. The conversation, ostensibly about the book, was wide ranging. Toward the end of the interview, we began chatting about our respective worldviews. I was struck by how easy he was to talk to. Given his wealth and stature, I was expecting someone more â€¦ stiff. But Rogers speaks and moves with the ease of a man who sleeps well knowing he is right.
We were in agreement that big changes were coming that would affect food and energy supplies, and by extension world economies. He spoke at length about his time in China, and what a positive impression the country had made on him. Rogers then advised me to move out of New York to a mid-size U.S. city surrounded by agricultureâ€”the kind of place that could sustain its own population with what it grew nearby. He specifically mentioned Omaha, Neb. That sticks out. He gave me some other advice that I jotted down later because by that point we were just chatting, but I’ve long since misplaced that notebook.
His advice about choice of location stuck with me. Now we live in Chicago, which is surrounded by agriculture, but not at any scale that could sustain the population here. We do have a garden in the back yard, though. Three years after our chat Rogers announced that he was moving to China.