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Skeptical Debunker

Firing the $70 billion man - Mar. 10, 2010 - 0 views

  • Not only did TCW oust Gundlach, but the firm also announced that it was acquiring an entire company -- crosstown rival Metropolitan West Asset Management -- to replace him. That in turn set off a wave of defections from TCW, as 45 of the 60 staffers who had worked for Gundlach streamed out the door to join him at a new firm that he had opened within days of leaving.Then things really turned nasty. TCW filed an incendiary lawsuit in January accusing Gundlach of conspiring with confederates at TCW to steal proprietary information as part of a long-running plot to form their own competing firm. The suit added a salacious twist of the knife, perfectly calibrated for maximum media interest -- Gundlach had allegedly stashed a trove of illicit material in his office: 70 pornographic magazines and videos, 12 "sexual devices," and several bags of marijuana.Gundlach has countered with his own lawsuit. He charges TCW and its owner, the French bank Société Générale, with pushing him out so that they can get their hands on his lucrative fees. In addition to his mutual funds, Gundlach had managed what were effectively two hedge funds for TCW, each of which commanded the amped-up fees typical of those vehicles. Gundlach calculates that he would have personally reaped $600 million to $1.2 billion over the next few years.
  • TCW seemed content with the arrangement and did little to tie its managers' fates to the company as a whole. Few of them, for example, received significant stakes in TCW. That bred frustration in multiple generations of standout performers, who viewed corporate executives (some of whom did receive ownership shares) as getting rich off their toil.So it went for Gundlach, a bona fide investing star who, by the end, oversaw about 70% of TCW's assets, some $70 billion, putting him in charge of one of the biggest pots of money in the country. Gundlach didn't just generate steady returns; he avoided the blowup of the century. A specialist in mortgage-backed securities, he publicly warned in 2007 that "the subprime mortgage market is a total, unmitigated disaster, and it's going to get worse." He invested accordingly, not only delivering positive returns in the blighted year of 2008 but also earning himself a growing role as a media sage. His ego grew along with it.There are few people like Jeffrey Gundlach in the mutual fund world -- or in any world. A former rock-and-roll drummer, Gundlach, 50, is a math whiz (but not a quant). He views everything in binary terms: Either you perform to his standards or you don't, and he won't hesitate to let you know which category you fall into. Nor is he shy in articulating his view of himself. "I was by far the biggest revenue generator at TCW, by far the biggest performer," he says. "I created $4 billion in value for clients in '09. If telling you that is self-promotion, so be it. It's just a fact."
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    On November 19, 2009 Jeffrey Gundlach was named a finalist for Morningstar's award for bond fund manager of the decade. For Gundlach, the nomination recognized 10 years of stellar results, exceeding even the returns of the legendary king of bonds, Bill Gross. Two weeks later Gundlach was confronted, fired, and then pursued on foot out of a Los Angeles skyscraper by two lawyers working for TCW, the money management firm with $110 billion in assets where Gundlach had worked for 24 years.
Skeptical Debunker

In Past Decade, American Funds Created Most Wealth - Yahoo! News - 0 views

  • Morningstar determined that Janus and Putnam were the two largest "wealth destroyers" during the decade, losing $58 billion and $46 billion, respectively. "Janus and Putnam rode the growth wave more than anyone else," Kinnel says. "They had some very aggressive funds that put up big numbers that got huge inflows." After the tech bubble burst, the funds that were most heavily invested in these types of holdings experienced huge sell-offs, which made it difficult for these funds to attract inflows through the remainder of the decade. According to Morningstar, American Funds created about $191 million in wealth for investors during the decade, followed by Vanguard and Fidelity. Since American Funds generally employs a more value-oriented strategy, the firm was largely able to avert the first bear market of the decade. "The 2000 to 2002 bear market was all growth and tech, and American barely touched that, whereas they had lots of value, dividend payers, and bonds, which did very well," Kinnel says. Recently, the tables have turned for American. In 2009, it lost the most of any fund family (more than $25 billion). No fund family, including American, was able to avoid the bear market of 2008. The same strategy that allowed American to bypass most of the first bear market failed because many well-known dividend-paying companies, like big financial firms, experienced huge losses.
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    In a decade with two bear markets and lackluster returns for many investors, American Funds created the most wealth for investors, while Janus destroyed the most wealth, according to a survey released by Morningstar. For the survey, Morningstar looked at the 50 largest mutual fund families and their total net assets at the end of 1999. Then the fund tracker subtracted each fund company's total cash flows over the decade and deducted their total net assets at the end of 2009. Numbers were calculated in dollar terms so that any funds that were liquidated during the decade would also be included.
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    Get this! Mutual funds, where most American's have their 401Ks, IRAs, and retirement savings, performed pitifully in the "great economy" of the 2000's (brought to you by Republican deregulationists starting with Ronald Reagan). The "best" made $191 million (but lost $25 billion in 2009!), the worst lost around $50 billion! What a great way to transfer all that hard earned savings, mostly by the "little guy", from them to the Wall Street gamblers. Another socialistic Republican "redistribution of wealth" of the corporate criminal rich, by the corporate criminal rich, and for the corporate criminal rich.
Skeptical Debunker

New study shows sepsis and pneumonia caused by hospital-acquired infections kill 48,000... - 0 views

  • This is the largest nationally representative study to date of the toll taken by sepsis and pneumonia, two conditions often caused by deadly microbes, including the antibiotic-resistant bacteria MRSA. Such infections can lead to longer hospital stays, serious complications and even death. "In many cases, these conditions could have been avoided with better infection control in hospitals," said Ramanan Laxminarayan, Ph.D., principal investigator for Extending the Cure, a project examining antibiotic resistance based at the Washington, D.C. think-tank Resources for the Future. "Infections that are acquired during the course of a hospital stay cost the United States a staggering amount in terms of lives lost and health care costs," he said. "Hospitals and other health care providers must act now to protect patients from this growing menace." Laxminarayan and his colleagues analyzed 69 million discharge records from hospitals in 40 states and identified two conditions caused by health care-associated infections: sepsis, a potentially lethal systemic response to infection and pneumonia, an infection of the lungs and respiratory tract. The researchers looked at infections that developed after hospitalization. They zeroed in on infections that are often preventable, like a serious bloodstream infection that occurs because of a lapse in sterile technique during surgery, and discovered that the cost of such infections can be quite high: For example, people who developed sepsis after surgery stayed in the hospital 11 days longer and the infections cost an extra $33,000 to treat per person. Even worse, the team found that nearly 20 percent of people who developed sepsis after surgery died as a result of the infection. "That's the tragedy of such cases," said Anup Malani, a study co-author, investigator at Extending the Cure, and professor at the University of Chicago. "In some cases, relatively healthy people check into the hospital for routine surgery. They develop sepsis because of a lapse in infection control—and they can die." The team also looked at pneumonia, an infection that can set in if a disease-causing microbe gets into the lungs—in some cases when a dirty ventilator tube is used. They found that people who developed pneumonia after surgery, which is also thought to be preventable, stayed in the hospital an extra 14 days. Such cases cost an extra $46,000 per person to treat. In 11 percent of the cases, the patient died as a result of the pneumonia infection.
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    Two common conditions caused by hospital-acquired infections (HAIs) killed 48,000 people and ramped up health care costs by $8.1 billion in 2006 alone, according to a study released today in the Archives of Internal Medicine.
Skeptical Debunker

'Clash' of 3-D movies to hit underprepared cinemas - 0 views

  • The pileup was created in part because studios want to capture some of the excitement surrounding "Avatar," the James Cameron epic released in December. At $2.4 billion in global ticket sales, it is the highest-grossing film ever. In addition to the novelty or richer experience that might drive more people to see a 3-D movie, tickets to 3-D movies also cost a few dollars more. Around the time "Avatar" came out, Warner Bros. decided to convert a remake of "Clash of the Titans" from 2-D to 3-D and push its release back a week, to April 2. That will be the third 3-D movie to hit the market in a short span. DreamWorks Animation SKG Inc.'s "How to Train Your Dragon" comes out a week earlier, and The Walt Disney Co.'s "Alice in Wonderland" hits theaters March 5. And "Avatar" might still be playing in some places too. But a limited number of theaters can show these movies in 3-D, because not all theater owners have bought new digital projectors and undertaken other upgrades necessary to show movies in the format. About 3,900 to 4,000 3-D-ready screens are expected to be available in the U.S. and Canada by the end of March. Typically a movie in wide release might be shown on 3,000 to 10,000 screens in North America. In the past, a smaller number of 3-D-capable screens was adequate when one major film at a time was being released in 3-D in addition to 2-D. Each movie had a longer run, and moviegoers who wanted to see it in 3-D could pick a convenient time to go. With three out at once, each will get less exposure because some theaters with only one or two 3-D screens will have to choose which movies to show in 3-D. "One or all three are going to suffer in some way," said Patrick Corcoran, director of media and research for the National Association of Theatre Owners. "It makes it a much harder decision on exhibitors on what to keep or what to drop or what to add and probably should have been avoided."
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    Movies in 3-D are becoming such big moneymakers that Hollywood studios are cramming them into the nation's theaters, even though there aren't enough screens available to give each film its fullest possible run. That will mean an unprecedented number of 3-D movies for film fans to choose from this spring, and smaller profits for Hollywood studios than they might otherwise get with fewer 3-D competitors.
Skeptical Debunker

Lawrence Lessig: Systemic Denial - 0 views

  • So in coming to this meeting of some of the very best in the field -- from Elizabeth Warren to George Soros -- I was keen to hear just what the strategy was to restore us to some sort of financial sanity. How could we avoid it again? Yet through the course of the morning, I was struck by two very different and very depressing points. The first is that things are actually much worse than anyone ever talks about. The pivot points of our financial system -- the infrastructure that lets free markets produce real wealth -- have become profoundly corrupted. Balance sheets are "fictions," as Professor Frank Partnoy put it. Trillions of dollars in liability hide behind these fictions. And as expert after expert demonstrated, practically every one of the design flaws that led to the collapse of the past few years remains essentially unchanged within our financial system still. That bubble burst, but we can already see the soaring profits of the same firms that sucked billions in taxpayer funds. The cycle has started again. But the second point was even worse. Expert after expert spoke as if the problems we faced were simple math errors. As if regulators had just miscalculated, like a pilot who accidentally overshoots the run way, or an engineer who mis-estimates the weight of cargo on a plane. And so, because these were mere errors, people spoke as if these errors could be corrected by a bunch of good ideas. The morning was filled with good ideas. An angry earnestness was the tone of the day.
  • There were exceptions. The increasingly prominent folk-hero for the middle class, Elizabeth Warren, tied the endless list of problems to the endless power of "the banking lobby." But that framing was rare. Again and again, we were led back to a frame of bad policies that smart souls could correct. At least if "the people" could be educated enough to demand that politicians do something sensible. This is a profound denial. The gambling on Wall Street was not caused by the equivalent of errors in arithmetic. It was caused by a corruption of the system by which we regulate those markets. No true theorist of free markets -- and certainly none of the heroes of even the libertarian right -- believe that infrastructure markets like financial systems can be left free of any regulation, including the regulation of rules against fraud. Yet that ignorant anarchy was the precise rule that governed a large part of our financial system. And not by accident: An enormous amount of political influence was brought to bear on the regulators of these core institutions of a free market to get them to turn a blind eye to Wall Street's "innovations." People who should have known better yielded to this political pressure. Smart people did stupid things because "the politics" of doing right was impossible. Why? Why was their no political return from sensible policy? The answer is so obvious that one feels stupid to even remark it. Politicians are addicts. Their dependency is campaign cash. And in their obsessive search for campaign funds, they let these funders convince them that for the first time in capitalism's history, markets didn't need the basic array of trust-producing regulation. They believed this insanity because it made it easier for them -- in good faith -- to accept the money and steer financial policy over the cliff. Not a single presentation the whole morning focused this part of the problem. There wasn't even speculation about how we could build an alternative to this campaign funding system of pathological dependency, so that policy makers could afford to hear sense rather than obsessively seek campaign dollars. The assembled experts were even willing to brainstorm about how to educate ordinary Americans about the intricacies of financial regulation. But the idea of changing the pathological economy of influence that governs how Washington governs wasn't even a hint. We need to admit our (democracy's) problem. We need to get beyond this stage of denial. We need to recognize that until we release our leaders from a system that forces them to ignore good sense when there is an opportunity for large campaign cash, we won't have policy that makes sense. Wall Street continues unchanged because the Congress that would change it is already shuttling to Wall Street fundraisers. Both parties are already pandering to this power, so they can find the fix to fund the next cycle of campaigns. Throughout the morning, expert after expert celebrated the brilliance in Franklin Roosevelt's response to the Nation's last truly great financial collapse. They yearned for a modern version of his system of regulation. But we won't get to Franklin Roosevelt's brilliance till we accept Teddy Roosevelt's insight -- that privately funded public elections tend inevitably towards this kind of corruption. And until we solve that (eminently solvable) problem, we won't make any progress in making America's finances safe again.
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    Everyone recognizes that our nation is in a financial mess. Too few see that this mess is not simply the ordinary downs of a regular business cycle. The American financial system walked the American economy off a cliff. Large players took catastrophic risk. They were allowed to take this risk because of a series of fundamental regulatory mistakes; they were encouraged to take it by the implicit, sometimes explicit promise, that failure would be bailed out. The gamble was obvious and it worked. The suckers were us. They got the upside. We got the bill.
Skeptical Debunker

Hold vendors liable for buggy software, group says - 0 views

  • "The only way programming errors can be eradicated is by making software development organizations legally liable for the errors," he said. SANS and Mitre, a Bedford, Mass.-based government contractor, also released their second annual list of the top 25 security errors made by programmers. The authors said those errors have been at the root of almost every major type of cyberattack, including the recent hacks of Google and numerous utilities and government agencies. According to the list, the most common mistakes continue to involve SQL injection errors, cross-site scripting flaws and buffer overflow vulnerabilities. All three have been well-known problems for
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    A coalition of security experts from more than 30 organizations is urging enterprises to exert more pressure on software vendors to ensure that they use secure code development practices. The group, led by the SANS Institute and Mitre Corp., offered enterprises recent hacks of Google draft contract language that would require vendors to adhere to a strict set of security standards for software development. In essence, the terms would make vendors liable for software defects that lead to security breaches. "Nearly every attack is enabled by [programming] mistakes that provide a handhold for attackers," said Alan Paller, director of research at SANS, a security training and certification group.
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    Of course, a more general way to address this and other "business" generated problems / abuses (like expensive required "arbitration" by companies owned and in bed with the companies requiring the arbitration!), is to FORBID contract elements that effectively strip any party of certain "rights" (like the right to sue for defectives; the right to freedom of speech; the right to warranty protections; the right to hold either party to public or published promises / representations, etc.). Basically, by making LYING and DECEIT and NEGLIGENCE liability and culpability unrestricted. Or will we hear / be told that being honest and producing a quality product is "anti-business"? What!? Is this like, if I can't lie and cheat being in business isn't worth it!? If that is true, then those parties and businesses could just as well "go away"! Just as "conservatives" say other criminals like that should. One may have argued that the software industry would never have "gotten off the ground" (at least, as fast as it did) if such strict liability had been enforced (as say, was eventually and is more often applied to physical building and their defects / collapses). That is, that the EULAs and contracts typically accompanying software ("not represented as fit for any purpose" more or less!) had been restricted. On the other hand, we might have gotten software somewhat slower but BETTER - NOT being associated with or causing the BILLIONS of dollars in losses due to bugs, security holes, etc. Others will rail that this will merely "make lawyers richer". So what if it will? As long as government isn't primarily "on the side" of the majority of the people (you know, like a "democracy" should be), then being able to get a individual "hired gun" is one of the only ways for the "little guy" to effectively defend themselves from corporate criminals and other "special interest" elites.
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