Friday, February 27, 2009
The media reports I saw, such as this NYTimes piece, suggested that restoring the itemized deduction phase-out would alone raise $318 billion. This seemed wildly optimistic to me, especially as the article said deductions would be capped to yield a 28% tax benefit, not a complete reduction.
In fact, the budget document projects $179 billion in revenue from reinstating the personal exemption phaseout and the limitation on itemized deductions. It also predicts that restoring the 36% and 39.6% tax rates (why not round up to 40%? too simple?) would raise $338 billion.
But the most interest part to me is the projection of capital gains tax collections. The first two items have no revenue effect until 2011, which is when all the new "upper-income tax provisions" take effect. The increase to a 20% capital gains tax rate somehow loses $182 million in 2009, then gains $1.1 billion in 2010. In 2011 the taxes start to pour in, with $28 billion attributed to that additonal 5% increment, and an additional $49 billion in 2012.
I guess that means the Dow is going back to 15,000?
Really, I'd love to read their methodology sometime, but I think it's classified information.
Overall, the increased taxes on "the rich" are projected to raise $636 billion, double the number I've seen in media reports.
What's more, there are several Carter-esque tax hits proposed for the oil and gas industries. Because we all remember how great the windfall profits tax was at generating new energy sources within the U.S. Oh, wait . . .
Fred the Intelligent Bear thinks it's too soon to talk about the road back. He's still focused on the road down, as shown in this chart. (Caution: Fred produces interesting charts but massages the data. Read the fine print.)
If professor Dimson is right, we'll have to wait until 2018 before we even start dreaming of new highs for the DJIA.
2018? That year rings a bell on this blog. One of our first posts highlighted saros cycles. Those cycles run about 18 years: one up, the next down, then up again. They seem to match up roughly with the performance of the stock market since World War II. The last up cycle ended in 2000. Our current down cycle should end around 2018.
The Dow's cycles are easier to spot when adjusted for inflation. In the chart below, you can see how punishing the 1970's really were.
Thursday, February 26, 2009
A 2004 revision to the mission statement of the Leona M. and Harry B. Helmsley Charitable Trust ordered that the money should be used for "purposes related to the provision of care for dogs" as well as other charities.
Before being revised, the mission statement mandated that the money would provide health care for the poor, with an emphasis on children.
Wednesday's fraud tally: three alleged schemes, $660 million, four arrests.
Those numbers seem small compared to Bernard Madoff's alleged $50 billion swindle, and even the $8 billion Allen Stanford is accused of running off with, but it's another sign that federal prosecutors have no end of work in sight tracking down fraud schemes.
Wednesday, February 25, 2009
In Paris, Christie's is delighted with the results of its auctions disposing of the art, antiques and collectibles of Yves Saint Laurent. The Matisse shown here, his 1911"Les coucous, tapis bleu et rose," (The Cowslips, Blue and Rose Fabric) sold for over $40 million.
In these tough times, all the art isn't going to auction. Some, The New York Times reports, is going to the pawn shop.
Update: Robert Frank's Wealth Report spotlights a remarkable leather armchair from the Saint Laurent collection. It sold for – are you sitting down? – $28 million!
Tuesday, February 24, 2009
Thought of Jim Gust's Endowment woes post as we gathered income-tax info. Unlike Harvard, this retiree and his bride have no need to tighten their belts. Dividends and interest from our mini-endowment actually rose slightly last year. Unless dividend cuts get really vicious, we expect about the same level of spending money for 2009.
We "beat" Harvard because ours is an old-style endowment. As our parents and their peers taught us back in the 1950s, we collect and spend our dividends and interest. We never dip into principal. Well, hardly ever.
Harvard (and Yale and just about every other endowment) march to a different drummer. They invest for total return, adding income to principal and spending a percentage of the total each year.
Total-return investing was born of necessity. As the notion of growth stocks took hold, dividend yields dropped below bond yields. In the 1960s, trying to get along on endowment (or trust) income became increasingly unattractive. Total-return investing provided a good alternative. But even then, old fogies warned that total-return investors would be sorry some day:
"Sure, you'll do fine most years. But once in a great while the Dow's going to dive big time. What's your four percent or five percent of 'total market value including accumulated income' going to look like then?"
Well, as the Ivy League universities and other endowed institutions are learning, getting along on one-quarter or one-third less than last year is no fun.
College and university endowments aren't going to change their total-return ways. But mightn't retirees sleep better if they invested 1950s style?
There's just one catch. While Harvard and Yale tap their endowments for four or five percent each year, the dividends and interest from our mini-endowment normally amount to no more than three percent.
What would you advise retirees? Is stability worth the sacrifice?
Monday, February 23, 2009
The attention paid to the Depression story may seem a logical consequence of our economic situation. But the retelling, in fact, is a cause of the current situation — because the Great Depression serves as a model for our expectations, damping what John Maynard Keynes called our “animal spirits,” reducing consumers’ willingness to spend and businesses’ willingness to hire and expand. The Depression narrative could easily end up as a self-fulfilling prophecy.Sunday, columnist Frank Rich – not heretofore known as an economist – warned that we weren't scared enough:
One of the most persistent cultural tics of the early 21st century is Americans’ reluctance to absorb, let alone prepare for, bad news. *** Obama’s toughest political problem may not be coping with the increasingly marginalized G.O.P. but with an America-in-denial that must hear warning signs repeatedly, for months and sometimes years, before believing the wolf is actually at the door.Who to believe? Let's go with Shiller. He just received the Deutsche Bank Prize in Financial Economics 2009.
(Please keep smart-aleck questions like "What does a bank know about financial economics?" to yourself.)
Abelson's guess: the DJIA will bottom around 6,000.
Sunday, February 22, 2009
. . . key political victories for the Team Obama spending plan have not been viewed as buying opportunities on Wall Street. A string of negative market reactions began with the December 18 announcement of a stimulus bill of $700 billion (Dow down 2.5%), continued with the January 7 announcement that the actual plan would be “on the high side” (-2.7%) and continued with last week’s 61-36 Senate vote supporting the Administration’s fiscal plan. The White House victory and the new bank bail-out plan announced the following day by Treasury Secretary Geithner were met with a 5% wipe-out in the DJI, and a decline in Treasury bond yields, indicating a “flight to quality.”Is more spending really the solution? Under President Reagan, a time when unemployment passed 10%, deficit spending reached 6% of GDP. Before the American Reinvestment and Recovery Act the deficit was projected at 9% of GDP, now it's shaping up at 12%. So will the recovery be twice as big as under Reagan? Or will it arrive in half the time? Or were other Reagan-era policies actually the key to recovery?
Saturday, February 21, 2009
The "Make Work Pay" tax credit in the stimulus bill is $400 in 2009 and again in 2010. So in total it is larger than the $600 check from IRS that the Bush administration pushed through last year, an approach that was, at best, a total failure. The MWP credit will be handled as an adjustment to withholding, rather than as a lump sum, because according to some economists that approach reduces the "risk" that taxpayers will save the money. We need spending now, not saving. I guess. I don't really understand that part. And although the President has warned us of imminent catastrophe, we can wait until June for the money (and much later for the jobs).
Anyway, this is how the credit will look to me. Sometime in about June (why June? no one has said, but most likely IRS is busy until then) my tax withholding will go down by about $13. Yay! Then next January my tax withholding will go up by about $6. That's because next year the same $400 credit will be spread over 12 months instead 7. Crap, that will still feel like a tax increase to me. I will have grown accustomed to that $13 extra. Then in 2011 my withholding will go up again by another $7 as the credit expires—another tax increase.
That seems like a really bad approach to me. The psychology is all wrong. Why hasn't the MSM jumped all over it?
Someone should tell Congress that it's not the money, it's the attitude. There's nothing in this stimulus bill that has any chance of giving individual taxpayers hope. Or relief.
By the way, is anyone else troubled by the fact that everyone is saying that the feds are "spending" $800 billion? The spending part of the bill was only about $500 billion, the rest is "uncollected tax revenue" which was mostly never going to be collected anyway. Why are they exaggerating the spending portion now?
How's that been working out for Jane? Not so good, in these markets, per the New York Times.
Harvard's portfolio was hit hard by the Lehman bankruptcy, and it was leveraged, with a cash position of negative five percent. Plus Harvard had some ambitious expansion plans underway that needed cash at just the wrong time. As a result of these factors, Harvard is underperforming its peers.
Harvard has said its overall endowment portfolio declined 22 percent from July through October and that it could end the fiscal year in June down 30 percent. That performance is in line with the average for university endowments, though some have done better. Yale’s endowment was off 13.4 percent in the comparable four-month period, while Princeton’s was down 11 percent, and both have projected a total 25 percent drop for the fiscal year.In order to raise urgently need cash, Mendillo had to sell some of her better performing assets, because no one would buy the dogs. What was it that went on the block? Among other things, an interest in a hedge fund with outstanding performance run by . . . wait for it . . . Jack Meyer. The same guy who did such a good job for Harvard that he got paid too much, and had to resign.
Do I think that hedge fund managers "deserved" their high pay? I believe I have nothing to say about it, I'm not hiring any. The unfettered market needs to set their pay, not me. I find the size of Harvard's tax-free endowment more shocking than the pay of its investment managers.
But it occurs to me that the Congress is taking substantially the same approach to banker compensation as Harvard did to its investment managers. I wonder why anyone thinks that is a good idea?
Friday, February 20, 2009
You remember Martha, the frumpy, dumpy widow we suspect George of marrying partly for her ample wealth. But what if she wasn't dumpy? And what if she ditched a richer boyfriend to marry George because George was a hunk?
George and Martha probably met while in their mid-20s. They wed, two hundred fifty years ago, when they were about 27, young by today's standards. One of his biographers, Flexner, pictures George as "Very tall for his generation – over six feet – with reddish hair and gray-blue eyes…. George exuded such masculine power as frightens young women just wakening to the opposite sex."
Martha, The Washington Post notes, may have been quite a foxy lady. Well over a foot shorter than George, petite and slender. Here's how she was portrayed before her marriage, together with an "age-regression" image based on what's believed to be the most faithful portrait of Martha in her later years.
Thursday, February 19, 2009
Tuesday, February 17, 2009
Factoring in the higher growth rate and the time until the spending will actually occur, by what amount should you increase the debt limit today?
Exactly $789 billion.
That's the adjustment included in the stimulus bill. Evidently Congress believes that the stimulus effect will be just enough to cover the interest due on the new debt.
If only you had waited! There's a new tax credit for those who had the sense to stay out of the housing market until 2009. Not only is this credit larger ($8,000) but you never have to pay it back! In other words, it's a real credit, not a loan with a blatantly misleading label.
I have been assuming, and all the media coverage reinforced this assumption, that forgiveness of the payback requirement would be extended back to the 2008 purchases. I was wrong. CCH is very clear on the point.
So the Congressional message to all home buyers is, "Wait—you might get a better deal later on!"
I would call that the exact opposite of stimilus. What's the word for that?
Note that the TARP bailout of GM triggered $10 billion in additional tax liabilities, which would have consumed the TARP bailout itself. An earmark was inserted without debate to remedy that little oversight. So keep in mind, whatever the nominal cost of the GM bailout, there's another $10 billion in deferred taxes.
Remember when the Congressional Budget Office confidently predicted that the bank bailout might cost as much as $25 billion? And there was only a 5% chance that Fannie Mae and Freddie Mac would have to be nationalized, at a far greater cost? I blogged about it here. Seems so long ago, but it was just last summer. So far, that prediction is only two orders of magnitude too low, but we have a long way to go yet.
Now it looks like bailing out GM alone will cost more than CBO's first estimate on the magnitude of the financial crisis. I know why they keep putting out numbers, what I don't understand is why anyone pays attention.
Sunday, February 15, 2009
Madoff’s alleged fraud hit Geneva particularly hard, after at least eight firms placed money with him. Many of their investments were made through so-called funds of funds, pioneered by the city’s bankers to pool client money and invest in multiple hedge funds run by outside managers.All told Geneva's money managers had about $8.6 billion invested with Madoff.
Nestled between the Alps and Jura mountains at the tip of western Europe’s largest lake, Geneva has 140 private banks and 600 independent asset managers. The financial industry employs 34,400 people in a city of fewer than 200,000….
Friday, February 13, 2009
Right next to that article is this one: Large Banks On the Edge.
Some of the nation’s large banks, according to economists and other finance experts, are like dead men walking.The article highlights calculations by Nouriel Roubini, the current "Doctor Doom."
Mr. Roubini estimates that total losses on loans by American financial firms and the fall in the market value of the assets they hold will reach $3.6 trillion, up from his previous estimate of $2 trillion.Not feeling depressed enough? Read why some Japanese think we're repeating their mistakes, which resulted in zombie banks and a "lost decade."
Of the total, he calculates that American banks face half that risk, or $1.8 trillion, with the rest borne by other financial institutions in the United States and abroad.
At this point you might as well ruin the day for good. Read or reread the interview with Ray Dalio in this week's Barron's. Mr. Dalio was foresighted enough to achieve positive investment returns last year, so his warnings of a long, slow "D-process" carry weight.
O.K. That takes care of Friday the 13th. Head for the weekend knowing that anything you read or hear is bound to be cheerier.
Thursday, February 12, 2009
Mr. Harkin said he was particularly frustrated by the money being spent on fixing the alternative minimum tax. “It’s about 9 percent of the whole bill,” he said, “Why is it in there? It has nothing to do with stimulus. It has nothing to do with recovery.”
There was exactly one item in the "stimulus bill" that had any chance of braking those price declines, the $15,000 credit for buying a home. It could have pulled people back in the home buying market. Reportedly realtors around the country were e-mailing their prospects about it last week.
We'll never know if the credit would have worked. The Democrats cut the provision in Conference, even though it had widespread Democratic support in the Senate (I think it passed 70 - 30). They cut it, reportedly, to deny the Republicans credit for the idea, given that almost no Republicans supported the bill as a whole.
As I mentioned earlier, this is an utterly unserious approach to economic recovery. One begins to think that the Democrats believe if they prolong the pain for years, they can extend their political dominance for decades, as FDR did.
For an eye-opening comparison of Presidential responses to economic crisis, see Reagonomics versus Obamanomics in The Wall Street Journal.
Wednesday, February 11, 2009
Quants and professors of economics may claim Charlie has lost his marbles. That's O.K. At least he's annoying academia:
Perhaps real estate speculation did the most damage. But the new trading in derivative contracts involving corporate bonds took the prize. This system, in which completely unrelated entities bet trillions with virtually no regulation, created two things: a gambling facility that mimicked the 1920s "bucket shops" wherein bookie-customer types could bet on security prices, instead of horse races, with almost no one owning any securities, and, second, a large group of entities that had an intense desire that certain companies should fail. Croupier types pushed this system, assisted by academics who should have known better. Unfortunately, they convinced regulators that denizens of our financial system would use the new speculative opportunities without causing more harm than benefit.
Considering the huge profit potential of these activities, it may seem unlikely that any important opposition to reform would come from parties other than conventional, moneyed special interests. But many in academia, too, will resist. It is important that reform plans mix moral and accounting concepts with traditional economic concepts. Many economists take fierce pride in opposing that sort of mixed reasoning. But what these economists like to think about is functionally intertwined, in complex ways, with what they don't like to think about. Those who resist the wider thinking are acting as engineers would if they rounded pi from 3.14 to an even 3 to simplify their calculations. The result is a kind of willful ignorance that fails to understand much that is important.
His girlfriend, who helped him stage the "suicide," has pleaded guilty and will serve less than a year.
She'll probably be out before we know what happens to Bernard Madoff, who may be negotiating a plea bargain.
The bad news: higher audit rates.
And let me point out--it only preserves the status quo! It keeps in place the exact same rule we had last year, when we were losing all those jobs! It's been years since the AMT went unpatched. But every year we maintain the charade that by continuing to keep the same policy in place we are delivering a tax cut! No one's taxes will go down, no one will have more money to spend. What has happened is that a previously scheduled tax increase has been suspended. How is that stimulus?
Please, who thinks like this? Am I the crazy one?
You will know that Congress is getting serious about the economy when they repeal the AMT once and for all (it doesn't even affect the truly rich any more, its nominal target). Until then, it's just business as usual.
Even the obviously harmless word "elderly" is now off limits. You can use the word for groups ("a home for the elderly" is ok, if barely) but not for individuals ("an elderly woman" is now per se demeaning).
Who makes these rules?
Whose feelings are we trying to spare? Why?
Tuesday, February 10, 2009
$35 billion is just too darn much for American homeowners to be granted, so some sort of restrictions will be required to "lower the cost." We could also lower the cost by going back to the original assumptions, but that doesn't fit someone's agenda.
Not that I'm expecting to make use of the credit, or even know anyone who is. But I've heard, and I'd like a source on this, that for $800 billion we could actually pay off completely some 95% of all the home mortgages in America. Why isn't that the right way to go?
Monday, February 09, 2009
So if you walk into a crowded room of wealthy people, most will avoid your gaze and look vacantly into the middle distance to avoid getting cornered by salesman, gold diggers, aspiring “friends” and other hangers on. ***
But if they know you, the wealthy can be just as locked in and engaged–perhaps more so–than the every day Joe. To me, it is more a function of familiarity than income.
The question not posed: With that rotten track record, why should anyone ever believe investment analysts again?
Stay the same. As noted with approval on Freakonomics, President Obama is thought to still favor continuing the tax at this year's level: 45% of everything over $3.5 million.
Lower exemption. Some (many?) estate planners have warned clients that a populist backlash against "the greedy rich" could spur Congress to lower the $3.5-million exemption.
Higher exemption. At the 3% withdrawal rate favored by Tiger 21 members and other cautious wealth holders, a $3.5 million inheritance would give an heir less than $115,000 a year to live on. Even twice that amount won't allow you to live rich these days. See You Try to Live on 500K .
Saturday, February 07, 2009
How long ago that seems! The financial economy has collapsed, and the falling stock market has made off with much of the family wealth that Madoff himself did not.
Could that be a lucky break for heirs?
For the next decade of so, anyway, many heirs no longer face the trauma associated with "Too Rich For Their Own Good." Fate has demoted them to a healthier, happier category: "Rich Enough to Do Anything; Not Rich Enough to Do Nothing."
Maybe every cloud does have a silver lining.
Friday, February 06, 2009
Apparently Tiger 21 members also invested with Madoff on their own. Sonnenfeldt tells Frank that none went whole hog.
Note the comments to the Wealth Report post. Cap Gemini seems to expect the world millionaire count for 2008 to be about the same as the previous year. Frank is understandably dubious.
Thursday, February 05, 2009
Things are going better, we hope, for those selected community bankers of the year. I especially admired UMB CEO Mariner Kemper, the sixth member of the family to run that bank since a Kemper founded it almost a century ago. Mr. Kemper's banking strategy must have seemed strange to megabanks, but it appears to be working for UMB: "…lend to borrowers we have met … understand the loans we are making, and [don't] make them through intermediaries."
Marketing sidelight: Lately it's been fashionable to imagine banks as composed of sub-brands: AnyBank Credit Cards, AnyBank Mortgage, AnyBank Brokerage, Anybank Trust, etc. It becomes easy to imagine that a slip-up at one sub-brand matters not to the others. Wrong! In the public's mind, what happens in any part of the bank shapes the reputation of the whole.
That's true when there are slip-ups, and it's true when a bank gets good PR. If you were looking for a Midwest trust department, wouldn't you figure that UMB's is likely to invest prudently, just because its CEO is so prudent about lending?
P.S. Mr. Kemper is one example of a banker who probably deserves more than $500,000 a year!
Charlie Foxtrot asks when the pay cap will apply to athletes, who perform in taxpayer-subsidized stadia? What about actors and actresses who are paid millions even when movies flop?
Wednesday, February 04, 2009
Earlier I thought that the $500k cap would apply to top executives only (top 5, I thought it was), but the Times is reporting that no one at Citibank or Bank of America can be paid more than $500,000 unless the excess is paid in restricted stock (query: would that be currently taxable?). Even guys (and gals) who have been working strictly on commission. In other words, all the most talented people have to start looking for other jobs unless they can take a pay cut, but the less talented won't have to sacrifice. To each, according to his needs.
This is the another manifestation of the Ward Three mentality that David Brooks wrote about yesterday. That was one of his best columns in months.
Not clear to me that this is a winning formula. My father worked with a Smith Barney broker, with whom he was well satisfied, but that guy has already jumped ship. He must have seen the handwriting on the wall.
Say 10 million cars are sold this year (we're fantasizing, O.K.?) at an average price of $25,000. Total sales: $250 billion.Any resemblance to reality in the above is strictly coincidental. Still, maybe the $11-billion estimate isn't as far off as we thought.
Of that, say $200 billion is financed at 8%. Total interest paid for year: $16 billion.
At an average income tax rate of 20%, $16 billion in interest deductions would cost the Treasury $3.2 billion.
Now suppose all 10 million cars are subject to sales tax averaging 8%. (8% of $250 billion = $20 billion.) At an average interest rate of 20%, $20 billion in sales-tax deductions would cost the Treasury another $4 billion.
$4 billion + $3.2 billion = $7.2 billion.
Suppose we raise the assumed average income-tax rate to 25%. That would bring the "tax cost" for 2009 alone to $9 billion.
One thing for sure. To Jim Gust's charge of Congressional hypocrisy you can add an indictment for outrageous, ever-worsening complexity. Read Howard Gleckman's column at Tax Vox and weep:
The University of Michigan’s Joel Slemrod, estimates that it costs individuals $85 billion-a-year in time and money to prepare their taxes. Businesses spend another $40 billion. This is nuts.
What really caught my eye was the "tax cost" of the provisions: $11 billion. That seems awfully high to me, given today's low interest rates. I'd love to see their methodology sometime.
I haven't blogged about H.R. 1, the American Recovery and Reinvestment Act of 2009, because the tax provisions are surprisingly weak. A huge percentage of the "tax cut" is just another one-year patch to the AMT. I wonder that someone doesn't call politicians out on the hypocrisy of declaring every year that maintaining the status quo for one more year is a $70 billion middle class tax cut.
Tuesday, February 03, 2009
Even larger quantities of seconds really boggle the mind. Take 50 billion, the notional total of the dollars lost in Madoff's self-confessed Ponzi scheme.
How long is 50 billion seconds? About 1,585.5 years. Backtrack though that much human history and you're in 423, the year Roman Emporer Honorius died. Honorius was the first to reign over only the Western Roman Empire, and that was disintergrating fast. The Visigoths sacked Rome in 410.
Now consider one trillion seconds. (The stimulus package is around $900 billion and counting, so consider we must.) If one billion seconds amount to 31.7 years, one trillion amount to to 31.7 millennia. Go back 31,700 years and you find yourself in the Stone Age. You're probably a few centuries too late to meet an actual Neanderthal. So head for what is now the south of France and ask an early Homo Sapiens about local art exhibits. With luck, he'll direct you to the Chauvet Cave, containing remarkable drawings of horses and other animals. This scene shows lions hunting bison.
Wonder what would have happened if the Neanderthals had remained in the World Survival League. They appeared to have sizable brains. Would they have steered clear of synthetic CDOs?
Monday, February 02, 2009
"By Zeus," I thought, "that's wrong!"
As described in The New York Times, Zeus is a computer program that analyzes coaching decisions, seeking to determine which ones create the highest Game Winning Chances, or GWCs. Zeus says coaches tend to be too conservative for the team's good in certain situations, such as fourth and one:
Coaches routinely take the points by virtue of a field goal when a long drive stalls on fourth-and-short in the opponent’s red zone. This misguided decision is responsible for a disproportionate amount of squandered G.W.C. each season.With one minute to go last evening, the Steelers were trailing by three. The early decision to go for three instead of trying for seven looked disastrous. If Holmes hadn't grabbed a pass in the end zone with 42 seconds to play….
If so, will they still manage to win financial independence before falling into retirement?
Sunday, February 01, 2009
The other day Tom Gerrity mentioned in an email that the late Rene-Thierry Magon de la Villehuchet's membership in the Milford Yacht Club apparently led to a number of local investors losing wealth to Madoff.
Walter Noel's Fairfield Greenwich Group was one of the more prominent Madoff feeders, but it had plenty of company. Fairfield County's namesake town suffered losses in an employee pension fund through a feeder fund offered by MAXAM Capital Management LLC of Darien. (Now Maxam is suing auditors who supposedly vetted Madoff.) The town of Fairfield would like to haul Madoff to Connecticut and arrest him for fraud.
Former Merrill Lynch CEO's Daniel Tully and David Komansky reportedly got Madoffed through a fund run by former Merrill brokerage chief John "Launny" Steffens. J. Ezra Merkin, who ran three feeder funds, was Steffens' partner. Tully and Komansky are among the founders of Fieldpoint Private Bank in Greenwich. Fieldpoint's distinctive marketing pitch is, "members only."
The moral of the story? That could take years to sort out. What's already clear is how time and networking worked to Madoff's advantage. The longer Madoff operated, the larger his network of feeders, subfeeders and dupes, the more "authentic" he seemed to become.
Many investors are likely to be taking David Swensen's warning seriously: If you can't pick a good hedge fund manager, you sure can't pick a funds of hedge funds manager.