6/22/2007

Hedge Funds, Conspiracies, and Goats

News for Those Who Wouldn't Care: The firm Blackstone Group LP raised 4.13 billion dollars today in the largest IPO in five years.

Ordinarily, you, me, or almost anyone that wasn't in investment finance wouldn't care, or even notice this headline amongst the other ignored Bloomberg ticker items. But, today's blog is different than all the other blogs because I also happened to be reading about hedge funds.

Recently I decided that I should become much more knowledgeable about economics. Sure, the uninterested pseudo-anarchist critique of capitalism will get one through a conversation over drinks, but if we're really going to start breaking them chains we're going to need a more materialist critique.

And boy/girl, have we certainly come a long way from Capital Vol. 1. Let's follow a little chain of ideas, shall we?

Now, Marx was groundbreaking for identifying and theorizing the concept of exchange value. Over-simply, one product is exchanged for another, creating an abstract unit of value that is "equal" to both. In a social marketplace this abstract quantification is money. Rather than the labor to make one hat being worth the labor to make two loaves of bread, now both are equal to five dollars. With five dollars you can get either a hat or bread, or you can be paid for making either of those things for someone else.

Or, you can collect 100 times those five dollars that you saved by selling the hats or bread you made, rent a building with a huge stove, buy a bunch of flour, and then pay other people a fixed rate to make loaves of bread. If you are clever enough to make more bread using your factory than all those people would make in the same time on their own, you can pay them the same that they would make selling their own bread, and keep the profit from the extra loaves of bread for yourself. Marx calls this surplus value, and it is the beginning of capitalism.

At this point, you can start playing with other options, like creating a brand to get a bigger market share, decreasing the quality of the product as much as possible without hurting margins or locking out or intimidating your workers to pay them less money, all for increasing profits. Alienation of labor, exploitation of workers, caveat emptor, etc.

But this is only the beginning. Marx totally did not foresee capital gains. Making money on the concept of making money, not only on the capitalization itself.

Everyone knows that you can invest in a company in the stock market. This is a market that sells interests in corporations; the product is a piece of the capitalization itself.

Then, once this becomes increasing complicated, you can give your money to a company that will "play the market" for you. Mutual funds try to sell you their investing, a product based on the manipulation of the products of making products.

And if you are a really big player, you can get companies to invest the money that you have stored after making it from all these schemes. These are called hedge funds, and are maybe the most recent incarnation of capitalism. Although probably invented in 1949 with the concept of "hedging" risk by combining investments, the current number of unregulated, limited-access, accredited investor only funds is unprecedented. Depending on the fund, a bank or a million-dollar plus investor can make 20%. Of course, there is still risk, and if the fund invests heavily in some market that tanks, like real estate or currency, you can still lose.

Which brings us to Blackstone. It is a hedge fund that turned around and offered public stakes in its overall company, different than the investors in the fund. The product is related to the product of producing products based on production. Holy crap. 4.13 billion dollars.

It is literally mind-boggling to conceive of all the ways to make money off of making money off of making money off of making money. The network is so big, there is no way to pull the plug anymore. Or even know where the plug is. WorldCom, Enron, those guys are only the dumb ones who get caught. What can the SEC even do at this point? In the hedge fund scandals of 2003, every major fund was found to be doing something improper. No one went to jail, there weren't even any convictions. They made some new laws, and there were some millions of dollars in settlements. What is 10 million dollars in a 4.13 billion dollar economy? A percentage, nothing more. The SEC is just another corporation, and it isn't even a good one. They really haven't identified a good business model. They are simply trying to surf the trends.

The potential for conspiracy is so rampant, that conspiracy is pretty much business as usual. If you aren't involved in a conspiracy, then you aren't in a good business. There are so many people in the world, so much money, so many organizations, power structures, combines, and pathways, that if you aren't exploiting some, then you are getting by on a subsistence economy. You aren't "making" anything anymore. Only consuming.

You have to really have your eyes open to any possibility of profit in this day and age. What can we finesse? What can we manipulate? What can we control that no one has even discovered the possibility of controlling, in order to gain the upper hand? Everyone does this, from the fast-food worker who snatches fries when the boss isn't looking, to the boss who snatches tips when the worker isn't looking. Of course, some people trust each other, but it is only so that they can do better than someone else somewhere else. Competition is the name of the game, and the name of the competition is the game.

The CIA really has the best mindset about this, I think. They aren't concerned by what is real and isn't, what is the law and what isn't. Going for the W, all about the win. I'm reading this book right now called The Men Who Stare at Goats, by Jon Ronson. It's about the CIA and Military Intelligence experimenting with new age and paranormal gurus in the effort to make super soldiers. Sure, why not? Maybe walking through walls and stopping goat's hearts with sheer will is impossible. If you want to be a superpower, you can not afford to not try and make super soldiers. What if someone else figures it out before you? Then you are fucked. And you better believe that US intelligence can afford to try and fail, what with more than half the government's money going to the military. Countries are just big corporations now. I think it is stupid when reformists try and argue that corporations are running the country. That's like being upset that a chairman of a corporation was once a CEO of another company. Of course! What sort of game do you think this is? Making money to make money in making money about money. Money isn't just the grease that makes the world go round anymore; it's the grease, the gears, the levers, the load, the ropes, and the chains. Is it true or false? How can a number be false? It can only be more or less.

If you know of any mutual funds whose plans include psy ops and telekinesis, let me know. I've got some money to invest, I'm just looking for the right product. I mean, market.

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