Wednesday, October 30, 2019

The most frightening woman in the world


By Maria Boroaroma
Wall Street Bureau

What's scaring you this Halloween?  Is it traditional holiday ghouls like witches, ghosts, skeletons, and the Trump Family?  Or is it bigger and realer threats, like coastal cities obliterated by rising sea levels, the collapse of our Republic, or the realization that Mark Zuckerberg knows what you did last night and he's selling that information every millisecond?

What terrifies America's plutocrats?
If you're a Wall Street finagler, none of those things scare you.  What does? 

The answer: the terrifying specter of President Elizabeth Warren.  Some of the most predatory plutocrats are now warning that if she becomes President, markets will collapse, cows will fall barren, crops will be devoured by locusts, day will become night, and they may have to pay up to 3% of their wealth each year in partial recompense of their colossal and colossally unearned good fortune.

Self-proclaimed Master of the Universe and long-time Wall Street finagler Paul Tudor Jones claims that a Warren victory could send stocks down by 25% “mostly because of concern over her proposed wealth tax.”

And what's the connection between a 2% tax on that portion of your pelf that exceeds $50,000,000 and a market decline (and 3% over $1 billion)?  Jones doesn't need to provide one.  He's rich and when you're rich you're surrounded by people who tell you're brilliant (this is known as “managing up”).   For those of us not named Andrew Ross Sorkin and thus not accustomed to lapping up whatever these self-righteous clowns spew out, we might ponder Jones's analysis for a second.

Why would a modest wealth tax cause prices to plummet 10 times more than the tax itself?  Would rich people stop investing if they could only keep say 80% (or 70%) of their winnings (assuming a normal equity market return of 10%)?  Why?  What would they do with their dough instead?  Put it up their nose?

Of course they wouldn't.  The rich, and institutional investors who wouldn't be affected by the tax, like mutual funds, ETF's and pension plans, will continue to invest.  Others will dart in and out of the stock market based on their judgment about the overall economy (likely to benefit quite handsomely from health care for all and a $2 trillion infrastructure stimulus) and the relative attractiveness of returns available in other asset classes (cash and bonds, not so hot; real estate, maybe better; commodities, wtf knows?)

By contrast, legendary Wall Street genius and man who was barred from money management for his failure to oversee compliance with securities laws at his former firm Steve Cohen thinks the drop will be only 15%.

In support of Jones's prediction though, Billionaire Leon Cooperman told CNBC earlier this month that the market would drop 25% if Warren or Bernie Sanders win.”  Leon Cooperman?  The name rang a distant golden bell.  We sent our interns into the library to find out who this guy was and this is what they came back with 23 milliseconds later (Thanks, Wikipedia!):

You're way off.
On September 21, 2016, Cooperman was charged with insider trading by the U.S. Securities and Exchange Commission.  He denied the charges.  Cooperman faced criminal charges in a related parallel proceeding and has asserted his Fifth Amendment right against self-incrimination before a SEC hearing. In May 2017 Cooperman's firm agreed to a $4.9 million settlement with the SEC. As part of the agreement, Omega Advisers admitted no wrongdoing. Following the settlement, Cooperman commented: "The process in my opinion was totally abusive. It's a problem that the government should address," and "My lawyers told me that the probability of my winning would be overwhelmingly high, that if I didn’t win it had nothing to do with the merits of the case,” he said. SEC officials declined to comment.

Sounds totally legit to us.

A more plausible argument heard on Wall Street is that Sen. Warren's ideas will be bad for the stock price of certain businesses, like private health insurance companies and other health-care parasites who take 15% or more of revenues to feather their own nests, while Medicare performs the same administrative work better for about 1.7%.  Shares of coal miners, oil drillers, gun makers, heavily leveraged banks, and other sterling corporate citizens might indeed head south if their business models, premised as they are on imposing whopping costs and externalities on the rest of us, run into something that looks like rational regulation.

Not even close.
But protecting the stock prices of drug and tobacco traffickers, fossil fuel generators, grifting loansharks (excuse us, payday lenders) and other malefactors of great wealth is not all that great a reason to leave us unprotected from their ills.  Dropping anvils on the heads of small children might do wonders for the market value of Consolidated Anvil but otherwise has little to recommend it. 

What scares the private equity finaglers especially is the knowledge that Elizabeth Warren is on to their con and might shut down the whole game.  Forcing these corporate bloodsuckers to limit their asset-stripping and factory-closing activities wouldn't harm the market; it would just cut down on the undeserved loot trousered by these heartless raiders, like the current junior Senator of the great state of, let's see where is he living now, Utah, Wilfred M. “Profiles in Courage” Romney.

Warren's proposals to, for example, make private equity raiders responsible for the pensions of the companies they buy and loot could well reduce their sacred Internal Rate of Return on investment by a  few percent.  Writ large, her focus on private equity might reduce the massive inequalities arising when viable businesses are bought, stripped, looted, and dumped and their jobs shipped overseas, all to enrich a tiny gang of grifters and their investors.

What Jones, Cohen, Cooperman, and the rest of the gang are worried about is not a 25% decline in the stock market, but a 25% decline in their own ill-gotten gains.  For years they have paid hundreds of millions to buy the United States Government and operate it as a wholly-owned subsidiary.  The Internal Rate of Return on their lucrative investment in Congress and the Republican Party has been massive.  Losing that trade would hurt these plutocrats a lot more than a 3% wealth tax.

No comments:

Post a Comment