Goldman Sachs claims the Senate subcommittee's characterization of its subprime business was “sloppy and incomplete.” (Photo Credit: CC BY/Ludovic Bertron/Flickr)

Goldman Sachs Group Inc., the securities firm Sen. Carl Levin, D-Mich., once described as a “financial snake pit, rife with greed, conflicts of interest and wrongdoing,” is preparing to strike back. The Wall Street Journal reports that the firm plans to counter the Senate’s financial crisis subcommittee’s 639-page report, which alleges that Goldman Sachs sought to profit by betting against the housing market and betraying its clients. Reports indicate that Goldman’s defense will focus on what the company believes to be “sloppy math” on the part of federal regulators.

‘Sloppy math and incomplete analysis’

The Senate Permanent Subcommittee on Investigations went through tens of millions of documents disclosed by Goldman Sachs, yet the securities firm says in its defense that the Senate’s analysis was incomplete. Goldman Sachs has not denied that the firm profited from the subprime mortgage crisis as prices fell and borrowers defaulted, creating the big short. However, the firm believes data suggest the Senate’s numbers are inaccurate.

One document the Senate found particularly damning for Goldman Sachs was a chart that characterized the company’s net short positions against the housing market being as high as $13.9 billion on June 25, 2007. Goldman says that number appears artificially large when juxtaposed against the 2007 net revenue of $11.6 billion the Senate reported. Goldman claims its actual net revenue was $46 billion.

Insider trading, truthful and accurate

The WSJ reports that Goldman Sachs will use data on bullish mortgage trades to temper the opportunistic venom behind such numbers, data to which the Senate already had access but chose not to highlight in its report. Goldman argues that billions of dollars in bullish trades – as well as more than $5 billion invested in prime mortgage bonds – more than offset the subprime short bets.

Despite the fact that former Goldman Sachs corporate board member Rajat Gupta backed away from his position following allegations of insider trading, the firm maintains that its dealings with the U.S. government have been “truthful and accurate,” according to a company representative for CEO Lloyd Blankfein.

Goldman Sachs gambled more than $1 billion of Gaddafi’s money

Sources

The Atlantic Wire

Goldman Sachs

Wall Street Journal

Because investors equate lower payrolls with higher profits, the stock market historically performs better with higher unemployment. Image: CC Davic C. Foster/Flickr

Stocks rose on the jobs report released by the Labor Department Friday. Job creation in the last two months is the strongest it has been since before the recession. But the market’s current response to a positive jobs report is unusual, and stocks could fall again if the labor market continues to improve.

First quarter gain for stocks and jobs

The U.S. unemployment rate dropped from 8.9 percent in February to 8.8 percent in March, the lowest rate in two years, according to the Labor Department. In response, stocks rose across the market. The Dow Jones Industrial Average rose 87 points to 12,406, a 0.7 percent gain and a new high for 2011. The Standard & Poor’s 500 rose 10 points to 1,335, a 0.8 percent gain. The Nasdaq composite rose 15 points to 2,796, a 0.6 percent gain. Payrolls at U.S. companies increased by 216,000 workers in March after a 194,000 gain the month before. The unemployment rate has been dropping since it was 9.8 percent November, the biggest four-month decrease since 1983. U.S. stocks surged 5.4 percent in the three months ending with March for the biggest first-quarter gain since 1998.

The counterintuitive relationship between markets and labor

Normally companies announcing layoffs benefit on Wall Street because investors believe smaller payrolls equal higher profits. When the labor market was hemorrhaging jobs in January 2009, the stock market gained. In fact, in the past 60 years the stock market has performed better on average when the U.S. unemployment rate was higher rather than lower. According to Ned Davis Research, the S&P 500 mustered an average annualized gain of 13.5 percent when the unemployment rate was above 6 percent. When unemployment dipped to 4.3 percent or below, the S&P 500 managed just a 2.1 percent gain on average. In January 2009 Ed Clissold of Ned Davis Research told MarketWatch that in addition to lower costs and higher profits, traders salivate at high unemployment because it means they will benefit from economic stimulus provided by the federal government. Traders may also believe that by the time unemployment news hits the streets, stock prices have already been affected by job cuts and shares can be flipped for profit if they rise.

Traders hope job news doesn’t get too good

Stocks may have surged on Friday’s good labor market news not because unemployment has dropped but because it hasn’t dropped too much. Traders myopically chase short term gains and don’t consider long-term strategies. In the current environment, many of these traders believe the stock market has been propped up by the Federal Reserve bond buying program known as QE2. Some of them, especially those in the fixed-income market, worry that if the labor market gets too strong, the Fed will quit buying bonds after QE2 is slated to end in June, and the gravy train will stop. As the return of record profits and bonuses on Wall Street while average Americans have struggled has shown, what’s good for stocks isn’t necessarily good for the country. If more Americans keep finding work, the markets could change their tune.

Sources

Associated Press

MarketWatch

CNNMoney.com

Wall Street pay is rising fast, while taxpayer salaries are stagnant or sinking. (Photo Credit: CC BY-SA/dforian 1980/Flickr)

Total compensation and benefits for publicly traded Wall Street banks and securities firms hit a record of $135 billion in 2010, a 5.7 percent increase over 2009, reports the Wall Street Journal. While more salary is deferred than before, the increase in base Wall Street pay more than compensates.

Wall Street salaries a ‘Get Out of the Recession Free’ card

The Wall Street Journal’s survey of 25 large financial firms that posted full-year results reflected a significant revenue rebound. Overall, revenue reached a record $417 billion. That 1 percent increase is a sign that things are getting back on track for the recipients of taxpayer-funded bank bailouts.

“Things are shifting back to where they were before,” said corporate law professor J. Robert Brown of the University of Denver.

But not everything will be the same. Federal regulation and pressure from shareholders have changed the culture of the Wall Street pay. Criticism over large Wall Street bonuses was impossible to ignore. In 2009, one-third of Wall Street salaries were delivered in manner that allowed them to be deferred. However, as New York pay consultant Alan Johnson of Johnson Associates Inc. estimates, half of Wall Street salaries were deferred in 2010.

Wall Street revenue drives record salaries

Wall Street pay is driven by what is known as the compensation ratio, the percentage of total revenue that Wall Street directs to employees. The average Wall Street salary was up by 3 percent (to $141,000), and the compensation ratio reached 32.5 percent last year. Deferred or no, those are hard numbers for the average U.S. taxpayer to swallow, considering that salaries off Wall Street have stagnated and consumers are looking to short term credit like installment loans to make up for deficiencies in pay.

Runs on hiring Wall Street executives have also contributed to the higher overall salary level. Investment bank Greenhill & Co. increased salary by 16 percent to $159.9 million after a three-year hiring binge. This occurred despite a less than impressive fourth quarter last year. Meanwhile, top executives such as Bank of America’s Brian Moynihan and Goldman Sachs’ Lloyd Blankfein received huge raises. Moynihan’s 2010 salary was 67 percent higher than the previous year, while Blankfein tripled his salary and received a stock-based raise of 40 percent.

Sources

Reuters

Wall Street Journal

‘It Takes a Pillage’ to pay Wall Street

A proposed compromise with Republicans by the Obama administration trades extending the Bush tax cuts for an unemployment extension. Image: CC blves boy/Flickr

A tax compromise announced by the Obama administration Tuesday features both an extension of Bush tax cuts and a  federal unemployment extension. Wall Street gave the tax compromise a resounding approval, approaching stock-market highs not seen since the brink of the financial crisis. However, politicians on both sides of the isle vowed to do everything in their power to scuttle the deal.

What the tax compromise is all about

The tax compromise outlined by the Obama administration is a proposal that extends the Bush tax cuts for all tax brackets another two years. The Bush tax cuts are scheduled to expire Dec. 31. The federal unemployment extension would last for one additional year. Other parts of the tax compromise include renewing the estate tax at a lower rate, which Congress allowed to lapse in 2010 and that Republicans want to end permanently. Instead of extending the Stimulus Act income tax cut that Republicans wanted, the tax compromise proposed a payroll tax cut that reduces Social Security contributions from 6.2 percent to 4.2 percent.

Markets surge on hint of bipartisanship

The Obama administration tax compromise was given credit by analysts for a stock market surge Tuesday that pushed Wall Street to highs not known since the September 2008 collapse of Lehman Brothers plunged the U.S. into an epic financial crisis. The tax compromise hasn’t yet been approved by Congress, but the certainty it promises infused more confidence in the stock market, which is coming off a strong November. As riskier investments like stocks become more attractive, the price of bonds fell while their yield rose. News of the tax compromise fuels a recent resurgence in U.S. markets that defies the fear in global markets over sovereign debt in Europe.

Politicians leave their blinders on

Despite positive reaction in the real world, extremists in Congress are vowing to contest the tax compromise. Comments from liberal Democrats about the tax compromise ranged from “a moral outrage” to “an absolute disaster.” Bernie Sanders, D-Vt., has vowed to filibuster the legislation. Right wing Republicans groused at the prospect of the Obama administration getting anything it wanted in the deal. Michelle Bachmann, R-Minn., told Fox News the GOP would not support an extension of federal unemployment benefits, even as more than 2 million jobless Americans are set to lose them Dec. 31.

Sources

Christian Science Monitor

Fox News

New York Times

Benlysta gives hope to people with Lupus, such as Lada Gaga, but Wall Street isn't so impressed with the drug's profit potential. Image: Wikimedia Commons

Human Genome Sciences has been developing a drug called Benlysta for the treatment of Lupus, a painful, deadly disease. Benlysta has been in trials conducted by the Food and Drug Administration to determine whether the drug is safe and effective. Benlysta has given people with Lupus hope, and the FDA appears to be on the verge of approving the drug. However, Wall Street downgraded Human Genome Sciences’ stock because people with Lupus won’t be charged as much for Benlysta treatment as investors had hoped.

Human Genome Sciences and Benlysta

Human Genome Sciences stock was downgraded Wednesday because sales revenue for Benlysta may not be as lucrative as they had once assumed. MarketWatch reports that analysts at Citigroup and Bank of America cut their stock-price targets for Human Genome Sciences before trading commenced. While Lupus sufferers wait in anticipation for potential life-saving relief, fearful investors worry about how much money they can make. Bank of America Analyst Rachel McMinn told MarketWatch that information provided by an FDA panel Tuesday “underscored concerns that Benlysta will have a smaller than expected role in lupus treatment.”

Good news for Lada Gaga

Human Genome Sciences’ Benlysta will be the first new treatment for lupus in 50 years. About 1.5 million Americans have Lupus. Lada Gaga may be the most prominent of them. Lupus tricks the body into attacking itself. Symptoms include skin rashes, aching joints and inflammation of vital organs. Current Lupus treatments come with serious side effects. Patients often have to choose between suffering from either Lupus or the side effects from treatment. There is no cure.

Bad news for Wall Street

In a one-year FDA study people with Lupus given Benlysta had greater improvement than people given standard treatment. However, the drug loses some of its effectiveness after the first year. This result has led McMinn to lower her estimate of Benlysta treatment from $40,000 per patient to $35,000. She downgraded Human Genome Sciences to “underperform” from “buy” and cut the price target from $33 a share to $24. A Citigroup analyst told MarketWatch that global sales for Benlysta, which investors had hoped would reach $2.6 billion by 2015, are now only expected to reach $1.6 billion.

Sources

MarketWatch

WebMD

CBS News

Black Swan author Nassim Taleb, who writes about improbable events like Wall Street's Flash Crash, was actually linked to last week's mass selloff. Flickr photo.

Black Swan is the title of a book that examines stuff no one thinks can happen, but does — like last week’s high speed trading meltdown of the Dow Jones Industrial Average. Nassim Taleb, author of “Black Swan: The Impact of the Highly Improbable,” describes the rise of the Internet and the September 11, 2001 attacks as examples of Black Swan Events. In Black Swan, Taleb’s argument is that since Black Swan events cannot be predicted, society should at least try to practice policies that may minimize the damage of events, like the Wall Street flash crash, when they do.

Wall Street’s Black Swan

Various media are calling last week’s stock market flash crash a Black Swan event. And in an interesting coincidence, The Wall Street Journal reports that a hedge fund Nassim Taleb advises made a big stock market bet that may be related to the near-catastrophic market selloff, when the Dow dropped nearly 1,000 points in a matter of minutes. In lieu of fast cash loans, Universa Investments LP purchased 50,000 options that would pay off if the stock market dropped off a cliff. According to the Journal, the buy may have contributed to the panicked selling. Investors were already running scared because of the Greek debt crisis, so all it took was one big bet on failure to send them running for the exits. High speed trading made them trample each other on the way out.

Black Swan author Nassim Taleb speaks

Black Swan author Nassim Taleb showed up on CNBC Wednesday to talk about the Wall Street Journal’s Black Swan theory and the flash crash. He dismissed the link between himself and Universa’s Wall Street gamble. “I don’t know anything about Thursday’s event,” he said. “I don’t have enough facts to say whether the collapse was a Black Swan event.” Taleb said things have changed for the worse since he quit everyday trading a year ago. His sentiment:

The world is vastly more fragile than it was when I left it. The crisis of 2008 was caused by debt, hidden risks and irresponsible risk management. We have more debt, more irresponsible risk management and a lower tax base and more hidden risks.”

The Black Swan surprise

Black Swan wasn’t coined by Nassim Taleb. The term has been around since ancient times to describe improbability. Swans are almost always white, but every now and then a black one is hatched for no apparent reason. Taleb uses the term to focus on the markets. In “Black Swan: The Impact of the Highly Improbable,” he seems to predict a global financial collapse. Taleb states that the globalization of the financial markets has created that threat. When one financial giant fails, the rest fall like dominoes.

The next Black Swan: predicting the unpredictable?

Taleb says that Black Swan events, given their unpredictability and improbability, cannot be prevented. But he appeared to have the ability to see into the future when he listed “Ten Principles for a Black Swan-proof World” in the Financial Times last year. But it may be too late for markets, governments and the public at large. On CNBC Thursday, he said the government should shoot for a surplus — definitely a Black Swan event. He also said the worst may be yet to come. To paraphrase:

The U.S. is going to have $5 trillion to $6 trillion to borrow in the next 10 years. It’s going to be competing with European governments and corporates. One day, you’re going to have a bad auction. And that day will be the start of something new.

Wall Street panicked as the stock market tanked during chaos triggered by a combination of investor fear and high speed trading. Flickr photo.

Wall Street breathed a little easier and the end of trading Thursday. The Dow Jones Industrial Average finished the day down only 348 points. Earlier in the day the stock market dropped like a rock — 1,000 points and nearly 700 points during one panic-stricken stretch. On Friday Nasdaq canceled the trades of 296 stocks that fluctuated most. It turns out that a toxic combination of algorithmic, or high speed, trading and fearful investors may be the culprit.

High speed panic on Wall Street

A Wall Street system to prevent what happened to the stock market Thursday may have actually caused it, thanks to high speed trading. When a stock price falls rapidly the number triggers a “circuit-breaker” that briefly halts New York Stock Exchange trades on it. CNN Money.com reports that at about 2:45 p.m. on Wall Street, shares of Procter & Gamble fell 10 percent. The circuit-breaker stopped NYSE trading on it for 80 seconds. Meanwhile the stock was in high speed play on other exchanges.

How does high-speed trading work?

The NYSE, down about 400 points, took a breather on P&G, Accenture, Boston Beer Co. and others. Meanwhile, investors afraid that the Greek debt crisis would leave them in need of faxless payday loans were clamoring to sell. How does high-speed trading work? Automatic programs in computers on other exchanges like Nasdaq began issuing tiny orders every millisecond. The computers found no offers to buy for the stocks that had hit their NYSE circuit-breaker. High-speed trading software seeking best offer saw the best bid as $0.  The high-speed trading computers, with greed in mind, are designed to add a penny to each trade to make a commission on every deal. The high-speed trading software placed millions of bets at 1 cent. Many stocks traded all the way down, triggering a massive sell-off.

High speed trading crackdown?

The computer-driven panic on Wall Street Thursday has people calling for a crackdown on high speed trading. Reuters reports that the massive sell-off that pushed the stock of highly regarded companies into a tailspin highlighted concerns that regulators can quickly lose control of the markets in the world of high speed trading. Democratic senators Edward Kaufman and Mark Warner said Congress needs to investigate the causes of the market plunge, which at its deepest point wiped nearly $1 trillion off equity values.

What is high speed trading?

On Wall Street, high speed trading has caused average daily volume on the stock market to explode. The New York times reports that powerful computers enable high-speed traders to transmit millions of orders at lightning speed and reap billions at everyone else’s expense. Stock exchanges say that a handful of high-speed traders account for a more than half of all trades.  What is high speed trading? It’s a bunch of computers that are so fast they can outsmart or outrun other investors, man or machine. It also appears they can outsmart and outrun themselves.

The U.S. Capitol Building. Image from Wikimedia Commons.

An amendment to the financial reform bill, which has been in the spotlight lately, has passed the Senate by an incredibly wide margin.  Included in the amendment are protections that preclude taxpayers from bearing the brunt of the expense of helping huge firms that go down in flames. The amendment to the bill passed 93 to 5, which means the changes made to the bill are things both parties are satisfied with Usually, the only bill that passes that quick is a vote to give legislators more payday cash.

Financial reform bill amendment passes Senate

The Senate voted 93 to 5 for the financial reform bill amendment, and lawmakers spent weeks collaborating to come up with regulations that made both sides of the aisle happy.  The amendment, according to CNN, was co-written by Sen. Chris Dodd (D-CT) and Sen. Richard Shelby (R-AL), and only five Senators didn’t vote for it, 2 of which didn’t vote at all.

Too big to pay for

One of the changes that the amendment to the financial reform bill makes is that it places a tax on banks if any bank were to fail in the spectacular manner as several did during the Wall Street collapse.  The previous version would have taxed banks to create a $50 billion emergency fund for failing banks.  The new version still places the burden on investment banks if anyone of their number should fail as badly as they did in this last recession.

Regulatory reforms

There are numerous impacts the financial reform bill amendment would make. The new bi-partisan version of the bill allows the Federal Reserve to lend only to banks that need credit, but otherwise aren’t insolvent.  The FDIC would have to get Congressional approval before paying or guaranteeing any bank debts.  The amendment would also ban from the industry any bank executive or director who engages in illegal or otherwise illicit activity. Also included are new rules that would allow the government to recoup any over-payments on bank debt. In other words, say the government assists a failing bank, but pays a creditor more than they would receive in a bankruptcy.  The government would get the remainder back.

So far, so good, but so what?

At this moment, it’s only an amendment to a bill.  The financial reform bill is not close to passing yet, and it will be weeks before it’s ready to go to the House, never mind the President’s desk. The financial reform bill still has a long road ahead of it.

The Cooper Union Foundation Building, where the Obama Wall Street speech took place. From Wikimedia Commons

As the financial reform bill is starting to make its way through Congress, President Obama went to Cooper Union College to speak, and the Obama Wall Street speech was full of requests for cooperation and change.  He asked for the Volcker Rule to be reinstated and implored Wall Street to cast off its  insular nature and mind the connection it has to the rest of the American economy.  A lot of people have been sent running for a money lender or to the unemployment line because of financial mismanagement.

Obama Wall Street address calls for reform

The Obama Wall Street address at Cooper Union College was attended by many Wall Street luminaries, and a full transcript is available from Reuters.  He called for common sense reforms and to curb the influence of lobbyists on regulatory bodies.  He also took Wall Street to task for being irresponsible.  He suggested some specific reforms were needed: the public needs more insulation from too-big-to-fail firms, greater transparency, more consumer protections and greater controls for shareholders.

Volcker Rule

Part of the financial reform bill is the instituting of the Volcker Rule.  Named for former Federal Reserve Chairman Paul Volcker, the Volcker Rule is a proposed rule that would prohibit banks from certain kinds of trades or investments that aren’t on behalf of their customers, or from other kinds of risky trades. Critics have declared regulations would stagnate industry growth, but Obama countered that “unless your business model depends on bilking people there is little to fear from these rules.” (From USA Today.)

Defending and decrying bailouts

Included in the Obama Wall Street speech was a defense and denunciation of the bailouts.  The President maintained that bailouts were made because the risk of not doing so would be greater than doing nothing.  At the same time, he also said that “the American people should never have been put in that position in the first place.” He staunchly denied the notion that further bailouts would be on the table, as he made it clear that greater insulation from gambles on the market was needed.  The President clearly doesn’t want to give Wall Street another huge cash advance from the taxpayers.

Financial Reform bill passes the House

The financial reform bill, the features of which were part of the Obama Wall Street speech, has passed the House of Representatives, and a Senate bill is due out soon.  Republicans, and some Wall Street impresarios have opposed it, while others have said it won’t provide the right kind of reforms.

We all want to hear good news; it’s human nature. Perhaps that’s what the Obama administration and current Federal Reserve leadership are playing off of as they paint a picture of America’s economy in real recovery. But the reality is that many things still could go wrong before we’re out of the woods. Your payday loans bloggers finds this opinion piece in the Nieman Watchdog to be interesting, so he will summarize the top 7 for your economical viewing pleasure. Here are your top 7 signs that the economy could still mess up, friends!

1. The middle class is disappearing – People are feeling better about their 401(k)s lately, but homeowners are still struggling with negative equity. Not only that, but they borrow $.25 to $.30 for every $1 equity increase. Since home prices are still way down, middle class homeowners are largely still up the creek, and millions more are living paycheck-to-paycheck, according to Harvard Professor Elizabeth Warren.
2. You want this recovery done WHEN? – Ben Bernanke says the signs of recovery are already there, but there are people who fear that’s just a result of the massive stimulus package. A Washington Post column asserts that “The surprising strength of the bounce-back testifies to the wisdom of the underlying strengths of the U.S. economy and the success of the policies, but is likely to peter out as the stimulus begins to wear off and the inventory correction is completed.”
3. We may only be putting on a band-aid – Obama has even said this himself. Stop adding to the debt, he says. But the Watchdog columnist worries about a lack of demand. Credit and housing used to be America’s big economic growth areas. Now what’s going to get people (investors) excited? People are still holding on to their money, says Nobel laureate economist Joseph Stiglitz. No spending could mean a double-dip of recession.
4. How would we dig out of another recession? – Interest rates have already been lowered; zero percent is not a possibility for the Fed. Would bailout and stimulus money be there again, after how unpopular Obama’s plan was the first time around?
5. Throwing away the crutches too quickly – New York Times columnist Paul Krugman notes that President Roosevelt and the Fed were a bit too hasty when they declared an end to the Great Depression in 1937. They jumped back on the reducing the deficit wagon before the wheels were secure, and the wagon lurched off the road again for a while.
6. Pumping the system could be what has stocks up – And how long will that last? Foreign investors swooping in on the weak dollar helped, as have nearly zero-interest loans. But there’s no solid sense that this will continue, says the Watchdog.
7. Wall Street hasn’t been slapped hard enough – Which could mean they’ll have every intention of playing their games again. Obama may have called Wall Street a Ponzi scheme, but they’re still wearing their “too big to fail” pants. The president’s stance toward banks has now become less aggressive, leaving the door open for a repeat performance of much of what got us into trouble in the first place. On CNBC, economist Simon Johnson admitted that it will be “exciting” to see whether America can have back-to-back financial crises.

Does that sound exciting to you, payday loans blog readers?

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(Photo:fr.wikipedia.org)

This recession has put the proverbial shackles on the aspirations of people both rich and poor. The availability of credit is still moving at the pace of a slow crawl, while consumer spending is still searching for a way to pick itself up off the floor. But of course, it won’t truly be able to do that until the question of job security becomes less a hot button and more background scenery. Until money and credit begin flow as they did 10 years ago, the stock market will continue to show only modest gains at best. People are looking for help, whether it is the temporary assistance of cash advance loans or the more permanent change in which wages actually begin to keep pace with inflation.

Most of know just how the recession has taken a bit out of our finances. But did you know just how much even those who would have been “untouchable” have been hurt by the downturn? A recently New York Times articles takes a look at John McAfee, founder of the software company that produces McAfee Antivirus. His $100 million fortune has dwindled by an astounding 96 percent. Sure, that still means that he’s worth about $4 million and won’t need a cash advance, but what a drop!

“Horrific news”

Yes, Gawker jests when they call this “horrific news,” brought to us by “those tireless chroniclers of the plight of the rich, the New York Times,” but this cautionary tale does give us some idea of just how far America’s economic dealings have run aground. The number of super-rich in the United States may just be at its ebb tide. Yes, there are those who have already recovered to their pre-recession salaries, but there are many more that have not.

John McAfee is certainly not one of those who have recovered. He founded his company in the late 1980, and then sold his stock a couple of years after the antivirus giant had its initial public offering on Wall Street. He made $100 million in the deal, and he went on to invest much of it in real estate and bonds through the Lehman Brothers brokerage. At the time, it seemed like a great way to keep his fortune safe. Everyone in his income tax bracket was doing it.

Then the bubble burst

And John McAfee’s real estate holdings dropped in value like crazy. A 10,000-square-foot home in Colorado with a view of Pike’s Peak cost him $25 million to buy and build. In 2007, it sold for only $5.7 million. Then Lehman Brothers went belly up and his bonds were suddenly worth pennies on the dollar. Other stock investments cost him millions more in lost revenue.

Wait, there’s more. John McAfee has sold his 10-passenger Cessna and now flies like the rest of us. I wonder if he used the JetBlue unlimited pass when he went to visit his Hawaii oceanfront estate for the last time. That estate is gone too. It sold at auction for $1.5 million (much less than he paid for it), and there were only a handful of bidders. Apparently the former antivirus software mogul is going to high-tail it to Belize, where tax laws are more favorable to sinking millionaires like him.

What’s in store for John McAfee?

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Let’s be realistic. I’m sure he’s going to land on his feet in Belize just fine. However, he’ll have to make do with much less than before. We who get cash advance loans when we need a cash advance will surely weep for him, particularly after ANOTHER estate (this one in New Mexico) goes up for a no-floor auction. In other words, no matter how low the top bid is, John McAfee has agreed to accept.

(Photo: glyphjockey.com)

I bring all of this to your attention not because John McAfee deserves a pity party. I’m sure he was aware that he was taking some risks with his money, and he certainly isn’t hurting with $4 million left over and likely a nice home in Belize. What I’m saying is that we can no longer allow the game players who manipulated the levers and knobs of the U.S. economy to carelessly speculate with our money. They walk away with something left over, but what of the less sophisticated investors? Like Tommy Wilhelm in Saul Bellow’s “Seize the Day,” they’re left with nothing. Financially, it’s a perpetual funeral.

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