Rajat Gupta is now a “Real Player”

Rajat Gupta friends and associates recounted in several article as to why he did what he did, in that for whatever reason he wanted to be in their words a “Real Player”.

Congratulation Rajat you are now a “Real Player”, and like all “Real Player” you now have a rap sheet, with 4 Felony convictions, and not just any Felony Convictions but Federal Felony Convictions, you have arrived in the big league, way to go big fella, you are off to one nice start on the road to being a “Real Player”.  Now you get to spend a little time in stir (it just adds to the mystic of being a “Real Player”), do not worry a “Real Player” like you can do 24 months on standing on your head, and you just might spend some of it on your head so for gosh darn sakes be careful.  The 24 months gets you a minimum-security facility according to the Federal Correction Facilities guidelines (Lucky You, the Judge did you a favor, and you should write him a thank you note).  The bad news is there is no parole from federal prison (You can thank your Congressman and Senator for that feature).

You get to report after the first of the year, “Real Player” get taken from the courtroom to the holding cell to the bus, to the facility. (Again you should write the Judge a thank you note)

Compared to your life now it will be really bad, but you can take it after all you are a “Real Player”.  To an individual who has been to either a medium, high security, or maximum Security they will not look at you as a “Real Player”, they will look at you as having only played in the Class A league.  Medium Security being Double A, High Security as Triple A, and Maximum Security as the Big League.  But remember all of the leagues keep score and they all play for keeps.

Rajat just a little note “Real Players” do not whine, the guards do not like it, and guess what the other “Real Player” really hate it.  Every freaking day will be Ground Hog Day, get use to it, cause after all you a “Real Player”.  Your time is their time.  The food selection sucks, but not as bad as the food sucks, hopefully someone puts money into your account so that you can get stuff from the commissary (Note selection here is also very limited).  Who can visit you and when they can visit you and how often they can visit you, how long they can visit you will not be in your sphere of control.  “Real Players” do not have control.

Early Release, the good news is that it possible, the bad news reduction is minimal (Again you should take a moment to thank your Congressman and Senator for this feature of the Law).  If your sentence is greater than 1 year but less than life, you already might be a winner, in that if you keep your nose clean, they might take 54 days off your sentence (So one full year of good behavior is only worth 54 Days, what a system).  It does not appear that any additional time off can be earned for that last year of your sentence, but you could lose any and all “good time” by even the most minor of offenses in that last year.

When you get out you will be something really special, it is called “unemployable”, because you are now a CONVICTED FELON, but given your age that may not be an issue.  When you get out it will be spooky.

You will have to be careful with who you hang out with especially during your supervised time after your release, given that hanging with other convicted felons is not acceptable for you or them.  Do not worry about holding any type of state issued professional licensed because that is not going to happen because you are a CONVICTED FELON.  Do not worry about getting any type of position where you have to be bonded, cause you are a CONVICTED FELON.  Forget about voting, because you are a CONVICTED FELON.

I am not sure if it has really hit you already, but I know it will hit you one night in your first week, that it really sucks to be a “Real Player”.  To have climbed so high and to have fallen so far it is a sin.  Your real test will not be prison; it will be what you do with the time God has given you after you leave prison.

How much money did you make today how does it compare to the Presidential Candidates? Or not so much fun with numbers

I do not know what started me down this path, but it would not let me go.  In this little exercise of basic mathematic we will take Barack H Obama, and Willard M Romney (Order of citation determined by alphabetical order of last Name) Income Tax Number as reported by each candidate, and see what we can see.

The Candidates Data

2010 reported Adjusted Gross Income Barack H. Obama $1,728,096.00 Dollars. Charitable Contributions $245,075.00 Dollars, Federal Income Tax paid $416,734.00 Dollars

2011 Reported Adjusted Gross Income Barack H. Obama $789,674.00 Dollars, Charitable Contributions $172,130.00 Dollars, Federal Income Tax paid $162,074.00 Dollars.

2010 reported Adjusted Gross Income Willard M. Romney $21,661,344.00 Dollars, Charitable Contributions $2,983,974.00 Dollars, Federal Income Tax paid $3.009,766.00 Dollars

2011 Reported Adjusted Gross Income Willard M. Romney $20,901,075.00 Dollars. Charitable Contribution $$4,020,572.00 Dollars, federal Income Tax paid $3,226,623.00 Dollars.

The First Pass

In 2010 after taxes and charitable contributions Barack H. Obama was left with $1,066,287.00 Dollars or $2,921.33 Dollars per Day.

In 2010 after taxes and charitable contributions Willard M. Romney was left with $15,667,604.00 Dollars or $42,924.94 Dollars per Day.

In 2011 after taxes and charitable contributions Barack H. Obama was left with $455,470.00 Dollars or $1,247.86 Dollars per Day.

In 2011 after taxes and charitable contributions Willard M. Romney was left with $13,653,880.00 Dollars or $37,407.89 Dollars per Day.

The Second Pass

In 2010 Willard M. Romney took 24.84 days to make what Barack H. Obama made in 365 days.

In 2011 Willard M. Romney took 12.17 days to make what Barack H. Obama made in 365 days

The Third Pass

How does it compare to the averages?  The most recent averages I could locate were for 2008.  In 2008 John Q. Average Adjusted Gross Income, $58,006.00 Dollars. Charitable Contributions $4,412.00 Dollars, Federal Income Tax paid $7,242.00 Dollars (note see the below discussion as to how these number were developed).

In 2008 after taxes and charitable contributions John Q, Average was left with $46,352.78 Dollars or $126.99 Dollars per day.

For the sake of argument agree that these number are going to be in the ballpark (+/- 10 Percent) for 2010 and 2011, in other words they are not going to change by an order of magnitude.

In 2010 Willard M. Romney would require only 1.079 Days to make what John Q. Average made in 365 days.

In 2010 Barack H. Obama would require only 15.87 Days to make what John Q. Average made in 365 days.

Fourth Pass

We could flip it around the other way.  John Q. Average would have to work 338 days to make what Willard M. Romney made in 1 day in 2010.  John Q. Average would have to work 23 days to make what Barack H. Obama made in 1 day in 2010.

End of the Trail

These are just numbers and simple calculation done by a simple old man what you do with them is up to you, what if any conclusions you draw from them are entirely up to you.  They are just something to think about.

(How John Q. Average numbers were developed for those who are interested)

The latest data I could find is available from the United State Government is “The 2012 Statistical Abstract, The National Data Book” link below

http://www.census.gov/compendia/statab/cats/federal_govt_finances_employment/federal_individual_income_tax_returns.html

In particular reports number 488, “Individual Income Tax Returns—Number, Income Tax, and Average Tax by Size of Adjusted Gross Income” and number 489” Federal Individual Income Tax Returns—Selected Itemized Deductions and the Standard Deduction”.

The most current reporting period is for the year 2008, but it should be close enough for practical purposes in this comparison. (I do not anticipate an order of magnitude change between 2008, and or 2010 and 2011.)

In 2008 there were 142,450,569 tax returns filed in the United States (That in it self is a pretty amazing number), the aggregate reported AGI was $8,264,000,000,000.00 Dollars for an average of $58,006.00 Dollar per return filed.  In 2008 a total of $1,031,580,923,000.00 Dollars of Federal Income taxes was reported as collected.  In 2008 there was an average of $7,242,00 Dollars per tax collected for each return filed.  Finally in 2008 a total of 39,200,000 tax returns were filled with itemized cash charitable contribution (Again an amazing number).  A total of $172,936,000,000.00 dollars of charitable contributions were reported on these filed tax returns, or $4,412.00 Dollars of Charitable Contribution per file tax return with an itemized charitable contribution.

Goldman Sachs were nearly 40 Percent of the employees are Vice Presidents

The Bloomberg article http://www.bloomberg.com/news/2012-10-18/greg-smith-quit-goldman-after-unrealistic-pitch-for-1m.html

The article on Greg Smiths resignation and it’s famous Muppet contained pretty much what one would expect from the offensive in Goldman Sachs rebuttal campaign, but the little jewel I found in the story was that it reported that Goldman Sachs has 13000 vice presidents.

This is a pretty amazing fact.   Yahoo profile for Goldman Sachs reports they have 34700 full time employees ¹.   This makes the statement on the number of Vice Presidents not only amazing but also absurd and bizarre.  Imagine that nearly 40 percent of all Goldman Sachs employees are vice presidents to be fair to Goldman Sachs it is only 37.5 percent, who wants to quibble over 2.5 percent.  Sounds likes too many chiefs and not very many Indians, maybe that might be part of the problem with Wall Street, or at the very least that might be part of the problem with Goldman Sachs.

13,000 vice presidents would explain why the senior management had no idea of who Greg Smith was when he left the firm.  So if someone were to say that they were or are a vice president of Goldman Sachs, your response could or should be “I thought nearly everyone who is employed by Goldman Sachs is a Vice President”.   It would appear that Vice President is some sort of entry-level position at the firm, what a snow job.  It is another indication that the emperor has no clothes.  The pathetic part is that we buy into to this dribble.

Mr. Smith request for a salary of 1 Million Dollars a year could be taken as prima facie evidence of his delusional mental state and possible sanity  (paranoid/schizophrenic, narcissism, and greed (ok greed is more of a sin than a psychiatric disorder, but you get the picture) at the time he worked was employed at Goldman Sachs.  Some how 500K Dollars was not enough, go figure.   I do not know about the rest of you, but I know more individuals than I can count on the fingers and toes in my immediate family, who would jump at the chance to work to be employed for just one year (two would be nice, but I am not going to be greedy) at that salary level.  (On the other hand I could just be Mittens for 9.125 days and make the same amount of money, I know it is a cheap shot, but sometime the devil just gets the best of me, after all I am only human, and from time to time I can be tempted by the dark side)   I would suspect that Mr. Smith is not the only individual working at employed at Goldman Sachs afflicted with these conditions.   I would suspect that the condition is especially rampant within the entire senior executive corps with equal or more severity.

And we wonder why the frigging wheels came of the bus.

¹ Unable to determine the number of individual who actually perform work at Goldman Sachs on any given work day, but using the most opportunistic estimates it could be that on any given work day at most about half of the employees actually perform some type of work.  It is highly unlikely that this group of employees is composed of Senior Executive Corps, Directors, and Vice presidents.

The Market is RIGGED get use to it.

Of coarse the stock market is rigged, it always has been rigged, and I would speculate that it will always be rigged call it human nature.  So get use to it.  The following paper is another indication of the level of rigging.

 “Earning Quality: Evidence from the Field” Dichev, Grahm, Harvey, and Rajgopal www.isb.edu/faculty/upload/Doc952012946.PDF

From the above-cited paper you have reports that CFO of public companies who responded (169 in all, although not typically by themselves) felt that corporate earning reports were being managed within the economy in any given period, by 18.43 percent of the firms.  Additionally 99.4 percent of the CFOs felt that “at least some earnings management of the opportunistic kind happens”.  There however was a large dispersion in the answers provided by the CFO as to magnitude of the earnings management.  The size of the dispersion precluded the authors of providing any statistically accurate measurement of the magnitude of the earnings management.

These same CFO when asked a hypothetical for any reported earnings what percent of the number is managed.  They estimated that about 10 percent of the reported value was the result of some type of management.  Most outsider models estimate that the percentage of the reported earning that is managed is much higher.

When asked under what conditions would they believe that earnings management is being performed, the one of the following three conditions were cited by the CFO’s  (1) fast growing firms; (2) firms whose earnings are more volatile than their peers; (3) and firms with higher exposure to lawsuits.

When asked if earning were managed to upside versus to the downside, only 58.8 percent indicated that they thought the management was to the upside.

Why influence earnings, the number one answer is that earnings influence stock prices.  Given that for many members of a company Senior Executive team not just the CFO have their bonus contractually tied to the performance of the stock price relative to some stock market bench mark (typically the SP 500) or to various named competitors, it is no wonder that earning are managed, baby needs a new pair of shoes.

My own personal opinion for what ever it is worth, would suspect that companies that are currently trading with high P/E ratios would be deep into the process of managing reported earnings, given that a short fall in reported earnings could result in a significant drop in stock price given the leveraging effect of their high P/E ratio.  In these high P/E stocks a small miss in earnings can have a profound effect on the price of the stock, which in turn could significantly reduce the expected bonus of the management team.

So how do you get around the rigging?  Can you get around the rigging?  At best I think that you can only minimize the effects of the rigging, I do not think that you can get around it, it is just too endemic to game.  Therefore we are left with minimizing the effects of the phenomenon.  To that end my advice would be to invest in broad base stock indexes, there is safety in numbers, as far as the index is concern the broader the better, this will go a long way in minimizing the effects of those companies that manage their earnings to the extreme, up or down, call it regression to mean.

As an investor one needs to look at long term tends in the indexes, minimize purchases on rises, and maximize purchases on retreats.  A very long event horizon is also required, remember that in the long term the stock market is a very accurate measuring device, eventually some one somewhere will see the butcher thumb on the scale.

An investor should carefully listen to manage words, but scrutinize managements actions, and act accordingly on any and all inconsistencies, after all the devil is in the details.   If management words are correlated with their actions, the caution is advised.

If things appear to good to be true, well we all should know by now that the pile of manure under the Christmas tree does not mean we are getting a pony.

Now Jack it is not the Soviet Union

For if it was the old Soviet Union the door to your apartment would have been kicked in, you would have been pulled out of your warm bed in the middle of the night, by several really nasty individuals, blind folded, dragged down the stair of the building and thrown into the back of a Black Maria.  There would have been a very cold ride to Lubjanskaja Ploschadj, 2, (Lubyanka headquarters of the KGB), where you would be shown the error of your ways, and allowed to change your mind on the subject, and come to your senses.

After you had come to your senses and realized the enormity of your error, and had professed to those present that this type of mistake would never ever happen again, as demonstrated by your own hand written and signed confession, never mind that you really did not write it, but it was your signature on the document, they (you know the really nasty individual who brought you to this place) would help you make sure that it would never happen again, since in the course of your conversion from the wrong path to right path you suffered a 9mm hemorrhage.

That was the old Soviet Union.  You know the place where you had the right to say anything ONCE.

Goldman Sachs “Muppet Hunt” Draws a Blank?

Where is the surprise in this announcement?  The Goldman Sachs “Muppet Hunt” is the moral equivalent to one “Elmer J. Fudd” looking for “Wabbits”.

So Goldman Sachs senior management goes on a “Muppet Hunt”, and surprise of surprises they dutifully report back to the Board of Directors that they have not found any “Muppets”.  That it was all just sour grapes by the recently departed, disgruntled, disaffected, “Not meriting promotion to Managing Director”, employee.  And that “No further actions should be taken.”(Let Sleeping dogs…). 

The “Muppet Hunters” are more than happy to report that everything is all right within the Goldman Sachs Magic Kingdom.  They dutifully report that Goldman Sachs Management and Employees are currently and in the past have been looking out for the best interest of their customers.  Additionally they are pleased to report that Goldman Sachs currently does not place the company’s interest nor has it ever placed the company’s interested above those of their customers (What a bunch of Boy Scout) (A Goldman Sachs Employee is: Trustworthy, Loyal, Helpful, Friendly, Courteous, Kind, Obedient, Cheerful, Thrifty, Brave, Clean, Reverent).  That 99 percent of the nearly 4000 emails that reference the word “Muppets” were not comments on their customers but were references to the latest Muppet movie.

So management of Goldman Sachs has fulfilled the requirements of those immortal words uttered by of Governor William J. Le Petomane “We have to protect our phoney baloney jobs here, gentlemen! We must do something about this immediately! Immediately! Immediately! Harrumph! Harrumph! Harrumph!”.  And something they did, they investigated, and they reported that they found nothing (surprise), it was just one big snipe hunt.

Trust them if you want, but remember that a fool and his money are soon parted.

Apple Revealer of State Secrets?

Headline “Apple Map Accidently Reveals Highly Sensitive Taiwanese Radar Installation”

Apple now they are the destroyer/revealer of state secrets, at least that what the article in Network World implies.  Link: http://www.networkworld.com/news/2012/101012-apple-maps-taiwan-263253.html?hpg1=bn

Reveals to Whom is the real question?  The United States, United Kingdom, France, NATO, Russian Federation, Japan, South Korea, the Peoples Republic of China?

Since all of these entities either have their own Reconnaissance Satellites or access to the data from someone who does have a Reconnaissance Satellite, many with resolutions on the order of at least 10 cm or better, they already know about it.  In the case of the United States we really know about the site, since Raytheon sold them the equipment, with DOD and State Department approval.

Who are the Taiwanese really trying to hide this site from?  The PRC?  That will be hard since the PRC for some time has had their own constellation of “Remote Sensing Satellites”.  Since January 2010 the PRC has launch 9 of the “Yaogan” series of “Remote Sensing Satellites” split fairly evenly between unit with Electro-Optical Digital Imaging and Synthetic Aperture Radar vehicles most in nearly circular polar orbit with orbital altitudes of 600 to 1200 KM.

I would not bet against the fact that the PRC already has had organic assets in the facility, and quite possibilities currently still have organic assets in the facility.  I would also wager that the PRC probably has better and more current maps and photo imagery of the site and surrounding area, and the rest of the island of Taiwan then the current government of Taiwan.

For some strange reason the average citizen of the world must have any and all satellite imaging of the site blurred so as to not cause concern to the Taiwanese government that their little egg nest has not only be located, and plotted on maps, but heaven forbid that unknown outside parties might know how many eggs are in the nest.  Because we all know that “We cannot handle the Truth”.