Daily Alpha: Alternative Thinking on Matt Damon, Hedge Fund Reputations and Swiss Sanity

Jun 6 2016 | 11:30am ET

"It was theft and you knew it. It was fraud and you knew it, And you know what else? We know that you knew it. I don't know if justice is coming for you in this life or the next but if it does come in this life? Her name will be Elizabeth Warren."

Matt Damon spoke at MIT during the school’s commencement and he probably ruined everyone’s time.

While he basically ripped off the “Hell’s Coming With Me” speech from Tombstone, he fancies himself an economist because he found a way to make people pay him $18 million per film where the central plot is about a country or world having to save him from himself.

Seriously, it would cost almost $1 trillion to save this guy if the plots of seven Matt Damon films were real.

Anyway, here is one of Hollywood’s most stubbornly narrow-minded activists rambling about the financial crisis as if he really understands the nearly 85 different factors that fueled the economic downturn.

The guy who remains 100% convinced that we need more government in the financial markets to protect us from ourselves…when government policy and loose Fed policy helped fuel a rather epic bout of speculation, accountability shifting and bad behavior.

It’s the worst commencement speech by an activist I've heard since the 2004 graduation at the Medill School of Journalism where a former NPR journalist never once congratulated the graduates and instead spent 45 minutes ranting about the Iraq War. (Your faithful editor was in the first row for that.)

If you were a student, would you want to hear someone with basically little understanding of economics – who makes thinly veiled movies about the morality of capitalism (when the events in the film are really more closely aligned with what happens under socialism)– lecturing you after you just worked hard for four years.

The guy who gets paid $18 million per movie to play make-believe is lecturing everyone about “theft.”

The man who wants government to take 50% in Federal taxes alone on every dollar over $5 million--is using the word “theft” as if it’s a core feature of the capitalist system--and then spend it blindly on bloated government programs that are already rampantly burning through cash thanks to fraud, waste and little accountability.

The guy who remains the central joke of Team America, World Police, who has built a massive fortune because of capitalism… proposes people should give up their money because he has his and he’s willing to pay more…“so must we shall!”

Damon has said he needs to pay more taxes…well, no one is stopping him. There’s been an account he can give money to since 1843.

Please forward him this address, and he can put his money where his mouth is:

Gifts to the United States

U.S. Department of the Treasury

Credit Accounting Branch

3700 East-West Highway, Room 622D

Hyattsville, MD 20782

Any time someone from La-La Land lectures you, be sure to quote the great Chris Issak, who once said this about Hollywood:

“The less the government has to spend the better off we’ll be. But I should say that I, and the rest of entertainers, don’t know a god-durned nothing about policies. We’re too busy self-aggrandizing to come up with any solutions. It’s amazing how many entertainers can find time between adopting children to tell you how to live your life.”

“You look at what Wall Street does, what it means for job creation, economic growth…there’s a great story to tell. But if you don’t tell it, nobody else is.”

That was John Boehner at the SkyBridge Alternatives Conference in Las Vegas. The statement popped up in a Financial Times column by Mary Childs, in which she argued that the hedge fund industry required a makeover.

It should have been titled: Sometimes, very rich people say very stupid things.

Childs takes hedge funds to task for several public statements made by T Boone Pickens, Karl Rove, and Leon Cooperman. Occasionally there is praise for the sector, followed quickly by a swift rolled-up newspaper to the nose.

This is one big “but” argument.

She says that hedge funds do wonderful charitable work, but the individual mindset of money managers hurts the industry’s ability to self-police.

She says that the SALT Conference aimed to change public perception, but it didn’t really work because T. Boone Pickens spoke too candidly about his plan for Muslim immigration.

“But” appears seven times. Of course, the bottom line, as Childs correctly says, is that the industry can do better.

Everyone and everything can certainly do better. But in the case of hedge funds, public perception is not going to change as people continue to grow more hostile to wealth in this country.

The conference that Childs chides had one central message: Work your ass off.

If you do that, you can succeed in this country – and this is the only country on earth that consistently creates world class entrepreneurs and rewards people for the years and years of dedication it actually takes to become a millionaire – if not billionaire – regardless of profession.

That said, roughly half of Millennials now think that people get ahead in this country because of luck, according to a recent poll by NY College Republicans.

It’s not a difficult time to take pride in your work if you’re in the industry.

Hedge funds aren’t selling poisoned milk to school children. They’re in the business of generating Alpha – a very difficult thing to do in a nation where central banks and the federal government increasingly pick winners and losers.

David Rubenstein told everyone at SALT to “Be proud, not embarrassed.”

Sure, returns have been lackluster – the industry will change and adapt. But personal pride is sometimes sideswiped when other people are telling you that you should be embarrassed.

For Childs’ article, for each dumb statement that she cites, it implies universal guilt – meaning that the anti-Wall Street crowd (Matt Damon!) falsely equate one dumb comment by Pickens and another dumb comment by Karl Rove (a man who has made a lot of these in his profession) and claim its representative of the entire industry.

Meanwhile, when a hedge fund does something extremely right – it’s never applied universally.

Starboard overhauled the corporate culture of Darden Restaurants, and now is aiming to improve the completely disemboweled culture of Yahoo Inc. Instead of praise for this, the financial media uses words like “attack” and “plunder” to describe their activism on the side of shareholders.

Sure, Pickens said one dumb thing out of a three-day conference. The media jumped on that…and they never let it go during the entire event. Click-bait articles were written – generating thousands of views – and now they sit stagnant as the news cycle moved on.

There were few mentions of the money raised for the Christopher Reeve foundation… or the very generous “9/11 Jersey” donation to the Baseball Hall of Fame.

At that point, what does it matter if people feel good about their jobs?

A bunch of reporters are just going to tell the world how terrible hedge funds are, and how these people are having a hard time feeling proud about their work.

The good news is that the 2017 SALT Conference likely won’t be a Donald Trump discussion festival like it was this year. Unfortunately, the media seems to not have understood their role in creating the circus that Childs condemns.

The hedge fund industry doesn’t need champions. It simply needs fair coverage. The Daily Alpha always points out when someone in the hedge fund industry does something outrageous, stupid, dangerous, or hypocritical. But we recognize that one bad thing is not representative of the industry – and we’re not interested in piling on.

“If you pay people to do nothing, they will do nothing.”

Finally, that’s Charles Wyplosz. He teaches economics at the Geneva Graduate Institute.

Over the weekend, 80% of Swiss voters rejected a proposal to provide a basic income guarantee (BIG) to its citizens. The idea has been on the left’s agenda for decades, effectively aiming to give every single person a stipend each month.

Wyplosz understands human behavior. BIG proponents really don’t.

Here’s the best quote from a supporter who voted yes.

"For me it would be a great opportunity to put my focus on my passion and not go to work just for a living," said a 26-year old carpenter.

If you’ll recall, the potential for musicians to quit their jobs and pursue artwork was an actual argument that economically ignorant Congresswoman Nancy Pelosi said back during the passage of the poorly named Affordable Healthcare Act.

All that’s happened since is that health insurance has become far less affordable… and more artists are “rent-seeking” for subsidies from the Federal government.

It’s stunning how bad policy makers are at understanding economic consequences.


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Garrett Baldwin is the voice of the The Daily Alpha and the features editor for Modern Trader magazine.

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