Soros and Schwarzman speak
The two biggest names I interviewed for my film on the financial mess we鈥檙e in, Super Rich: The Greed Game (to be broadcast at 9pm on 大象传媒2), were Stephen Schwarzman and George Soros.
Mr Schwarzman is the founder and chairman of , which 鈥 with and 鈥 is one of the super-elite of private equity. And Mr Soros, apart from being the trader who broke sterling in 1992, has been one of the most consistently successful hedge-fund superstars.
The take of these multi-billionaires on the causes and consequences of the current global financial crisis is oddly complementary: Soros is very gloomy; Schwarzman sees a glistening golden lining.
Mr Soros says we are witnessing the end of a 60-year 鈥渟uperboom鈥, characterised by ever-rising levels of debt within the economies of the US and much of the West, especially the UK.
He is a critic of what he calls market fundamentalists who believe that financial markets tend towards equilibrium. His view, which he has applied to great personal profit as a trader, is that markets have a tendency to move towards disequilibrium, that bubbles and excess are the natural order of things.
And each time since the War that one of these bubbles has gone pop, central banks have slashed interest rates and bailed out those with the greatest debts. Which Mr Soros says has created a massive moral-hazard problem, in that businesses, financial institutions and individuals have all been encouraged to become even more indebted in subsequent economic booms - because they鈥檝e been confident that if it all went horribly wrong, the central banks would bail them out.
This is what he says about how bad it will get for all of us:
鈥淵ou can鈥檛 rekindle the willingness to borrow and the willingness to lend because the balance sheets of the banks are now over-burdened and there are all kinds of risks that have become apparent. And they haven鈥檛 yet fully worked themselves out, so there鈥檚 a great deal of unknown credit risk in the system. And as a result, the banks are husbanding their resources because they鈥檝e actually lost a lot of money...
Now the financial crisis is going to abate because basically central banks know how to provide liquidity. But there is also a question of solvency, and that they don鈥檛 quite know how to handle. So there is going to be a fallout... partly because of the housing crisis itself, and partly because of the contraction of the financial system, the de-leveraging of the financial system - because it has become apparent that it was over-leveraged鈥
Right now it has affected the housing market. It will, in due course, affect commercial real estate as well. It is also going to affect credit card performance and so on鈥 Then there are all these leveraged buyouts which will take a couple of years before a number of those go sour. So you really have now, as I say, the end of a super boom that will take us much, much longer to work itself out.鈥
What Mr Soros expects is a recession in the US and a sharp economic downturn in the UK. And he expects the financial industry, here and in New York, to shrink very considerably.
He believes the UK economy is vulnerable, due to its dependence in recent years on financial services and the risk that there鈥檒l be a sharp fall in house prices. But he doesn鈥檛 expect the entire world to fall into recession, largely because of the strength of the Asian economies. (You can watch my interview with George Soros here)
Mr Schwarzman is less apocalyptic. Like Mr Soros, he鈥檚 lived and worked through many financial crises 鈥 and he鈥檚 unconvinced that this one will turn out to be significantly more dire than its predecessors. That said, he says that from mid-2006 he became concerned that credit was becoming too easy to obtain and the price of assets was becoming inflated.
But right now, Schwarzman is hoping for the worst. This is what he said to me:
鈥淚t鈥檚 going to be a great opportunity. And when people were giving interviews a year ago talking about the golden age of private equity, my back was just like tensing up because that was a golden age for paying a lot of money to people who were selling businesses.
The real golden age comes when you have a mess. You have economies that are on their back. You know, capital inadequate. And when you start buying businesses at that part in the cycle you inevitably do extremely well - unless you are too early.
And right now it鈥檚 a little bit too early. But as you wait and this develops it鈥檒l be a great time to be buying businesses.鈥
In a way it鈥檚 a statement of the bloomin鈥 obvious that the best time to buy assets is after they鈥檝e collapsed in price. But to seemingly wish for as much economic misery as possible, so that Blackstone can buy companies at a knockdown price, is perhaps not the most politically sensitive statement ever made by Mr Schwarzman.
I'm 
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Blackstone joined Citigroup and JP Morgan to concoct the plan to sell Northern Rock. The plan was entitled 'Project Wing' (on a wing and a prayer perhaps?). This plan seems to be rather clandestine as Northern Rock were referred to as 'Blackbird'. You can read a summary of the plan via this link.
It seems very strange that all these advisers were American companies.
Oh, and I'd still like to know whether Alastair Balls (Chairman of the NR charity arm) is in any way connected to Ed Balls.
Politically sensitive or not - I feel the same. I don't have a mortgage or own property.
So a bit of downturn would be fine for me to be honest.
But then I do not want to see massive repossesions again... my parents lost a house, and I woudnt wish that on anyone.
Guy
Fairplay to Schwarzman - I wouldnt expect a succesful businessman to be "politically sensitive". I cant remember who said it but the line "sell greed and buy fear" comes to mind!
Maybe I am mis-reading George Soros, but he appeared to be saying that bubbles were caused because central banks gave liquidity. Right now we are seeing central banks giving unprecedented amounts of liquidity. But then he goes on to say that the golden days are over forever. How does this reconcile? He also appears to be saying that securitisation is over forever. This is a big call.
Schwarzman on the other hand provides and interesting point. Indeed, with private equity having a 5-10yr incubation cycle, this could be a golden time for him, where his firm will generate returns because it has bought cheap assets, not because it has bought expensive assets with cheap financing. Private equity has over $1,000bn (yes, a thousand billion) of un-called capital, that is, untapped cash ready to spend. Today we saw Fortress ready $15bn of funding to spend on mortgages. A drop in the ocean but is starting to build daily. Is the bottom of the market near?
Schwarzman is the man.
If it was that easy calling the bottom of any market everybody would be making a killing. Like buying any asset get it at just about the bottom or on the other side of the hyperbola when it just starts it upward trend and you make a killing. As the Omaha Sage put it "Price is what you pay. Value is what you get."
George Soros is now 78 years old. He may have been one of the sharpest financial minds of his era but to make a statement that the superboom of the last 60 years is now over can only mean, in his opinion, we are facing as severe a depression as was experienced in the 30s. The latest prediction I read is there is a one in three chance of a recession in the UK this year. Yes, we are in for a bumpy time, but 'the end of life as we know it'.... I don't think so. George is past it and we should not value his opinions any longer.
I cannot work out how if a Super-boom ends - all you have is a recession for a year in the US and a dip in activity in the UK? It does not sound like an end of a 60 year Super-boom? I would expect such an end would have a 10 year recession and world wars etc.
On Blackstone/Private Equity. Company valuations maybe lower, but so will returns and exit values. Plus there will be less money to finance the buyouts and PE deals. The companies that will become distressed will nearly all be in private equity ownership - so there will be big losses for PE companies.
The PE market has a direct link to the debt market - they have both expanded together. More likely they will both contract - with losses.
> a little bit too early
This is great news. It's only a little bit too early, after the market goes up 150 points. I guess it could also be a little bit too late, eh? We'll have to wait and see.
I cannot work out how, if a Super-boom ends, all you have is a recession for less than a year in the US and a dip in activity in the UK? It does not sound like an end of a 60 year Super-boom? I would expect such an end would have a 10 year recession and world wars etc.
On Blackstone/Private Equity: Company valuations maybe lower, but so will returns and exit values. Plus there will be less money to finance the buyouts and PE deals. The big companies that will become distressed will nearly all be in private equity ownership - so there will be big losses for PE companies.
The PE market has a direct link to the debt market - they have both expanded together. More likely they will both contract - with losses.
Gearing ratios will be reduced and risk premiums could be increased on any debt taken out by PE owned companies. This will mean Blackstone may pay lower enterprise values, but their equity element could be higher for a lower return, due to lower gearing on the deal and higher returns to debt providers.
Soros closer to the mark. What will happen is a rebalancing between the different economic sectors of the main economies. This will become a good time for trade buyers rather than PE players. Manufacturing and industrials will gain in value, whilst hedge funds will fall in value. The real economy will come back in favour, cash generation will become more important than EBITDA. Real assets more valuable than financial assets.
Both of these experts have their strategies which are not readily available to the rank and file investor! We want to talk to other investors who want to buy distresed mortgages at deep discounts. There are no markets avaialble to such investors.
Our assets will be going cheap at a time when oil rich countries are receiving proportionately more for their resources. Expect more news of UK Plc falling into foreign hands.
I鈥檓 tired of hearing about this 鈥渞ecession鈥.
Only reason it鈥檚 such a big story is that it is the financial sector, London and the political classes that will be effected. It will be them who have to pay this time, not the miners, manufacturers, heavy industry, etc.
Sure, there will unfortunately be a few casualties where people have over-extended, but for 95% of normal people life will get no worse鈥.or better.
George Soros has probably got it right. It has seemed over the past few weeks that every time a bank squealed, a central bank, whether the Fed, BoE or ECB simply showewered them with money to make life easier. Obviuously the banks like this idea, so periodically squeal, and the trick works - loads more liquidity (cash to you and I) from the central bank.
I seem to recall something called inflation in the 1970s, which was caused by excess money supply. The money supply was reigned in, and inflation (somewhat painfully) fell.
With the policies of trying to keep growth going through all this mess just going to rekindle 1970s style inflation, which will have to be cured with 1970s style measures - or is that too simplistic?
Don鈥檛 believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike 鈥榣esser鈥 estimates, this includes all stocks, bonds, cash, and material assets held by America鈥檚 richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own 鈥榟umanitarian鈥 spin on it. Calling attention to her own 鈥榞ood will鈥. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don鈥檛 fall for any of their 鈥榟umanitarian鈥 CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can鈥檛 just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world鈥檚 richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this 鈥榞ood will鈥 鈥榟umanitarian鈥 BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars which have been transfered FROM US TO THEM. All over a period of about 27 years. Thats Reaganomics for you. The wealth does not 鈥榯rickle down鈥 as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They just keep getting richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductible crumbs and call themselves 鈥榟umanitarians鈥. Cashing in on the PR and getting even richer the following year. IT CAN鈥橳 WORK THIS WAY. Their bogus efforts to make the world a better place can not possibly succeed. Any 'humanitarian' progress made in one area will be lost in another. EVERY SINGLE TIME. IT ABSOLUTELY CAN NOT WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. So don鈥檛 fall for any of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductible contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. Crime, poverty, and suicide will skyrocket. SEND A 鈥淭HANK YOU鈥 NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I鈥檓 not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren鈥檛 for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah Winfrey, Ellen DeGenerous, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. Now, there are commercial ties between nearly every industry and every public figure. IT MAKES THEM RICHER. So don鈥檛 fall for their 鈥榞ood will鈥 BS. ITS A LIE. If you fall for it, then you鈥檙e a fool. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you鈥檙e a fool. No offense fellow citizens. But we have been mislead by nearly every public figure. WAKE UP PEOPLE. THEIR GOAL IS TO WIN THE GAME. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Reaganomics. Their idea. Loans from China. Their idea. NAFTA. Their idea. Outsourcing. Their idea. Sub-prime. Their idea. High energy prices. Their idea. Obscene health care charges. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit. Their idea. The multi-million dollar endorsement deal. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. Brainwash plots on TV. Their idea. Vioxx, and Celebrex. Their idea. The MASSIVE campaign to turn every American into a brainwashed, credit card, pharmaceutical, love-sick, celebrity junkie. Their idea. All of the above shrink the middle class, concentrate the world鈥檚 wealth and resources, create a dominoe effect of socio-economic problems, and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, executives, entrepreneurs, attorneys, and politicians. IT MAKES THEM RICHER. So don鈥檛 fall for any of their 鈥榞ood will鈥 鈥榟umanitarian鈥 BS. ITS A SHAM. NOTHING BUT TAX DEDUCTIBLE PR CRAP. In many cases, the 'charitable' contribution is almost entirely offset. Not to mention the opportunity to plug their name, image, product, and 'good will' all at once. IT MAKES THEM RICHER. These filthy pigs even have the nerve to throw a fit and spin up a misleading defense with regard to 'federal tax revenue'. ITS A SHAM. THEY SCREWED UP THE EQUATION TO BEGIN WITH. If the middle and lower classes had a greater share of the pie, they could easily cover a greater share of the federal tax revenue. They are held down in many ways because of greed. Wages remain stagnant for millions because the executives, celebrities, athletes, attorneys, and entrepreneurs, are paid millions. They over-sell, over-charge, under-pay, outsource, cut jobs, and benefits to increase their bottom line. As their profits rise, so do the stock values. Which are owned primarily by the richest 5%. As more United States wealth rises to the top, the middle and lower classes inevitably suffer. This reduces the potential tax reveue drawn from those brackets. At the same time, it wreaks havok on middle and lower class communities and increases the need for financial aid. Not to mention the spike in crime because of it. There is a dominoe effect to consider. IT CAN'T WORK THIS WAY. But our leaders refuse to acknowledge this. Instead they come up with one trick after another to milk the system and screw the majority. These decisions are heavily influensed by the 1% club. Every year, billions of federal tax dollars are diverted behind the scenes back to the rich and their respective industries. Loans from China have been necessary to compensate in part, for the red ink and multi-trillion dollar transfer of wealth to the rich. At the same time, the feds have been pushing more financial burden onto the states who push them lower onto the cities. Again, the hardship is felt more by the majority and less by the 1% club. The rich prefer to live in exclusive areas or upper class communities. They get the best of everything. Reliable city services, new schools, freshly paved roads, upscale parks, ect. The middle and lower class communities get little or nothing without a local tax increase. Which, they usually can't afford. So the red ink flows followed by service cuts and lay-offs. All because of the OBSCENE distribution of bottom line wealth in this country. So when people forgive the rich for their incredible greed and then praise them for paying a greater share of the FEDERAL income taxes, its like nails on a chalk board. I can not accept any theory that our economy would suffer in any way with a more reasonable distribution of wealth. Afterall, it was more reasonable 30 years ago. Before Reaganomics came along. Before GREED became such an epidemic. Before we had an army of over-paid executives, bankers, celebrities, athletes, attorneys, doctors, investors, entrepreneurs, developers, and sold-out politicians to kiss their asses. As a nation, we were in much better shape. Strong middle class, free and clear assets, lower crime rate, more widespread prosperity, stable job market, lower deficit, ect. Our economy as a whole was much more stable and prosperous for the majority. WITHOUT LOANS FROM CHINA. Now, we have a more obscene distribution of bottom line wealth than ever before. We have a sold-out government, crumbling infrastructure, energy crisis, home forclosure epidemic, 13 figure national deficit, and 12 figure annual shortfall. The cost of living is higher than ever before. Most people can't even afford basic health care. ALL BECAUSE OF GREED. I really don't blame the 2nd -5th percentiles in general. No economy could ever function without some reasonable scale of personal wealth and income. But it can't be allowed to run wild like a mad dog. ALBERT EINSTEIN TRIED TO MAKE PEOPLE UNDERSTAND. UNBRIDLED CAPITALISM ABSOLUTELY CAN NOT WORK. TOP HEAVY ECONOMIES ALWAYS COLLAPSE. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we鈥檝e ever seen before. The American dream will be shattered. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. THERE IS NO SUCH THING AS A MULTI-MILLIONAIRE HUMANITARIAN. EXTREME WEALTH MAKES WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman.. Of course, they will jump to small minded conclusions about 'jealousy', 'envy', or 'socialism'. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don鈥檛 believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.
"As a market participant, I do not need to be concerned about the consequences of my actions." George Soros.(So thats ok then.)
Stephen Schwarzman, the private-equity king, may have just set a new standard for wealth denial. In a revealing profile by Jim Stewart in the latest New Yorker, Mr. Schwarzman is asked about his recent displays of excess 鈥 the over-the-top birthday party at the Armory, his $37 million apartment in New York, his tear-down estate in Florida, the $34 million place in the Hamptons and so on. His lifestyle and sudden riches ($8 billion on the day Blackstone went public) turned him into what Mr. Stewart calls 鈥渢he designated villain of an era on Wall Street.鈥
Yet his IPO to the public is worth less than half of its a initial price, so everyone else gets hosed.
How perceptive of the 大象传媒 to give these two slimy characters a platform....
Re post 11: Not 100% sure on the details, but there are public funds you can buy that will have indirect exposure to mortgage assets / private equity etc. Good examples are Pantheon's PIP (listed trust with 20+ yrs p/e experience) and I think some of the Brevan Howard trusts will have a heavy fixed income exposure
Really enjoyed the 大象传媒2 programme, which I just watched.
It's really a very depressing picture. I just wish those guys like Schwarzman and Soros would spend a day with that poor sub-prime family so they could understand the misery that their activities are causing to real people.
Capitalism may be the best way to create wealth, but it sure isn't the best way to distribute wealth evenly amongst all the citizens.
What is so stupid is that I really doubt whether the super-rich are that happy, in spite of their wealth.
To think that the public will just sit back and let themselves get shafted again is possibly a bit naive. That's what the french aristocracy thought in 1789, and they got a rude comeuppance.
Caught the TV show. It was well presented and the points made came across clearly. Good editorial.
So where's the economic theory to explain all this?
Welcome back Marx?
Re Post # 7, "George [Soros] is past it and we should not value his opinions any longer." - David, the report you referred to about the UK having a 1 in 3 chances of going into recession was by Lehman Brothers. Given the condition they find themselves in, possibly they should be paying someone else to do research on financial markets for them? A random number such as 1 in 3 should probably be reversed in this instance, that the UK has a 1 in 3 chance of NOT going into recession. Most of the over-specialised economists and forecasters in The City and Wall Street STILL don't get it. They didn't predict the bubble and they won't predict the burst. That's why they work for investment banks - it's what people want to hear.
Soros should not be lumped together with some hedge fund contemporaries (and especially PE guys). He made his money speculating both ways in markets, usually warning that he was making money specifically because bad government policy created opportunities for him to exploit the eventual return to equilibrium. He probably helped accelerate the UK leaving the ERM in 1992, thankfully, ensuring the UK recession was more shallow than it otherwise would have been.
He has constantly warned in recent years of this manic bubble developing, and has constantly argued that government's have helped to cause it, that it would eventually burst, and both wealth AND DEMOCRACY will be at risk.
In the meantime he has continued to pump milions of dollars into his Open Society Institute, for which we should all be thankful that someone is standing up to increasingly totalitarian governments both East and West.
So whatever you do, I think taking a pop at George should be left out of it.
Hahaha, I think it's hilarious that a few naive buy-to-letters on this site would question the validity of Soros' views.
The central banks are playing a dangerous game. They are printing money to prop up faulty financial institutions and a fragile economy but all this is doing is delaying a process of hurt.
People are living in a fantasy world, refusing to accept the reality of the situation. Uk growth in the last decade has been driven by unprecedented consumer debt but consumers are reaching a point where they're maxed out and the banks are now starting to tighten lending due to being overleveraged in 'make believe' finacial products. This simply means a slowdown. There can't be any other outcome.
"Something is rotten in the state of Denmark..."
An appropriate analogy to the current situation might be the Titanic after it hits the iceberg and passengers start to scoop up the snow and ice on the decks for snowballing.
What stage are we at?
Has the snowballing begun or have we just realised that something has gone wrong?
Indeed is the banking system 'sinking' or is this also being overplayed for advantage?
The fact is no one knows.
Are banks and finance houses being as 'up front' with the facts as they need to be?
Check on the LIBOR rate and see whether THEY think a new age of clarity and reduced market danger has dawned...
Good post Neil. Wall St analysts are actually under constant pressure to produce bullish reports so as not to 'bite the hand...'
It took the stock market at least 6 months to see the writing on the wall for subprime despite constant negative data. Now it's UK investors with the blinkers on. Mortgage approvals at 13yr low, mortgage lenders halting new property loans, 5 months of continous falls. Does this all add up to rising housing demand? Common sense and basic ecomonomics says not.
Caught the TV show. It was well presented and the points made came across clearly. Good editorial.
I work all week, I pay my bills, I pay my mortgage.....I follow the rules. I get trampled on when the rich panic.
I stand to lose everything I have worked hard to get because some rich spoilt people who play games and write their own rules have designed a game that does not work.
What do you think will happen when too many like me get trampled on?
It does not look pretty....not at all.
So some wealthy oligarch (born, brought up & educated in this country but not domiciled here) presents himself to the public as a hero, by claiming not to pay himself a salary, then gives his wife 拢1.2bn dividend which is tax-free鈥 Nice. It鈥檚 OK though, because anyone in hat position would take advantage of this loophole. Hmm鈥
If he paid himself this money in the normal way and was taxed on it, he would still take home, say 拢800m, with is quite a tidy sum, by anyone鈥檚 standards (how much money does one actually NEED in a year?) The remaining 拢400m of taxes could then pay for how many schools and hospitals to keep the poor sods earning just over the minimum wage in his huge business empire at the basic levels of health and literacy needed to do their jobs??
I don鈥檛 have a problem with being with talent and a good work ethic getting paid massive amount of money, as long as they pay a proportionate amount of tax. I remember an interview years ago with Ross Perot saying he was proud to pay the amount of tax he did on his earnings as they paid to make the country he lived a safe and agreeable place to be. Where have the business leaders like that all gone?
Truxter has hit the nail on the head!
So what's the solution? Well individually we must all stop playing the game!!
As soon as you have somewhere to live with a modest amount of savings and some land to grow food you drop out. Try to become as self-sufficient as possible. Stop working and paying tax. If you have a happy home life you don't need to escape the stresses and strains by going on holiday every 5 minutes. You don't need to consume vast amounts of "stuff". Don't fuel the fires of capitalism and the "winners" who want us all running round like headless chickens working all the hours God sends to pay for everything. It makes us all the more susceptible to our "addictions". They also like nothing better than a good war as well...it keeps us divided so they can "rule" so don't join in by joining the armed forces.
The earth will be grateful too as the way we live now is totally unsustainable and if we don't change our ways Gaia will do it for us by making the planet inhospitable to us. Some other species will come to dominate. The earth doesn't care one way or the other. We only have ourselves to blame and must stop being so greedy and we must also stop listening to people who only want to put the fear of God in us for their own ends. For example, the earth doesn't care one way or the other if people fail all their exams at school. In the bigger scheme of things it's totally immaterial.
Excellent program Robert but I wasn鈥檛 made jealous by all the wealth. Like most people I have something far more valuable -self respect from having made a contribution to society.
Former BUSM workers have bitter experience of two of your interviewees, Cohen as the chairman of Apax which owned the company and Moulton, as a former director. We lost our company pensions under circumstances which led MPs of both parties to ask for a public enquiry. Cohen, the so called 鈥渇ather of venture capitalism鈥 told you that few people could do what they have done so they are entitled to their reward. What rot! Other highly intelligent professionals don鈥檛 abuse their power or willingly inflict misery on this sort of scale. They deserve our utter contempt. By the way, does anyone know what Cohen is doing as a board member of the British museum or chairman of the Unclaimed Assets Commission? The latter has perhaps 拢15B of public money to spend so will we all benefit as a result?
"What do you think will happen when too many like me get trampled on?"
You will know better next time! Hopefully.
You can blame the soros of this world for making a buck off misery. You can only blame yourself if you took stupid risks and caused yourself misery.
Unforunately, there's a part of everyone that has looked at their house or flat as their golden ticket to richdom. Their chance to make a quick buck. As a result everyones been prepared to perpetuate the situation and offer a stupid price fully expecting you will make money in the end. Hey many people have made a business from it!
And what happened next? Stupid house price rises, increased stupidity, increased defaults, increased interest rates, credit crisis....
And what happened next? Time will tell.
If you don't even know how to pronounce "leverage" properly, how much confidence should we have in your comments about it?
There was nothing original in the programme.Pure sensationalist anti-City journalism.The vast majority of people in the City earn good money but not millions, and work very hard and honestly for what they earn.Peston simply tarnishes everyone with a brush which is only applicable to a very small handful of people.As for the sub-prime mess?It takes two to tango: cavalier lenders as well as daft borrowers.There is too much jealousy expoused in the comments above.Why do so many people in this country have such a chip on their shoulder and always seek to blame the rich (and I am not one of them) for everything?No trait is more corroding in a society than jealousy and spite;it is worse than greed quite frankly.Agree fully with James (31).
George Soros predicts the end of the most resiliant trend in financial history (credit growth), at a time when the controllers of the worlds money have embarked on a record breaking programme of credit EXPANSION. Who is he, a man who has profited more than any other from bubbles, to say this old gal hasn't got one more bubble left up her sleave?
Is his prediction (which runs contrary to the trading ethos he has used his entire career) a sign that his mind is preparing for his demise due to old age, by seeing the demise of credit growth due to its old age? I wouldn't blame him for this misconception, as his own life has grown, blossomed and matured more or less in line with that of the credit bubble he speaks of. But who is he to say credit growth has the same(ish) life expectancy as a human?
I thought Robert Peston's TV programme was utterly brilliant and radical in the most deeply political sense. I couldn't help wondering whether Peston, who normally cuts such an orthodox analytical figure, realises just what a radical piece he has produced. He seemed both fascinated and repelled by his subject (the super-rich) in equal measure. A truly memorable and instructive essay on the 'filthy' rich and their insidious effect on the rest of us.
I missed the documentary - is there going to be a repeat, or anywhere I can access it?
thanks!
I like Soros' comment on markets moving to disequilibrium. To me it sounds like he is embracing chaos theory where you expect pops and bubbles.
Its interesting to me that lenders were careful about the mortgages they sold when they held the paper. It wasn't until they learned how to play 'hot potato' with their loans that they stopped caring if the loans could actually be repaid or made financial sense.
Soros says markets move towards disequilibrium which perfectly describes the consequences of lenders first lending with probity and eventually with wreckless abandon as they discovered how quick profits could help this quarter's income statement at the expense of the suckers who purchased the collaterlized debt and the suckers who took out loans they didn't understand and could not hope to repay.
Regulation has its own dangers, but the only way to stop, or at least attenuate, the pops and bubbles Soros says must happen is to smooth out the greed with intelligently conceived standards. Greed is a good thing when its used to create real wealth and dangerous when its used to make a quick profit at the expense of someone else.
Mr. Schwartzman is also correct: when we've reached bottom we can all start the process over again.
George Soros is not infallible though, is he? He may have made a killing over the ERM debacle, but I seem to remember that he got badly burned trying the same stunt elsewhere. In truth, does anyone really know how things will turn out-ever? Lots of heat, not much light!
GordonT
Soros is a realist believing in disequilibrium in 'boom and bust' economics.
Schwarzman sees "a golden lining" for his own pockets, acting as a vulture picking up the pieces.
Look at Australia and New Zealand Central Banks putting up interest rates, fearing inflation; while U.S.A. Fed is lowering theirs in order to kick-start the financial markets, irrespective of inflation. Interest rate manipulation is a blunt and anachronistic tool given to Central Banks.
Do any of your readers appreciate that THE Fed, sitting atop the 12 mini Feds, is actually still a private firm and that is why Greenspan was giving away credit/debt at approaching zero interest rate to assist his financial buddies to stratospheric profits?
It was an interesting program, but I would have loved to have seen more on the interviews.
If it's not a daft question, is there any possibility of putting some of these online via the 大象传媒 or even YouTube? Especially interested in hearing more of the Soros interview.
2c.
Soros is a bit naughty - have a look at his trading strategies - he has recently re-taken over running of the Quantum fund, and is actively shorting stocks and currencies.
So Mr Peston, George is so happy for your program. Negative words from George Soros drives the market down, and he profits. I am sure he is running the fine line of fraud there.
Dear old George - do you trust that he is saying this all for your benefit? He is lining his own pockets. After all, this is the guy that crushed Sterling to make a few bucks for himself.
There's a great book out there (amongst many similarly relevant ones) called 'the Coming of the First World Debt Crisis' by Ann Pettifor. It pretty much tells you what Soros is telling us, and explains how we got there (first published in 2003!).
Most people don't want to believe that things will get bad - but there are fundamentals that have been ignored far too long - and they're coming back to haunt us.
Sure, we can buy ourselves some time, but unless we change the way banking works in the Western world, the problems will only keep coming back to haunt us.
I'm looking forward to watching this report!
I would always be wary of anything Mr Soros has to say as you can't help but think he is saying it with a view to manipulating the situation to his own financial gain.
Despite his years don't underestimate Mr Soros cunning, we know it too well. Even Mr Preston agrees that sentiment plays a huge role in any market; which financial institutions benefit most from large upswings and downswings, hedge funds perhaps? The great skill is to cause a devaluation in an asset but make it look like a prediction, financial spin if you like. Mr Soros is a past master at this and therefore any commentary should be read with a huge dose of cynicism.
I have two points;
1. Mr Peston's interesting piece was silent about the implications for corporate management. These are the people who will confront the challenges that will emerge over the next 12/18 months but, in general, the media is silent about the significance of their role.
Mr Schwarzman salivates about the investment possibilities that will arise but who will manage these businesses in distress? The same people who directed them in the buoyant conditions? No, the skills required are different and the people capable and experienced are few.
2. Both Soros and Schwarzman may be correct but that is not really the point.
The point is that we have deluded ourselves that the credit cycle had been smoothed by Greenspan's masterly management of the US economy. The belief/hope that we had entered a new paradigm was misplaced and now none of those who denied the cycle can be heard.
The question is why we believe that we can eradicate business cycles when we don't understand the economic mechanism that causes them.
But we do know that the economic temperature tends always to be measured in the credit market. When covenants approach negligible and lending margins fall to unprofitable levels these are sure signs that we have entered the final phase of the credit cycle. But we ignore the signs.
To regard the events through which we are travelling as being purely of economic interest is wrong.
If Schwarzman believes the credit crisis is being overdramatised by Soros, how can he explain Bernanke's comments today that the Bear Stearns bailout was basically done to stop the financial system going into freefall. How robust a system can it be Mr Schwarzman? You'd be an idiot to plunge into the quagmire now. No, on second thoughts you wouldn't Mr Schwarzman-go for it.
The fractional banking system is a house of cards, now built on a very shaky property industry.
Of course real estate wouldn't be so shaky if wages had grown at the same rate as real estate prices.And this leads me to globalisation and the free market. Our financial lords and masters want it every which way don't they: GDP growth, productivity growth, profit growth-but they just don't want wages going up. In fact it has become almost illegal to take strike action in Britain and Australia. Union membership across the Commonwealth has plummeted-the hard won gains of our fathers and forefathers have been thrown away as every one has come to believe they are wealthy ( and therefore powerful in their own right).The message of individualism seared into our brains has triumphed in dividing us into easy little targets. If regulations and interventionism and collectivism is good enough for Wall St (our archetypal capitalists) then its about time the workers of the Commonwealth (at least) united again. After all the Federal Reserve is a UNION of 12 investment banks..which made a $36 billion profit last year...and they're not working for your benefit!
George Soros is a man that should be respected, a man with great insight proven over the many years.
Governments through out the world are drawing on the wealth of the prudent, manipulating (fraudulently) to finance a cancerours,anxiety driven, nonprodutive mass. This can only lead to, and has lead to the high inflation and debased currencies of the western world.
Rome all over again?
"If you don't even know how to pronounce "leverage" properly, how much confidence should we have in your comments about it?"
So if i can find someone with exemplery pronounciation your confidence will be fully restored? Your an idiot with a GCE in english.
Explain the faults in the mans thinking, don't run around dishing out ticks for grammer.
Just for the record, i'm with Soros on this and think Schwarzman has a very narrow feild of vision. He might well be able to make a killing out of this situation, but then who cares? Is he just blowing his own .... trumpet rather than reflecting on the concequences for the population. His comments about being able to make money out of this is a bit crass but then you have to be if your aspiration is to own the largest share of the Universe possible.
Post 41 has it bang on re Soros. Who benefits from Soros's comments only Soros himself? No doubt part of what he's saying has truth, but he's out there with the people in tin foil hats if he thinks the whole of modern financing will be drawn back and we're at the end of a 60 year boom. Where was this superboom in the 70s oil crisis, or the 90s recession? The real superboom has hardly started, with China, India, Brazil et al all starting to develop modern market-based life, with burgeoning middle classes that will want representation, education, peace and prosperity. And with it they will want and pay for our tourism, life sciences, education, creative industries, financial services etc etc etc.