Les Leopold summarizes what Hedge Funds really do. See the last section of his article for practical solutions.
It's not just that these financial gurus are filthy rich. It's that they are the richest of the rich and we don't even know what they do.
While nearly 15 million Americans still can't find jobs due to the 2008 Wall Street-created crash, the top hedge manager, David Tepper, earned $1,057,692 an HOUR in 2012 -- that's as much as the average American family makes in 21 years!
America's new math: 1 Wall Street hour = 21 years of hard work for the rest of us.
Together the top 10 hedge fund managers waltzed off with $10.1 billion in 2012, which is more than enough to hire 250,000 entry level teachers or 196,000 new registered nurses.
... hedge funds are investment vehicles for the super rich -- for "sophisticated" investors and institutions who have the resources to gamble for ultra-high returns.
When you read media reports it always sounds like top hedge fund managers are just the very best at buying low and selling high.
... obtaining reliable information about what they do is really hard to come by.
1. Insider trading.Many hedge funds (and we don't know how many) make their money through illegal insider tips.
... we are not talking simply about the occasional corrupt individual. We are talking about something verging on a corrupt business model." -- U.S. Attorney Preet Bharara, NYT, May 27, 2011
2. Design financial products to fail so you can collect the insurance.
We know for certain that hedge funds colluded with big banks to create mortgage-related securities that were designed to crash and burn, so hedge fund investors could bet against them.
3. Manipulating the media -- rumor mongering.
For example, you can set off rumors about a particular bank's solvency while you're betting against that bank. If you can help set off a bank run, so much the better, because then you can really win big.
4. High frequency trading.
... when the rest of us hit the buy button on E-Trade, a high frequency algorithm has probably jumped in there before us, bought the stock we want, and is selling it back to us for a few pennies of profit. They do this millions of times a minute, racking up from $5 to $20 billion a year. It's like a hidden private sales tax that goes into the pockets of high frequency traders. Our pension funds and 401ks are fleeced as well.
A Tax Break for Hedge Funds
... to add insult to injury, hedge funds have a special tax break called "carried interest" which allows the richest of the rich to pay a lower tax rate than the rest of us.
Halting Runaway Inequality
The more these guys make, the more every CEO desires (would Freud call it hedge fund envy?).
In 1970 the top CEOs averaged $45 for every dollar paid in worker wages. By 2006 the ratio jumped to $1,723 to $1. [emphasis in purple mine]
Thanks, Ruth. Those people are so able to corrupt politics that reformers can't become couch potatoes.
I'm now reading Peter Dreier's The 100 Greatest Americans of the 20th Century: A Social Justice Hall of Fame.
But for those folk, the US of A would still be the capitalist hellhole it was until the early 1900s progressive period. (It's $9.99 for Kindles, with a free sample available.)