Unscrupulous tipsters and touts

From the legislative history of the U.S. Investment Advisers Act of 1940:

Not only must the public be protected from the frauds and misrepresentations of unscrupulous tipsters and touts, but the bona fide investment counsel must be safeguarded against the stigma of the activities of these individuals. Virtually no limitations or restrictions exist with respect to the honesty and integrity of individuals who may solicit funds to be controlled, managed, and supervised. Persons who may have been convicted or enjoined by courts because of perpetration of securities fraud are able to assume the role of investment advisers. Individuals assuming to act as investment advisers at present can enter profit-sharing contracts which are nothing more than “heads I win, tails you lose” arrangements. Contracts with investment advisers which are of a personal nature may be assigned and the control of funds of investors may be transferred to others without the knowledge or consent of the client.

S. Rep. No. 1775, Investment Company Act of 1940 and Investment Advisers Act of 1940, 76th Cong., 3d Sess., 21-22 (1940).

“UnSCRUpulous TIPsters and TOUTS.”  An alliterative, rhythmic and evocative phrase.

Cash-register management

Recommended reading – Steven Harper’s article in this month’s American Lawyer about the results of the midlevel associates survey.  Money quote:

The prevailing business model has distorted some concepts of value and jettisoned others. At most big firms, productivity equals billed time, without regard to the efficiency of the worker or quality of the end product. Meanwhile, anything that can’t be measured—mentoring, creating a sense of community, delegating important client relationships to young attorneys, and encouraging balanced lives that make better lawyers—gets discounted or lost altogether.

That’s the real theme permeating midlevel associate dissatisfaction. Running big firms according to metrics aimed at increasing short-term profits is deceptively objective and relatively simple. But it risks ignoring important things that can’t be quantified. […]

As a result, behavior that would enhance institutional stability and intergenerational transition yields to the self-interested development of portable books of business. Add enough laterals, and any partnership can quickly lose itself. Client-filled partner silos don’t promote the shared identity that provides a sense of community. Relying on current profits to be the glue that holds everything together can quickly make a strong firm fragile. Just ask lawyers who once worked at Heller Ehrman, Howrey, or, for history buffs, Finley Kumble.

Among large-firm equity partners, a revolution of rising expectations has continued for two decades. Recessions come and go, but somehow average equity partner earnings have trended skyward as associate satisfaction has tanked. With new attorneys flooding the market, where’s the incentive for those who reap staggering rewards to reconsider the human impact of their business models, especially on the youngest and most vulnerable?

[…]  The question for large firms is whether they can continue to attract the best and the brightest even when top recruits truly understand the work they’ll do, the culture of short-term thinking they’ll endure, and the failure most will encounter in their bids for equity partnership.

The tragedy, as I see it, is that the people most responsible for creating the winner-take-all law firm culture, and most capable of correcting it, will read this and either (i) not care (“I’ve got mine, Jack”), because worrying about the institutional legacy is for chumps, or (ii) not recognize themselves, because they believe their own recruiting hype and would vehemently deny pursuing short-term profits über alles or asset-stripping the firm before they retire.

Peggy Noonan, blah-di-blah

Note to Cliff:

What exactly did you find so consequential or even provocative about this piece?  It revolves around the assertion that no one loves Obama anymore, on the basis of conversations Noonan’s had.  Uh huh. She didnt ask me, thats for sure.  Reminds me of what Pauline Kael is supposed to have said after the 1972 elections:  “Nixon?  I cant believe it.  I dont know anybody who voted for him.”

The other evidence Noonan marshals – the Obama campaign’s want ad for predictive modeling specialists says more about her distrust of quantitative analysis, lest it affect her pre-determined conclusions, than it does about Obamas humanity.

But the launching pad for this unscientific bit of mass psychology is even more meaningless.  Let’s see if I have this right:  the Tea Party movement and the Republican establishment, by joining in support of the Boehner proposal, have each succeeding in moderating the excesses of the other.  Moderating?  The Tea Party movement wants to use the debt limit increase as a vehicle for forcing deficit reductions that rely entirely on spending cuts, with no tax increases, even if this means driving the economy back into recession.  The Republican establishment wants to destroy Obamas presidency and ensure his defeat in 2012, even if this means driving the economy back into recession.  With the Boehner proposal, the Tea Party gets what it wants, although maybe not everything its ideological heart desires, and the Republicans double-down on wreaking havoc with the economy as their only strategy for winning back the White House in 2012.

This path is neither Burkean nor viable and Noonan’s a loser for endorsing it.  Boehners a loser for permitting it (although I like and feel for the guy, I really do), and the rest of us are just plain losers.


On November 19, 2010, the Securities and Exchange Commission (SEC) issued proposed rules relating to provisions of the Dodd-Frank Act that expand the SEC’s regulatory authority over investment advisers to include many more investment advisers to private equity and hedge funds, subject to certain exemptions.

Later, a non-U.S. investment adviser went to the SEC’s Division of Investment Management to get a Foreign Private Adviser Exemption, as described in the Dodd-Frank Act.

This is the story of that investment adviser.

Buy more and be happy


You are a true believer. Blessings of the state. Blessings of the masses. Thou art a subject of the divine. Created in the image of man, by man, for man. Let us be thankful we have commerce. Buy more. Buy more now. Buy more and be happy.

Short of direct stimulus spending, a payroll tax holiday — at least with respect to the employee’s portion of Social Security and Medicare taxes — looks like the best, fastest and most politically feasible way to put money into the hands of people who will actually use it to buy more. A holiday on the employer’s portion of payroll taxes, albeit a necessary (if not sufficient) condition for Republican support, is going to be less effective stimulus.  To the extent the employee’s portion gets spent, the increase in aggregate demand is likely to have a greater impact on hiring decisions than the reduction in employers’ cost per employee.

Let us be thankful we have an occupation to fill. Work hard, increase production, prevent accidents, and be happy.

Either way, of course, a tax cut that actually works to stimulate the economy is the last thing the Republicans want. Republican congressmen will accuse Obama of raiding the Social Security and Medicare trust funds so he can buy free lunches for illegal immigrants and build a mosque in your home town, and New York Post readers will believe.  Republican advisors will argue that only regressive tax cuts create jobs, and Fox News Channel viewers will believe. Republican lobbyists will say that because a payroll tax holiday is only temporary, it results in more “regime uncertainty” and further undermines business confidence, and Wall Street Journal readers will believe.  And all the true believers will know, on some level, that two more years of slow-or-no growth and high unemployment is the key to Republican hopes in 2012.

For more enjoyment and greater efficiency, consumption is being standardized.