Wednesday, November 24, 2010

Two Must-Watch Democracy Now! Segments: CIGNA Whistleblower Wendell Potter Apologizes to Michael Moore for PR Smear Campaign ...and Joe Nocera on The Hidden History of the Financial Crisis

I. The Fear of Sicko: CIGNA Whistleblower Wendell Potter Apologizes to Michael Moore for PR Smear Campaign; Moore Says Industry Was Afraid Film Would Cause A 'Tipping Point' for Healthcare Reform

Democracy Now! hosts a joint interview with Academy Award-winning filmmaker Michael Moore and Wendell Potter, who was the head of corporate communications for the health insurance giant CIGNA when Moore’s film, Sicko, was released in 2007. Potter left the company in 2008 and has since become the industry’s most prominent whistleblower. In the interview, Potter apologizes for his role in the industry’s attack on Moore and the film. [includes rush transcript]
Blogger's Note: Unlike the sound bites you hear on U.S. TV newscasts, these three segments evolve slowly as the interviewees carefully choose their words to accurately recount the facts well as their feelings about these facts. Bear with them. It's worth your time.

Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR Is Killing Health Care and Deceiving Americans
Wendell Potter (Author)
Michael Moore (Actor), Tucker Albrizzi (Actor), Michael Moore (Director)

II. Joe Nocera on "All the Devils Are Here: The Hidden History of the Financial Crisis"

As federal agents raid the offices of three major hedge funds amidst news of a sweeping probe of insider trading at Wall Street firms, we speak with New York Times business columnist, Joe Nocera, about his new book, All the Devils Are Here: The Hidden History of the Financial Crisis. The book describes how most of the underlying structures and key players behind the financial crisis have emerged relatively unscathed. [includes rush transcript]

All the Devils Are Here: The Hidden History of the Financial Crisis
Bethany McLean (Author), Joe Nocera (Author)

Blogger's Note: At the opening of this interview, Amy Goodman states that "Federal agents have raided the offices of three major hedge funds amidst news of a sweeping probe of insider trading at Wall Street firms. ... Collectively, the three firms manage nearly $10 billion in assets."
One might hope that this is just the tip of the iceberg, since convicted Ponzi scheme operator Bernie Madoff managed about $65 billion and lost and estimated $18 billon of his investor's money.

Actually, it seems to me that a far bigger Wall Street fraud was exposed by Joe Nocera in a New York Times article entitled "Markets Quake, and a ‘Neutral’ Strategy Slips" on August 18, 2007. But if Joe recognized what really happend then, he hasn't spelled it out even in his new book.

I beleive that I've figured it out. The essence of this Nocera column had to do with the so-called quant (short for quantitative) funds based on computer programs developed by physicists who are particularly good at analyzing complex systems by means of mathematical algorithms. By means of these computer algorithms AQR Capital Management's flagship hedge fund had been up over the previous seven years on average, 13.7% a year, out performing the S&P which gained only 2.9% during that time. Then in a single week (August 6-10, 2007) this quant fund LOST 13% ...and all other quant funds had similar losses.

"And then," Nocera wrote on August 18th, "in the blink of an eye, it turned around, at least for the moment. As of today [the AQR quant] fund had gained back half of what it lost in the previous two weeks..."

Nocera posed some big questions: "What really happened during the Great Quant Meltdown of early August? More to the point, should it scare us or reassure us?"

I decided that even more important was the question: Why did everything turn around “in the blink of an eye”?

And it wasn't hard to answer it. Physicists and IT experts using computers have an expression, "Garbage in equals garbage out."

Normally the "garbage" is the data, but it this particular situation the data are rightly assumed to be correct. Therefore, the algorithm that was totally correct for seven years running must have transmogrified into total garbage by August 10, 2007. And the reason everything was cool again with the quant funds by August 18, 2007, was that the physicists had revised the algorithm to take into account the new trend in the data. Duh!

Because I had been graphing both the market indices and commodities stocks at the time, the algorithm fix immediately became clear to me: Up to August 10, 2007, when the stock market weakened, investors had intuitively switched their money into commodities. Just common sense.

And by August 18, 2007, the quant physicists had figured out why common sense is now out the window: Now when the major market indices begin to slide, their new algorithm (counter intuatively) sells a five-times larger bundle of commodities than the baskets of S&P, Dow-Jones, and NASDAQ stocks others are dumping and uses the cash from the commodity sales to prop up the New York markets.  And the new algorithm reverses this process once these major exchanges show renewed signs of life due to duped investors reentering these markets.  My evidence for this conclusion can be downloaded here.

What led to this paradigm change? Obviously, it was the sudden inception of full manipulation of the stock markets by the U.S. government and/or Wall Street criminals. The object is to keep the Wall Street indexes from crashing (as they must) until some future time when 'The Powers That Be' are fully poised to profit from the market-crashing event they are cooking up.

So this part of the "hidden history" is still hidden from us.

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