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Why John Arnold Is Disliked for Giving Away Billions

By Shlomo Maital

John Arnold

John & Laura Arnold

   If you’re a billionaire, and are busy giving away your money for good causes, you should be widely known and beloved, right?   Well, John Arnold (and wife Laura, a lawyer) are billionaires, have a foundation that is giving away their money for good causes – and they are widely disliked. Why?

   Arnold made a fortune as a financial trader. His method:   Discover an idea, a truth, nobody else saw. Then bet everything you had on it.   In 2006 Arnold’s hedge fund Centaurus bet against natural gas prices. He was right. They fell. He made a fortune. In 2008 Arnold bet on a commodities price crash. He was right. Commodities fell. Three years ago, at age 38, and worth $4 billion, Arnold decided to spend the rest of his professional life giving away his fortune. The story is told by Bloomberg Business.

   Arnold and wife Laura decided to focus on problems “dragging down the nation that no one else wants to confront”. For instance: research integrity; drug-sentencing reform; organ donations; pension systems that are broken.  

   “I try to look at supply and demand,” Arnold explains. “Where is the need being met today, and where is there unmet demand?”.   Arnold, a moderate Democrat, believes a rich country like the U.S. should provide a high safety net for its citizens. At the moment, it does not.

   Why is Arnold unpopular? Mainly for his work on pension reform. Fixing the pension system means slashing payments to people who need and were promised them. Without the changes, the Arnolds say, both governments and pensioners have no future.

   Arnold was used to being unpopular as a financial trader. He accepts the criticism of him as philanthropist. His method? Find “leverage points in the system”, and create “higher potential for value added”.

   Want to help people? Give away money?  It may well bring sharp criticism, when only love and praise are expected. Be prepared for it. You can be punished for doing good, if you rile vested interests. In fact, the more good you do, the angrier some people will become.

   Source: Dan Murtaugh, Bloomberg News, Nov. 19, 2015

Paul E. Singer and U.S. Hedge Fund Rules the World (And May Destroy It)

By Shlomo  Maital


 If you believe as I do that increasingly, money rules the world, not ethics, policies, governments, or ordinary people,  then this week you got confirming decisive evidence.

  A hedge fund manager named Paul E. Singer, right-wing libertarian and Republican, who runs Elliott Management, a $25 billion hedge fund,  bought up large amounts of Argentine government bonds after Argentina defaulted on its bonds in 2001 (because the IMF wanted to impose stringent conditions on a bailout loan, a huge mistake).    Then he went into U.S. District Court in Manhattan (like a fixed prizefight, he got to choose the venue most convenient and most likely to get a favorable decision) and won a decision from a judge, stating: “unless Argentina pays up the face value of bonds bought by Singer, it cannot legally pay interest on its bonds to its main bondholders”. 

   The result:  Because a $539 million interest payment was not made (it could not be made, because of that District Court Judge, who by the way is ELECTED!), by Argentina,  S&P rating agency declared Argentina in default.  This likely means that the government of Argentina is barred from raising capital in global capital markets.   Argentina’s economy is in recession,   in large part due to the Sterling law suit.  You cannot run any business, or any country, without borrowing money in capital markets.

    Singer has won.  Argentina and its 41 million people lose, and so does the world. Why?  Because investor panic regarding Argentina will impact other nations, like Portugal, and make their borrowing more expensive. 

    Argentina’s President Cristina Fernandez de Kirchner has made many mistakes.  But this time, the villain is not her but Singer.   And America, whose courts allow him to do whatever he wants for personal gain, damn the whole world.

     If we do not get control of our lives and our money  back from capitalists like Singer,  some day Occupy Wall St. will seem like a kindergarten birthday party.  

Blog entries written by Prof. Shlomo Maital

Shlomo Maital