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I listened to the show last night, and could not believe the guy who suggested the government should guarantee private loans so businesses like his can get capital "for new projects".  I also could not believe neither the host nor Randall Pozdena questioned this in any way.

What the caller was suggesting was that private investors be able to collect their interest on these loans WITHOUT ANY RISK since Uncle Sam would back them up if these "projects", started during a recession, happened to fail and the loan was not repaid.  In other words, he would like to borrow the logic of the investment banks who took on exhorbitant risk, only to have we, the taxpayers, keep them from failing.

Um, no thanks.  I've have enough subsidizing other peoples profits and bonuses, thank you very much.  While I am all for seeking efficient ways to stimulate the economy, and not opposed to tax incentives, I am not interested in giveaways.  And I am interested in providing something of value to the public (the taxpayers), such as improved highways, bridges, railways, energy grids, schools, parks -- all those things that we keep reading are falling behind in repairs.

Also, part of the reason capital may be hard to come by is that new ventures seeking capital look very risky in this economy.  If thats really the case, should we be throwing public money at them?

posted 4 years, 3 months ago
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I'm very interested in this story, but find the coverage of it and answers given thus far very frustrating.

First of all, any fund selected to be conservative (i.e. for near-term horizon) should NEVER be losing 10% in a year, let alone 30% -- regardless of what the stock market is doing.  I would expect such a fund to invest primarily in government securities, and higher grade corporate bonds and perhaps even mortgage securities.  Its pretty clear CBF was investing heavily in credit swaps, distressed financial-sector bonds ("the price is too good to pass up!")  and other junk.

I found Randall Edwards trying to vaguely link the fund's performance (as well as one caller) to the performance of the stock market to be insulting.  This is a bond fund -- NOT THE STOCK MARKET.  It is supposed to be a low-risk, low-yield investment, plain and simple.  Notice what the average performance of similar bond funds are -- nothing close to -30%.  Thus far I have put most of the blame on the idiots at Oppenheimer, but frankly Edwards seems to be somewhat in CYA mode rather than shooting straight about what went down.  Not too surprising, but disappointing nonetheless.

In particular, I never heard any specifics about what oversight the State does, other than looking at fund performance vs. benchmark, which takes about one minute to do.  When they didn't hit their benchmark, do they look at where they are investing and start asking questions?  When I have bought mutual funds, I have received a prospectus which shows how the money is allocated.  Does the state get this information?  Did they look at it, at least after Q3 when the fund was clearly underperforming?  I would hope so, but the lack of specifics offered by Edwards despite several opportunities during your show make me think otherwise.  I was also disappointed the host (or Steve Duin) did not ask these kind of questions.  (I would have tried, but I listened to the show later.)

All that said, while the State perhaps did not do all it could do, its clear to me Oppenheimer is the #1 culprit here.  This is simply gross mismanagement of a fund -- regardless of what the prospectus says or the legalities are.  Most of my frustration is with the lack of information we have about how this fund was managed, and the statements from Oppenheimer to the effect that the losses were consistent with the stated risk level of the fund.  That is BULL.  I would like to see the media hold their feet to the fire, but thus far they seem to be getting away with it.  And if their lawyers wrote their prospectus loosely enough, they will probably get away with it in the courts as well.

posted 4 years, 3 months ago
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