May 22/15 – Billionaires behaving badly
2015-05-22 11am EDT | #Blackstone #inequality #Jeff Greene #Paul Tudor Jones #Sanford Weill #Steve Schwarzman
Recently BlackStone’s Steve Schwarzman gave $150 million to his alma mater, Yale University. Proving that billionaires are no less insecure than the rest of us, he took the opportunity to strike out against the university that rejected him a few decades back. Although it was hard to hear, during the interview with Bloomberg news, I could definitely make out some sniffles as Steve recounted the story about being turned down by Harvard Business school. As tears welled up, Schwarzman recounted how he even phoned the Dean from his high school pay phone, begging for him to change his mind. He said it was like phoning “God” (which Schwarzman said we now know is just silly, as God works at Goldman Sachs). At this stage in the interview, Steve needed to take a break. After pulling himself together, Steve told how he got the last laugh. The Dean of Harvard reached out to him last year to say, “Boy we sure got that one wrong.”
Then the interview took a surprising turn as Schwarzman went on to recount how:
- A few years back at his 30th high school reunion, Marnie Ransby admitted that she was desperately unhappy with her life, and she should have never said no when Steve asked her to the High School prom.
- His former university chess club president was recently looking for a job and told Schwarzman they should have never kicked him out of the club. Steve really wasn’t as obnoxious as was claimed in the letter signed by all club members.
- The other day, Steve’s kids’ high school calculus teacher paid him a visit at work (he even took time off during school hours!) to apologize for yelling at him for double parking and leaving his Mercedes truck idling in the main school thoroughfare as traffic backed up behind him for ten minutes during school pick up time.
- When Steve went into his favourite restaurant last week-end, the owner came out to tell him they had fired the server from Steve’s previous visit who said, “I don’t care who you are, you are still a douche bag in my books.”
Come’ on Steve. You are one of America’s wealthiest business leaders. Do you really think the Dean of the University who turned you down as a kid thirty years ago is going to say anything different? Of course they are going to say they made a mistake. Certainly you can’t be so insecure that you still need to tell everyone about it….
No, I am probably wrong about that….
Actually I take that back, you probably are that insecure. Don’t forget this is the guy who, when Obama threatened to remove the special 15% tax rate that Schwarzman and his private equity cronies enjoy for carried interest, said the following; “It’s war. It’s like when Hitler invaded Poland in 1939.” Wow, the nerve of a President to suggest that Schwarzman pay the same rate on his labours as everyone else. Well, that proposal died a quiet death as Obama was given marching orders by the elite 0.01%’s who control the political process.
And the Hitler comment is by no means a one off affair for Steve. From the Daily Beast:
Especially Steve Schwarzman, the poster child for greed in the decade I call The Zeroes. On Feb. 13, 2007, he gained infamy by throwing himself a $3 million 60th birthday party, transforming the giant Park Avenue Armory into a replica of his 35-room Park Avenue palace in the sky, down to the replica paintings, and buying himself serenades from Patti LaBelle and Rod Stewart. “Steve, you’re more than a friend to me,” joked emcee Martin Short, “you’re a business associate.” Even in an age of excess, giving a $3 million birthday party prompted a huge backlash, one that he has since tried to distance himself from. (The following year, as if in penance he announced a $100 million gift to the New York Library, though a fight broke out over how many times his name would be chiseled onto the main branch’s facade.)
And it’s not just the Daily Beast that has chronicled Steve’s moronic moves. Slate had a wonderful article titled “The Golden Ass”:
Schwarzman, for the record, is so wealthy that his personal chef "often spends $3,000 for a weekend of food for Mr. Schwarzman and his wife, including stone crabs that cost $400, or $40 per claw." Yet he has vociferously fought against equalizing the tax treatment of investors like himself and the working Americans whose income is taxed at normal income tax rates.
Schwarzman’s stupidity in telling everyone how much his lunch costs is why DealBreaker affectionately refers to him as “CrabClaw” and created the great picture of Steve with crab hands.
Billionaires telling us how to live our lives
But I shouldn’t pick only on Steve. The list of idiot billionaires is as long as the list of moronic Hollywood stars. How about Jeff Greene, the latest jackass billionaire who made a fortune betting against subprime loans?
Recently at Davos, he made the following humble suggestion:
"America's lifestyle expectations are far too high and need to be adjusted so we have less things and a smaller, better existence," Coral Gables founder Greene told Bloomberg News at the World Economic Forum, adding, "We need to reinvent our whole system of life."
He made this comment after arriving in his private jet with his wife, kid and two nannies. Of course he needs two nannies. Who doesn’t have two nannies? He actually had to leave the other six full time house staff back in his Beverly Hills 53,000 square foot $195 million mansion. To be fair to Greene, the house doesn’t get much use as he spends most of his time on his yacht, the Summerwind, where he has hosted such notable philanthropists as Paris Hilton and Lindsay Lohan.
According to a former crew member Sharyn Peach who wrote about her experiences in the Palm Beach New Times (JEFF GREENE’S PARTY YACHT: THE INSIDER’S TALE FROM HIS FORMER STEWARDESS), Greene tours around, helping young women gain a foothold in life:
From that point forward, I kept a journal. I detailed every experience I had on that boat for the month I was there.
The real partying started in Sag Harbor, New York. That's when a deckhand and Mr. Greene would go to a place named the Sex Castle and come back with new women almost daily. My journal entry on August 14, 2006, begins:
“Last night’s party was interesting to say the least! I think I’ve seen more tits in one night to last a lifetime! Naked, drunken people everywhere! Freakin’ weirdos, bumping and grinding all over the place. Russell Simmons was onboard too. Nice, quiet guy actually.”
Shortly after that party, I found four lines of cocaine in Mr. Greene’s stateroom bathroom marble vanity. Frustrated, I blew as hard as I could figuring no one would miss it.
Day after day of constant partying wore on me and on the crew. On August 21, the chief steward quit after one week. The chef left the next day, and I gave my notice. On August 23, the captain got fired, and they gave the job to a captain who had run two boats aground. My journal entry from that day describes one of them:
“Last night, he was picking up Russell Simmons on the Tender — driving 50 mph, he runs into a sandbar and gets stuck! We’re screwed!”
Peach says “party girls” like this one were often brought aboard to entertain. On August 24, my journal entry explains the state of things: “I can’t even explain how f’d up this ride has become. Mr. Greene constantly berates me, makes me feel incompetent & unworthy of breathing the same air as him. But Beverly (my yacht recruiter) called me & tells me, he likes me and what will it take to keep me on until after Labor Day?”
Greene offered me more money to stay on through Labor Day. So I changed my mind (or lost it) and decided to stay on ten more days. It was more of the same.
“I don’t even know what to write about anymore,” I wrote on August 27. “I’m mentally and physically drained. It’s raining and cold today. These f er’s always show up, rain or shine, as long as there’s booze and food. Mr. Greene didn’t go to bed until 9 this morning.”
Mike Tyson got on board sometime in late August. I particularly remember serving Tyson a vodka and Red Bull while he was receiving oral sex from a hired entertainer. After this experience, I’d had enough. I booked a bus ticket from Sag Harbor to JFK.
I made my last journal entry September 8, when I got back to Fort Lauderdale: “It’s the never-ending saga of the Summerwind. I finally got paid last night, but it’s short, by $918.00. The damn bastard is screwing everyone out of monies owed. Have I mentioned how glad I am to be home? Even though I’m shorted money. What an experience indeed. Lesson learned. Never to be repeated again.”
Oh please Mr. Greene, give us some more of your profound wisdom about how America’s lifestyle expectations are too high and we need to learn to enjoy less things, and live a smaller, better existence.
They are not all morons
To be fair to billionaires, they are not all idiots. Some of them realize the absurdity of the current situation. It is tough to argue with the facts. Recently the OECD published a report that highlighted the fact inequality is the highest in decades.
Recently hedge fund manager Paul Tudor Jones gave a speech about the obvious unfairness in the current environment:
"This gap between the 1 percent and the rest of America, and between the US and the rest of the world, cannot and will not persist," says the investor. "Historically, these kinds of gaps get closed in one of three ways: by revolution, higher taxes or wars. None are on my bucket list."
Other, wise individual billionaires, are also trying to attract less attention. It was four years ago that the WSJ reported:
Sanford I. Weill, the former chairman and chief executive of Citigroup Inc., has put one of the most celebrated postwar penthouses in Manhattan on the market for $88 million, saying that at a difficult period in the country’s history, it is “a pretty good time” for wealthy Americans “to be quiet.”
He said he intends to donate to charity the proceeds from the sale of the largest apartment in the one of the most sought-after new condominium developments in New York, a huge penthouse at 15 Central Park West.
After the sale, Mr. Weill and his wife, Joan, plan to move from the full-floor penthouse with a terrace and garden that wraps around three sides to a much smaller apartment they own on the sixth floor of the building.
One of my twitter guys pointed out Weill said this 900 S&P 500 handles ago. I wonder what he thinks about the current environment?
But what does this mean?
I am in complete agreement with Paul Tudor Jones about the sustainability of the current situation. Something has to give. And it certainly makes a bad situation all the worse when idiot billionaires like Scwharzman and Greene behave so poorly.
But what does this mean for the market? How does this translate into an actionable trade?
I believe we have hit peak inequality. You can see the public slowly awakening to the unjustness of the current situation. Bit by bit, the narrative is changing.
Recently Hillary Clinton attempted to steal a page out of Elizabeth Warren’ playbook by aligning herself as the champion of the downtrodden middle and lower class.
Democratic presidential candidate and former Secretary of State Hillary Clinton said the US economy requires a “toppling” of the wealthiest 1%, according to a New York Times report published Tuesday.
Clinton reportedly made the comments in a meeting with economists earlier this year, when she was shown a graph that “charted how real wages, adjusted for inflation, had increased exponentially for the wealthiest Americans, making the bar so steep it hardly fit on the chart.”
“Clinton pointed at the top category and said the economy required a ‘toppling’ of the wealthiest 1 percent, according to several people,” writes The Times’ Amy Chozick.
Hillary is a shrewd political opportunist. If she is shitting all over her major donors, then she must believe this is the way the public is headed.
I doubt that Schwarzman’s 15% carried interest tax rate will make it through the next administration. The tide is shifting, and the public is not going to take the hypocrisy from the rich any longer.
We are already seeing this with the increases in minimum wage. They just keep coming. Recently Los Angeles was the next major metropolitan area to dramatically hike their minimum wage. This trend will only continue in the coming years.
This will all add up to less corporate profits, and lower financial asset prices. For the last couple of decades Wall Street has been screwing Main street. Well they have finally pushed it too far. We can expect less profits and more inflation in the coming years.
That’s it for me – I have to go find the Summerwind, I hear there is a good Memorial day party there this week-end….
Thanks for reading and have a great long wk-end,