FacebookTwitterGoogle+RedditEmail

The Crash of the King of Liquidity

Key Biscayne’s high-flying hedge fund operator, John Devaney, once called “The King of Liquidity,” has crashed and burned.

I’ve been gawking at the Devaney hedge fund wreck for a long time. The festive charitable giving to needy causes (inoculation from scrutiny by the mainstream press). The entertaining of then Senate majority leader Bill Frist and other luminaries. The mysteries of making a few hundred million trading asset backed securities formed from junk aka “the ownership society.”

That turns out to be one of the signature phenomenon of the current market cycle that shows no signs of bottoming yet: what an excruciatingly long time it is taking to play out.

A year ago, the media began reporting the troubles afflicting the Key Biscayne hedge fund king: “A Miami-based hedge fund titan with a taste for the high life is getting a harsh lesson in humility as his fund racks up losses in the bond-market rout. … The fund’s portfolios are now said to be worth around $460 million, down from about $620 million.”  (New York Post, August 2, 2007)

But according to The Miami Herald, “On Thursday, Devaney said the fund had lost about 90 percent of its value by September 2007.” (Miami Herald, July 11, 2008)

So, which was it?  A year ago, was Devaney lying or not?

Investors are suddenly realizing that down markets are an especially bad time to question whether there is any difference between fraud, theft, and a worthless investment portfolio with John Devaney.

With hedge funds, there is no penalty for misrepresentation unless it is outright fraud and theft. The US Congress and White House have repeatedly blocked efforts to hold hedge funds to the same degree of accountability as other fiduciary agents.

Most mutual fund owners don’t have a clue how John Devaney made enough millions to hang Matisses on the walls of his Key Biscayne home. But they should, because what John Devaney does (did) along with 10,000 hedge funds is shaking the foundations of the world financial system.

It is no surprise that hedge fund risk is manifesting in the collapsed fortunes of a Miami trader. The political origins of the housing boom–that many hedge funds fed from– are right here, twined like a golden thread in the chain of campaign contributions links builders, lobbyists land speculators and Wall Street– still freely circulating and immune to criticism by the media.

If you are looking for particular scoundrels, start with key McCain economic advisor former Senator Phil Gramm, now vice chairman of the Swiss bank UBS, who helped speed the deregulation of the financial industries and who just lashed out at Americans as “a nation of whiners”.

That clunker dropped at the same moment Miami production homebuilders, like beleagured Lennar, and lobbyists like Sergio Pino and Rodney Barreto–Miami’s local power brokers– are begging for government bailouts of their own cratering investments in land outside the Urban Development Boundary.

“Help us, help us,” they cry, expecting their pockets to be lined by insider deals from big infrastructure “economic rescue plans”, including new zoning changes to put more sprawl in western suburbs edging the Everglades.

Never mind that the last tranche of buyers flushed out like dove, long ago, or, that critics used to be called “elitists”, who complained about the costs of unsustainable growth. You don’t hear that, anymore. But you also don’t hear the history of what happened, or, most any other relevant news except iterations of the spin machine.

Look no further of reason for investors shunning the US dollar.

Yesterday, the Herald reported: “Devaney himself has lost more than $100 million, he said. His losses amount to about half his net worth, he added. But he still has a 126-foot yacht, the Dorothy Ann — a present to his mother — moored behind his Key Biscayne home.” Devaney will never be forced out of his home like those foreclosed from ranch-style American dream homes sold by Lennar or Pino or Barreto.

Like Pino or Barreto, Devaney’s assets are happily shielded by laws and regulations they condemn when it comes to the accumulation of wealth in free markets, like inserting platted subdivisions in wetlands or polluting public lands with stormwater runoff into the Everglades.

It’s just the case that the pockets of wealth are drying down, like Everglades ponding in dry season. In a perverse way, that makes it easier for observers to see what is in them, or, what is just pretending to be there.

ALAN FARAGO lives in south Florida. He can be reached at: afarago@bellsouth.net

 

 

 

 

 

More articles by:

Alan Farago is president of Friends of the Everglades and can be reached at afarago@bellsouth.net

July 18, 2018
Bruce E. Levine
Politics and Psychiatry: the Cost of the Trauma Cover-Up
Frank Stricker
The Crummy Good Economy and the New Serfdom
Linda Ford
Red Fawn Fallis and the Felony of Being Attacked by Cops
David Mattson
Entrusting Grizzlies to a Basket of Deplorables?
Stephen F. Eisenman
Want Gun Control? Arm the Left (It Worked Before)
CJ Hopkins
Trump’s Treasonous Traitor Summit or: How Liberals Learned to Stop Worrying and Love the New McCarthyism
Patrick Bond
State of the BRICS Class Struggle: Repression, Austerity and Worker Militancy
Dan Corjescu
The USA and Russia: Two Sides of the Same Criminal Corporate Coin
The Hudson Report
How Argentina Got the Biggest Loan in the History of the IMF
Kenn Orphan
You Call This Treason?
Max Parry
Ukraine’s Anti-Roma Pogroms Ignored as Russia is Blamed for Global Far Right Resurgence
Ed Meek
Acts of Resistance
July 17, 2018
Conn Hallinan
Trump & The Big Bad Bugs
Robert Hunziker
Trump Kills Science, Nature Strikes Back
John Grant
The Politics of Cruelty
Kenneth Surin
Calculated Buffoonery: Trump in the UK
Binoy Kampmark
Helsinki Theatrics: Trump Meets Putin
Patrick Bond
BRICS From Above, Seen Critically From Below
Jim Kavanagh
Fighting Fake Stories: The New Yorker, Israel and Obama
Daniel Falcone
Chomsky on the Trump NATO Ruse
W. T. Whitney
Oil Underground in Neuquén, Argentina – and a New US Military Base There
Doug Rawlings
Ken Burns’ “The Vietnam War” was Nominated for an Emmy, Does It Deserve It?
Rajan Menon
The United States of Inequality
Thomas Knapp
Have Mueller and Rosenstein Finally Gone Too Far?
Cesar Chelala
An Insatiable Salesman
Dean Baker
Truth, Trump and the Washington Post
Mel Gurtov
Human Rights Trumped
Binoy Kampmark
Putin’s Football Gambit: How the World Cup Paid Off
July 16, 2018
Sheldon Richman
Trump Turns to Gaza as Middle East Deal of the Century Collapses
Charles Pierson
Kirstjen Nielsen Just Wants to Protect You
Brett Wilkins
The Lydda Death March and the Israeli State of Denial
Patrick Cockburn
Trump Knows That the US Can Exercise More Power in a UK Weakened by Brexit
Robert Fisk
The Fisherman of Sarajevo Told Tales Past Wars and Wars to Come
Gary Leupp
When Did Russia Become an Adversary?
Uri Avnery
“Not Enough!”
Dave Lindorff
Undermining Trump-Putin Summit Means Promoting War
Manuel E. Yepe
World Trade War Has Begun
Binoy Kampmark
Trump Stomps Britain
Wim Laven
The Best Deals are the Deals that Develop Peace
Kary Love
Can We Learn from Heinrich Himmler’s Daughter? Should We?
Jeffrey St. Clair
Franklin Lamb, Requiescat in Pace
Weekend Edition
July 13, 2018
Friday - Sunday
Brian Cloughley
Lessons That Should Have Been Learned From NATO’s Destruction of Libya
Paul Street
Time to Stop Playing “Simon Says” with James Madison and Alexander Hamilton
Jeffrey St. Clair
Roaming Charges: In the Land of Formula and Honey
Aidan O'Brien
Ireland’s Intellectuals Bow to the Queen of Chaos 
FacebookTwitterGoogle+RedditEmail