You've likely heard by now that the SEC, IRS and UFC have each launched an investigation of me.  You may have even seen some of the scurrilous attacks against me.



On the advice of counsel, I am ceasing blogging immediately.  I've been doing this for exactly one year, so it seems like the right time to focus my efforts elsewhere.  I'll probably spend some time scrubbing my entries of possibly inculpatory content, but that's all the blog writing my attorneys will allow for the foreseeable future.  If you know of anything incriminating in any of my posts, please let me know!

Anyway, thanks for reading!

I'm pleased to see that Skybus, the new U.S. airline modeled after the super successful European ultradiscount carrier Ryanair, will open a base of operations here in Greensboro.  All of my employees who don't need to use of one of our private jets will be required to use it.

So, how did you, the readers of Percywalker.com, help bring Skybus to Greensboro?  I don't want to overly downplay my own contacts with the investors in the company and the hard work of our local officials, but Julian Robertson's Tiger Management is one of the early investors in Skybus and contributed one of its own employees to serve as Chief Financial Officer of the airline.  (Details here and here.)  As you'll recall, the North Carolina native and UNC grad was voted by you as the greatest hedge fund manager of all times, which elicited this comment from Julie:


I like to think that this move by Skybus is a small token of Mr. Robertson's appreciation for his support in Greensboro.  Keep up the good work!

I don't often write about religion, but as a good Christian (i.e., Catholic), I've long been bothered by the popularity of St. Christopher and his status as the patron saint of travelers.  To this day, many Catholics carry around images of St. Christopher for protection on journeys even though his name was dropped from the liturgical calendar in 1969 and isn't associated with any decent hotels.



With the demotion of St. Christopher, there is no good reason to continue to carry around his image while traveling.  We should instead be carrying around images of St. Regis and staying at the hotels named for him in one of the fourteen cities where they can be found, at least until Mandarin Oriental has been canonized.



I'll be presenting to Pope Benedict the case for elevation of St. Regis to patron saint of travelers.  I encourage you to set up an audience or brunch with your archbishop and do the same.

Another good idea for protection while traveling: hold stock in Starwood, the parent of St. Regis hotels.  I currently do!

Native North Carolinian and PercyWalker.com's " Greatest Hedge Fund Manager of All Time" had a lot of interesting things to say in an interview broadcast on CNBC yesterday.  The thing that received the most play, and no doubt contributed to the big decline yesterday, was his view on the economy:

Also of interest (but you have to watch the interview at CNBC.com to hear it because I can't find a transcript):

• On the taxation of carried interest:  Mr. Robertson believes that carry should not receive capital gains treatment.  Ouch!  In light of Mr. Robertson's view, I'm rethinking my own position on this issue.
• On Mitt Romney: "Smartest guy I've ever seen."  I agree!  Mr. Robertson is also sorry that Romney is "trapped into appealing to the ultra-conservative wing of the Republican party."  Double agree!
• On the environment:  Robertson is very concerned about global warming.  Thinks we should have a cap-and trade system.  Doesn't think corn ethanol is positive for the environment.  Thinks nuclear is a positive and has invested money into ways to deals with nuclear waste.  Thought Al Gore's movie was great but wished he hadn't put in the stuff about his loss in Florida.
• On underaged drinking:  He's "working with the former president of Middlebury College to have licensed drinking for 18 year-olds."  Interesting!  I'm for it.
  

My good friend Carl Icahn reiterated his view yesterday that someday soon all companies will be run by morons.  Left unsaid in his speech (or at least the press account of it) is that there is still hope.  Say what you will about activist hedge fund managers and buyout kings, nobody can dispute that we are, to our core, meritocrats.  So long as we are roaming the capital markets, the slow and weak, no matter how affable they may be, are at risk of being slaughtered and replaced with someone better, faster, stronger.  Which gets me to the point I think Icahn was trying to make: increasing taxes or regulations on alternative asset managers will kill off the predators that are essential to keeping the moron population in the C-level suites and boardrooms under control.

Anyway, that's what I think Icahn was saying in the unsaid part of the speech.  Here's Portfolio's take:

Many college kids seek refuge in their fraternities or clubs (when Icahn tells it, "sorority" is conspicuously omitted) for a friendly face. Without fail, the president of the club, who never seems to open a book, is there to cheer them up. He's a nice and friendly guy, the kind of guy you want around to make you feel better with a beer or a game of pool.

Not surprisingly, that guy goes into business. He's never the smartest guy in the room, but he's likable and he's a survivor. He moves up the corporate ladder, without a single original idea that might make his boss feel threatened by his potential.

Eventually, he gets to be the #2 guy at the company. He's a little dumber than the C.E.O., but the board likes him, so he eventually gets to be C.E.O.

Of course, he assigns a #2 who is a little dumber than he is. "And eventually, we're going to have all morons running our companies," Icahn concluded. "We might not be that far off from that right now."

And that, according to Icahn, is how your incompetent boss got the corner office.

Previously.

My friends at Gawker today published correspondence from a guy who sounds a little braggy.



After you read the correspondence, spend some time at his website.  Here's a taste:

I used my 98th percentile score on the SAT & ACT to acquire a Mensa membership then combined that with my 97th percentile G.P.A. to go on to a five star collegiate program.

I was educated at the University of Pennsylvania, an Ivy League institution founded in 1740 by Benjamin Franklin - the oldest university in the nation.  I was social chairman of my fraternity, published the humor magazine and took classes at the Wharton School of Business (perennially ranked #1 in the world).

I have worked & consulted for several Fortune 500 companies, including Time Warner, USA Today, GTE, Sprint, Pitney Bowes & Limited Brands.  I have saved 2 of these companies almost $1 million dollars combined.  I was the financial analyst during the $680 million dollar initial public offering of Intimate Brands (includes Victoria's Secret and Bath & Body Works) and also created a $22 million budget from scratch for them.

My take on all this:  I don't have a problem with anyone laying out their credentials on a website.  My problem is the excessive pride taken in unremarkable credentials.  First, the designation "Ivy League" should be limited to Princeton, Harvard, Yale and MIT.  Second, unless you scored 1600 (or 2400 under today's rules) on the SAT and graduated valedictorian, you really shouldn't be making any references to SAT scores or GPA.  Even then, you shouldn't be making reference to SAT scores or high school GPA unless it's on a college admission application.  Third, saying you saved two companies "almost $1 million combined" makes me think you quit working for them and allowed them to save the year's salary they would have paid before realizing you needed to be fired.

Previously: Histrionic Personality Disorder Part I, Part II.

Percy is the world's foremost authority on the proper tax treatment of carried interest.  He believes that carried interest should be taxed the same as the gains or income from which it is derived. Click here for all of his carried interest posts.

I went into a tailspin after watching Congressman Eric Cantor's (R-Va) interactive film, "Carried Interest Tax Adventure."  My wife became so alarmed about my mental state that she ordered my staff to wipe off the tips of the poison-tipped bone spears I use for wild boar hunting and World of Warcraft reenactments.  Here's a glimpse at the awfulness of the "film":



I'm glad Congressman Cantor is an ally in the struggle against efforts to impose discriminatory taxes on alternative asset managers, but public relations efforts that look like they were created by Eastern European porn merchants, or 5th-graders, are going to do us more harm than good.

On the plus side, my mood was lightened somewhat by the most recent stunt of the Service Employees International Union.  Here's what they did yesterday:


We can always count on the jesters at the SEIU to divert attention away from our own public relations failings.   Their unrelenting douchenozzlery will drive more people into our camp than any p.r. stunt we could dream up  for ourselves.  Previously. 

Front page news from today's Washington Post:

Senate Majority Leader Harry M. Reid (D-Nev.) has told private-equity firms in recent weeks that a tax-hike proposal they have spent millions of dollars to defeat will not get through the Senate this year, according to executives and lobbyists.

According to executives and lobbyists? I guess it's beneath the Sleuthy McSleuths at the WP to quote from Reid directly.  Here's Bloomberg, breaking the same news three months ago:

Senate Majority Leader Harry Reid said lawmakers won't take up legislation this year that would increase taxes on some managers of hedge funds, buyout firms and real-estate partnerships and may consider it in 2008.

I'm pleased to see a fellow Greensboro anarchist written up on the powerful Freakonomics blog today.  Liz Seymour is a 58 year-old Smith College graduate who, like me, is an anarchist and lives in an anarchist collective.  The only difference between Liz's band of anarchists and my own is that we are anarcho-capitalists.  Her group doesn't seem to appreciate capitalism so much.  Here's Stephen J. Dubner recounting a trip to Greensboro:

It was a very interesting few days, to say the least. I went dumpster diving for food with mom and daughter; hung out as they cooked up dinner for their Food Not Bombs charity; interviewed the roaming cast of characters that came through Liz's home, most of them young and punky and pissed off at someone or other. All of them tried to live as far off the grid of capitalism as they could. Sometimes this meant shoplifting or bartering or hitchhiking. A few of them participated in medical trials down in Research Triangle Park that paid a lot of money for a few days of swallowing pills and powders that they were assured wouldn't do them much damage.

My anarchist collective consists of 400 people, all of whom live and work on my estate in Greensboro.  We argue for a society based in voluntary trade of private property and services in order to maximize individual liberty and prosperity.  We reject the state on the grounds that states are aggressive entities which steal property (through taxation and expropriation), initiate aggression, are a compulsory monopoly on the use of defensive and/or punitive force, use their coercive powers to benefit some businesses and individuals at the expense of others, create monopolies, and restrict trade.  Our view is that you can't have freedom without free market capitalism.

We're still working on bringing our anti-capitalist anarchist brethren and sistren around to our way of thinking.


Darwin and Rand Walker and their friend Octavio, the head gardner's son, all live on the Percy Walker Anarchist Collective in Greensboro, North Carolina.

Economists at Elon University — just a few miles down the road from Greensboro — have confirmed what I have long known: returns on one's investment in grooming are quite substantial, particularly if you're a man.  From Bloomberg:

"Extra time spent grooming has a positive and significant effect on both men's and women's earnings, but the effect is considerably larger for men," [Elon economists Jayoti Das and Stephen DeLoach] said in a paper called "Mirror, Mirror on the Wall: The Effect of Time Spent Grooming on Wages."  "For men, every extra 10 minutes daily grooming increases their weekly wages by 6 percent.  However, women would have to nearly quadruple their daily grooming time to receive that much in additional wages."

This is welcome news for all of us:  people who aren't naturally attractive are incentivized to improve upon their appearance — whether it be via enhanced personal hygiene, exercise or surgical procedure — and the rest of us will enjoy having better people to look at.


Economists Das (left) and DeLoach look good enough to be making a decent wage.

One mistake I found in the paper: "Perhaps the recent 'metrosexual' phenomenon is a rational response to market forces."

The October 1, 2007 edition of Barron's contains its inaugural list of Best 50 Hedge Funds.  The rankings are based on average returns to investors over the last three years.  Funds smaller than $250 million and sector- or country-focused funds were not considered in compiling the list.

If you're wondering why some of your favorite big hedge funds aren't on the list, here's why:

A couple of the industry's top funds — quant-trading powerhouse Renaissance Technologies' Renaissance Medallion Fund and ESL Investments' flagship ESL Partners — each would have likely merited a spot. Both boasted returns of at least 35% annually for the three years through 2006. But we weren't able to obtain dependable year-to-date figures for either of them.

Two other pace-setters — SAC Capital and Appaloosa Management — offer funds that sources said would make our list, but we simply weren't able to obtain reliable figures. 

Percy Walker, whose omni-strategy fund would have placed first on our list, told us to go skullfuck ourselves when we asked him for confirmation of performance infomation we received from one of his investors.

You can find the top 50 list here (paid subscription required).  The top 25 are below.

Fund Name	3-year cumulative average return (through June 30, 2007)
1. RAB Special Situations	47.69%
2. The Children's Investment Fund	44.27%
3. Highland CDO Opportunity	43.98%
4. BTR Global Opportunity, Class D	43.42%
5. SR Phoenicia	43.10%
6. Atticus European	40.76%
7. Gradient Europe Fund A	39.18%
8. Polar Capital Paragon Absolute Return	38.00%
9. Paulson Enhanced Partners	37.97%
10. Firebird Global	37.18%
11. Passport Offshore-Global Strategy	36.28%
12. Tiger Asia Overseas	34.26%
13. Millennium Global High Yield	34.19%
14. Pershing Square	34.15%
15. Libra Fund	34.11%
16. Third Point Ultra	33.86%
17. JK Navigator	33.28%
18. Sprott Opportunities	33.21%
19. Horseman Global-Class A	32.80%
20. Riverside Wisdom World	32.61%
21. The Blenheim Fund	31.70%
22. Tontine Overseas	31.14%
23. Zweig-DiMenna Int'l	30.04%
24. Bay Harbour Partners	30.04%
25. Prism Partners	29.47%

"[Our hedge fund] has the top-rated performance for all hedge funds in the universe."

"...If God comes down and miraculously fixes everything that is going to drive us into a deep recession, we probably still would not lose money on [our commercial mortgaged-backed securities index shorts]..."

Go to FT Alphaville for the actual quoter.

An announcement from Duke University's Office of News and Communications:

Philanthropist David H. Murdock has given Duke a $35 million gift to support a massive biomedical research project at the North Carolina Research Campus (NCRC) in Kannapolis, university president Richard H. Brodhead and Chancellor for Health Affairs Dr. Victor J. Dzau announced Monday.

The name of the research project?  Measurement to Understand the Reclassification of Disease of Cabarrus and Kannapolis, or M.U.R.D.O.C.K.  Said President Brodhead, "We were stuck on the letter "C" until we realized that the City of Kannapolis is in Cabarrus County.  Boy, were we relieved!"

Because I like a challenge, I refuse to increase the pound test line I use when big game fishing.  This has resulted in a loss of a few million dollars worth of lures — four, to be exact.  I thought I'd go ahead and switch to live bait and give away my remaining lures to local blogger/anglers. 

Enjoy, Gerald and Eric.

 
The million dollar lure: crafted in just over 3 pounds of glimmering gold and platinum, then encrusted with 100 carats of diamonds and rubies (4,753 stones to be exact).

American billionaires are now more common than the sound of hand clapping in a Spoon song, and the latest Forbes list of the 400 richest Americans doesn't even include billionaires with less than $1.3 billion.  With my net worth now above $10 billion (see net worth calculator on the sidebar), I will now distinguish myself from other billionaire Americans by referring to myself as a decabillionaire.  I ask that you do the same.

How do I calculate my net worth?  The same way I calculate the net asset value of my fund:

1. any security that is listed or quoted on any securities exchange or similar electronic system and regularly traded thereon is valued at its last traded price;
2. any security that is not listed or quoted on any securities exchange or similar electronic system or is not regularly traded is valued at its fair market value as determined by me in good faith and having regard to objective third party market data, dealer quotations, the price at which any recent transaction in the security may have been effected, the size of the holding and such other factors as I may deem relevant;
3. investments, other than securities, that are dealt in or traded through a clearing firm or an exchange or through a financial institution will be valued by reference to the most recent official settlement price quoted by that clearing house, exchange or financial institution; and
4. investments, other than securities, including over-the-counter derivatives contracts, which are not dealt in or traded through a clearing firm or an exchange or through a financial institution will be valued on the basis of objective third party market data.

Of course, if I determine that the use of any of the above doesn't accurately reflect fair market value, I can use a different valuation methodology so long as I think it does a better job of reflecting fair market value.

A couple of other interesting tidbits from the latest Forbes list: nearly half of the 45 new additions made their fortunes from hedge funds and private equity funds, and two new members — Brothers Frank and Lorenzo Fertitta — made the list due to the success of Ultimate Fighting Championship.

UPDATED BELOW

Percy is the world's foremost authority on the proper tax treatment of carried interest.  He believes that carried interest should be taxed the same as the gains or income from which it is derived. Click here for all of his carried interest posts.

I am grateful for Congressman Pat Tiberi's skepticism over the wisdom of increasing taxes on the carried interest of fund managers.  I must, however, express my disapproval over the arguments he musters to justify his skepticism.  I'm particularly alarmed by gaseous sentimentality like this (from yesterday's Newark (Ohio) Advocate):

The carried interest tax proposal is complicated. It could have wide-ranging effects, not just to the people in air-conditioned, steel-and-metal skyscrapers, but to a hard-working mom looking forward to her retirement, to the little boy who hopes one day his neighborhood will be safe enough for his parents to let him ride his bike to the playground, or to the researcher who might be on the verge of discovering a new cancer treatment.

Please, let's leave the gaseous sentimentality to the private equity haters.  We need to stay focused: finance entrepreneurs, like all other types of entrepreneurs, take equity of little value on the front end.  Through a combination of hard work and capital at risk, the value of our equity may increase in value.  Why should we pay taxes on those increases at higher rates than other entrepreneurs?

UPDATE:  After posting this blog entry, I found Congressman John Linder expressing a similar view.  From today's Bloomberg:

"The principal sin in politics is overreaching," said Representative John Linder, a Georgia Republican who serves on the tax-writing House Ways and Means Committee and is undecided on the issue. "When they start talking about women and children, they're overreaching."

I encourage my readers to attend Greensboro's annual tech users' conference, ConvergeSouth, to be held on October 19 and 20.  This year's conference includes a film festival.  As I've pointed out before, hedge funds these days are throwing money at filmmakers.  If you want your film to be seen by a big-time hedge fund manager, you need to put it on a DVD and get it in the mail by September 25.  The festival is looking for short film, vlog, music video, animation and citizen journalism submissions.  Go here for film submission details.  Go here to register to attend.

Andy Coon, the festival's producer, provides more information in his weekly vlog:

ConvergeSouth Film Festival: Vlog Week 6

Add to My Profile | More Videos

Forbes identifies the people on the Forbes list of the 400 richest Americans over the last 25 years who have been convicted, acquitted or pardoned of crimes.  Listed alphabetically, here they are:

• Ivan Boesky (insider trading) (convicted)
• T. Cullen Davis (murder, attempted murder) (acquitted)
• John E. DuPont (murder) (convicted)
• Bernard Ebbers (fraud) (convicted)
• Pincus Green (tax evasion and fraud) (pardoned by Clinton before trial)
• Armand Hammer (illegal political contribution) (convicted)
• Leona Helmsley (tax evasion) (convicted)
• Nelson B. Hunt (market manipulation) (convicted)
• William B. Hunt (market manipulation) (convicted)
• Meyer Lansky (tax evasion) (acquitted)
• Michael Milken (insider trading) (convicted)
• Victor Posner (tax fraud) (convicted)
• Marc Rich (tax evasion and fraud) (pardoned by Clinton before trial)
• Leonardo P. Rizzuto (tax evasion) (pled guilty)
• Martha Stewart (obstruction of justice) (convicted)
• Alfred Taubman (price fixing) (convicted)
• Percy Walker (mayhem; unsanctioned ultimate warrior fight) (pled guilty)

Percy is the world's foremost authority on the proper tax treatment of carried interest.  He believes that carried interest should be taxed the same as the gains or income from which it is derived. Click here for all of his carried interest posts.

Once again, Professor Victor Fleischer, who I have challenged to a debate on the proper tax treatment of carried interest, has convinced the organizers of a carried interest tax discussion not to invite me to participate.  NYU School of Law's Tax Law Review and Law Review didn't invite me to its roundtable discussion "Does Atlas Shrug? Taxing the Rich and the Carried Interest Debate," which was held yesterday afternoon. 

NYU law professor, Daniel Shaviro, provides a helpful report.  As usual, the only person in attendance making any sense is a non-academic:

[Jon] Talisman[, partner, Capitol Tax Partners and former assistant secretary of the treasury for tax policy] gave the example: A and B both put cash in a partnership that develops shopping centers. Case 1, they participate equally, doing lots of work, and get a 50% return each, which unambiguously gets CG [capital gains] treatment under current law. Why should this change because A does a bit more work than B and thus gets 60-40. For that matter, why is A here different than if he did his own thing completely, blending a lot of labor income in developing the shopping centers with his own cash, and getting CG treatment for the whole thing. So what's the deal with disproportion being fatal to the CG result?

Exactly!  What's the deal?!?  I used almost precisely this example months ago.  The deal is this: people want to impose a penalty on the sweat equity on alternative asset managers, but NO OTHER HUMAN BEINGS.