Welcome to Business Class. This week, our travels take us to California's Sierra Nevada, where former Fed bailout chief Neel Kashkari finds his inner lumberjack; a financial gloom-fest in Sussex; and the ghetto, where MC Hammer is spinning gold into, well, money. So set your chair to recline and enjoy the ride.
The rise and rise of Neel Kashkari is an intriguing tale. It was intriguing when, as a 35-year-old business-school graduate he was appointed by Treasury Secretary Hank Paulson as the Bush Administration's federal bailout chief, overseer of the $700 billion set aside to help US banks out of the GFC mire. It was intriguing when he quit said post after only seven months. And it was intriguing when it was announced this week that he had been hired by Pimco to head up the company's new investment initiatives as it boldly ventures into managed equities. As the FT's Alphaville points out, this latest move "is likely to provoke criticism of the 'revolving door' between government and the financial sector". Kashkari is a Goldman Sachs alumnus, as is his ex-boss, Paulson.
But conspiracy theories aside, one of the most intriguing things about the Kashkari saga is the man himself – that is, if the extraordinary portrait painted by last weekend's epic Washington Post profile is anything to go by. We find our hero living in a log cabin "off the map" somewhere in the wilds of California's Nevada County, where he is "tramping on the pine-needled tracks of black bears", sporting a six-day growth and a "sweater he hasn't changed in three or four days", felling trees and undergoing a self-imposed 10-step "Washington detox". It is a must-read, with fantastic quotes. For example, here's our man on the GFC: "It's like a dream ... Sometimes I think: Was it real?" Oh yes, Neel. Ever-so real.
If you can't bring yourself to read the whole thing – it's five internet pages long, after all – you owe it to yourself, at least, to look at the slideshow that accompanies the piece. A small sample of this has been nicely repackaged, with some added commentary, by Dealbreaker’s Bess Levin.
Pity the banker, for he is misunderstood
The financial services world was rocked this week by the news that the UK's Chancellor of the Exchequer Alistair Darling was introducing a one-off 50 per cent tax on bankers' bonuses. Said Darling: "There are some banks who still believe their priority is to pay substantial bonuses ... I am giving them a choice. They can use their profits to build up their capital base. If they insist on paying substantial rewards, I am determined to claw money back for the taxpayer.”
The announcement was met by resounding condemnation from, well, bankers and, er, banking lobbyists, and resounding praise from almost everyone else – most notably from across the Atlantic (eg. here, here and here), where the major players of American business media bemoaned the fact that the move was unlikely to be emulated by the Obama Administration.
Meanwhile, somewhere in the Sussex countryside, a hard rain of truth was falling on the Future of Finance Initiative, a conference organised by The Wall Street Journal. Leading the assault was former US Federal Reserve chairman Paul Volcker. Here are some choice moments in his invective, courtesy of The Times and The Telegraph:
On pay: "Has there been one financial leader to say this is really excessive? Wake up, gentlemen. Your response, I can only say, has been inadequate.”
On innovation: "I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth – one shred of evidence."
On high-risk trading (particularly in CDS, which at the same conference, billionaire investor George Soros described as "a toxic market"): "Proprietary trading should be pushed out of investment banks and to hedge funds where they belong".
And his message to hedge funds: "If you fail, fail. I'm not going to help you. Your stock is gone, creditors are at risk, but no one else is affected."
Even shareholders are jumping on the bank-bashing bandwagon. Hong Kong's South China Morning Post reports that the usually mild-mannered Bank of East Asia chairman David Li Kwok-po lost his cool in a "testy exchange with an investor who persistently questioned the bank's fund-raising plans". The awkward scene – which ended with Li telling the shareholder, "if you are not happy, you can sell the shares" – captivated the other small investors who, says SCMP, usually turn up "for the dim sum and soft-drinks". Defending himself after the meeting, Li summed up the sad plight of all bankers: "I am not losing my temper but I only feel helpless when some shareholders do not understand our action." So true.
There's gold in them there high-rises
Why take Wall Street guru Jon Paulson's word for it? Gold is so hot right now, and you know how we know? MC Hammer told us. Well, he didn't actually tell us, but the 80s rapper and fashion icon this week became an equity partner in the online pawn shop Cash4Gold. Launched two years ago in the US, the company ingeniously turns customers' "used gold" into money – you send in your stuff, they email you a quote, if you're happy with the price they send you a cheque.
Mr Hammer had previously done some advertising work for the company – most notably, a 30 second ad for this year's Superbowl – which was founded in the US two years ago by CEO Jeff Aronson. Aronson's timing was good, and the company attracted the attention of some big-hitting venture capitalists, including Luxembourg-based Mangrove Partners and Boston’s General Catalyst and Highland Capital Partners.
Now, with the price of gold soaring, it's Hammer time.
But make no mistake, this is not all about money for Mr Hammer. As Fortune's Jessi Hempel points out, Cash4Gold spoke to the famously entrepreneurial rapper's "technology passions". Says Hammer: "If you don't think this is a technology driven business, what do you think it takes when we have 5000 pieces of gold in a warehouse and one person asks for their piece back?" Wow.
Cash4Gold extended its reach to Britain in July and, in keeping with a winning formula, has recruited Goldie, the British drum 'n' bass artist famous for his gold teeth, for promotional purposes.
So here's wishing Mr Hammer, Mr Goldie and Mr Aronson the best of luck. As Hempel says, they may need it: "A class-action suit filed in October alleges the company never mailed some people their cheques. It alleges that Cash4Gold frequently claims that it has lost items that were mailed in for estimates and offers poor customer service to people trying to follow up on the lost items." Technological faults, perhaps.
Sticking with the technology theme, Slate's William Saletan has written a nice piece on how advances in communications technology are changing the face of infidelity and bringing the modern day Lothario (If only we had a recent example!) undone.
Elsewhere, for those who have the time, we have "oft-bearish chief economist and chief market strategist for Toronto money manager Gluskin Sheff Associates" David Rosenberg, with his 10 reasons why the stock market "sweet spot" is over (with thanks to David Parkinson on the Globe and Mail's Market Blog).