Hedge Fund Criminal Values To Afghanistan

Hey, looks like the Afghanis have hedge fund criminals too!

KABUL, Afghanistan — One of the principal owners of the Afghan bank at the center of an accelerating financial crisis here said depositors had withdrawn $180 million in the past two days. He predicted a “revolution” in the country’s financial system unless the Afghan government and the United States moved quickly to help stabilize the bank.

Khalilullah Frozi, one of the two largest shareholders of Kabul Bank, said reports indicating that the institution had lost as much as $300 million were overstated. But he predicted that if Afghan depositors continued to withdraw their money at the current rate, Kabul Bank would almost certainly collapse, undermining confidence in the nascent financial system the Afghans have been trying to build with American help.

“If this goes on, we won’t survive,” Mr. Frozi said in an interview. “If people lose trust in the banks, there will be a revolution in the financial system.”

Afghan leaders promised to guarantee deposits in an attempt to arrest the panic, which began earlier this week when the country’s top banking officials demanded the resignations of Mr. Frozi, the bank’s chief executive, and the bank’s chairman, Sherkhan Farnood.

Afghan and American officials say the two men presided over the bank in a reckless and freewheeling manner, doling out millions to allies of President Hamid Karzai and pouring money into risky investments that crashed.

The bank’s troubles — and the corruption associated with them — are posing a direct challenge to the country’s fledgling financial system, which was built under American guidance after the collapse of the Taliban government in 2001. Kabul Bank, which counts a brother of President Karzai among its politically connected shareholders, illustrates the intertwining of political and economic interests in Afghanistan. Afghan and American regulators said the bank’s political connections had shielded it from scrutiny until now.

If the loss of confidence spreads beyond Kabul Bank, it seems almost certain to strain the resources of the Afghan government — and make it more likely that the United States will be forced to intervene. There were no indications yet that the panic was spreading, but American and Afghan officials said other Afghan banks might face similar troubles.

It brings a tear to my eye to see that we have infused American free market values so quickly in Afghanistan.

Can charter schools run by the Taliban and Jihadis for Education Reform (JFER) be far behind?

Everybody Loses Except For The Banksters and Hedge Funders

The Wall Street Journal says the 2000's have been the worst decade for stock performance in America ever.

The article is behind a pay wall, but I'm posting it here in it's entirety so you don't have to give Rupert Murdoch any money for it:

The U.S. stock market is wrapping up what is likely to be its worst decade ever.

In nearly 200 years of recorded stock-market history, no calendar decade has seen such a dismal performance as the 2000s.

Investors would have been better off investing in pretty much anything else, from bonds to gold or even just stuffing money under a mattress. Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade.

The period has provided a lesson for ordinary Americans who used stocks as their primary way of saving for retirement.

Many investors were lured to the stock market by the bull market that began in the early 1980s and gained force through the 1990s. But coming out of the 1990s, the best calendar decade in history with a 17.6% average annual gain, stocks simply had gotten too expensive. Companies also pared dividends, cutting into investor returns. And in a time of financial panic like 2008, stocks were a terrible place to invest.

With two weeks to go in 2009, the declines since the end of 1999 make the last 10 years the worst calendar decade for stocks going back to the 1820s, when reliable stock market records begin, according to data compiled by Yale University finance professor William Goetzmann. He estimates it would take a 3.6% rise between now and year end for the decade to come in better than the 0.2% decline suffered by stocks during the Depression years of the 1930s.

The past decade also well underperformed other decades with major financial panics, such as in 1907 and 1893.

"The last 10 years have been a nightmare, really poor," for U.S. stocks, said Michele Gambera, chief economist at Ibbotson Associates.

While the overall market trend has been a steady march upward, the last decade is a reminder that stocks can decline over long periods of time, he said.

"It's not frequent, but it can happen," Mr. Gambera said.

To some degree these statistics are a quirk of the calendar, based on when the 10-year period starts and finishes. The 10-year periods ending in 1937 and 1938 were worse than the most recent calendar decade because they capture the full effect of stocks hitting their peak in 1929 and the October crash of that year.

From 2000 through November 2009, investors would have been far better off owning bonds, which posted gains ranging from 5.6% to more than 8% depending on the sector, according to Ibbotson. Gold was the best-performing asset, up 15% a year this decade after losing 3% each year during the 1990s.

This past decade looks even worse when the impact of inflation is considered.

Since the end of 1999, the Standard & Poor's 500-stock index has lost an average of 3.3% a year on an inflation-adjusted basis, compared with a 1.8% average annual gain during the 1930s when deflation afflicted the economy, according to data compiled by Charles Jones, finance professor at North Carolina State University. His data use dividend estimates for 2009 and the consumer price index for the 12 months through November.

Even the 1970s, when a bear market was coupled with inflation, wasn't as bad as the most recent period. The S&P 500 lost 1.4% after inflation during that decade.

That is especially disappointing news for investors, considering that a key goal of investing in stocks is to increase money faster than inflation.

"This decade is the big loser," said Mr. Jones.

For investors counting on stocks for retirement plans, the most recent decade means many have fallen behind retirement goals. Many financial plans assume a 10% annual return for stocks over the long term, but over the last 20 years, the S&P 500 is registering 8.2% annual gains.

Should stocks average 10% a year for the next decade, that would lift the 30-year average return to only 8.8%, said North Carolina State's Mr. Jones. It is even worse news for those who started investing in 2000; a 10% return a year would get them up to only 4.4% a year.

There were ways to make money in U.S. stocks during the last decade. But the returns paled in comparison with those posted in the 1990s.

Of the 30 stocks today that comprise the Dow Jones Industrial Average, only 13 are up since the end of 1999, and just two, Caterpillar Inc. and United Technologies Corp., doubled over the 10-year span.

So what went wrong for the U.S. stock market?

For starters, it turned out that the old rules of valuation matter.

"We came into this decade horribly overpriced," said Jeremy Grantham, co-founder of money managers GMO LLC.

In late 1999, the stocks in the S&P 500 were trading at about an all-time high of 44 times earnings, based on Yale professor Robert Shiller's measure, which tracks prices compared with 10-year earnings and adjusts for inflation. That compares with a long-run average of about 16.

Buying at those kinds of values, "you'd better believe you're going to get dismal returns for a considerable chunk of time," said Mr. Grantham, whose firm predicted 10 years ago that the S&P 500 likely would lose nearly 2% a year in the 10 years through 2009.

Despite the woeful returns this decade, stocks today aren't a steal. The S&P is trading at a price-to-earnings ratio of about 20 on Mr. Shiller's measure.

Mr. Grantham thinks U.S. large-cap stocks are about 30% overpriced, which means returns should be about 30% less than their long-term average for the next seven years. That means returns of just 1.6% a year before adding in inflation.

Another hurdle for the stock market has been the decline in dividends that began in the late 1980s.

Over the long term, dividends have played an important role in helping stocks achieve a 9.5% average annual return since 1926. But since that year, the average yield on S&P 500 stocks was roughly 4%. This decade it has averaged about 1.8%, said North Carolina State's Mr. Jones.

That difference "doesn't sound like much," said Mr. Jones, "but you've got to make it up through price appreciation." Unless dividends rise back toward their long-term averages, Mr. Jones thinks investors may need to lower expectations. Rather than the nearly 10% a year that has been the historical average, stocks may be good for only about 7%.

In addition, Calculated Risk notes that we have fewer payroll jobs in 2009 than there were in 1999.

Fewer jobs, high unemployment, dismal stock market performance - gee, heckuva decade!

But of course somebody made money during the past 10 years...I wonder who that could be?

Oh, yeah - the connected people and institutions on Wall Street who gambled with their investments, then got bailed out by the government and gambled with taxpayer money.

Those guys did just fine.

And of course now they want to bring the magic they've brought to the American economy to the American public education system.

Imagine what that's going to look like in 10 years.