Tag Archive for 'Warren Buffet'


GREENPOINT, Brooklyn, September 19th…Imagine a crap table without a DON’T PASS line. A betting line without a point spread.

Imagine a world where you’re only allowed to bet for–not against.

A world where the house always wins.

“Unthinkable,” says Efraim Durg, CEO of Durgometrics, a hedge fund which specializes in high-risk sports betting.

But that’s what the SEC created yesterday when it banned the short selling of 799 financial stocks.

According to Business Week the companies covered are an “A to Z of nation’s powerhouse financial institutions, including Goldman Sachs and Morgan Stanley and commercial banks running the gamut from Bank of America to Charles Schwab to (Warren Buffet’s $147,000 a share) Berkshire Hathaway.”

The SEC’s action was echoed by the UK’s Financial Services ban on all short selling in Great Britain. By the end of business CALPERS (California Public Employees Retirement Service) announced that it would no longer lend stocks to short sellers.

“The fat cats are really stacking the deck this time,” Durg says.

Short sellers are the pessimists of the market. They borrow a company’s stock and sell it immediately, then buy it back when it goes down and pocket the difference. Short selling is a legal, respectable form of trading and is credited with keeping markets healthy by identifying corrupt and mismanaged companies. It’s been in existence since 1609 when a Dutch trader oversold his own company, betting that the English Navy would sink his ships. It was blamed for the Dutch Black Tulip crisis, which tumbled the bourses of Europe in the 17th. Century. Herbert Hoover blamed short sellers for the Great Depression, while J Edgar Hoover (no relation) threatened to investigate and imprison them.

Hedge funds were invented by short sellers to allow them to make larger bets. Recently short sellers were actually credited with forcing down the price of oil. Now they are the convenient scapegoats for a crisis caused by the greed and stupidity of “long” sellers who believe their assets should keep on appreciating no matter badly they are managed.

The anti short-selling rules had the predictable result of driving up the market, the Dow rising by close to four hundred points. Some stocks saw a 20 to 30% rise in their value.

“What goes up must come down” says Durg. “It was the perfect market for a short seller. And I was the only game in town.”

As an unlicensed, unlisted and unregulated hedge fund, Durg could create a market of his own. He started small, making a “proposition” to his few “clients.”

“I told them to pick a stock,” Durg says. “They would pay me a small premium which would be my “vig.” If the stock went down after a negotiated period I’d be stuck the difference. If it went up they’d be stuck…”

Durg’s eyes widen as he relates what happened next. “I started with four thousand in reserve capital, but as word spread through the neighborhood I suddenly had twenty-six thousand dollars in action.”

Looking to cover his bets, Durg went to Bolek Bernankovicz who takes numbers out of Paulsenki’s Paint Store. Bolek kicked in forty thousand in exchange for twenty per cent of the profits.

“But it wasn’t enough,” Durg says. “I blame the Internet and credit crisis. All these execs from Bear Stearns and Lehman sitting around with nothing to do until they’re indicted. By lunch I was looking at a $213,000 in bets.”

Durg couldn’t stop now. The market was skyrocketing. He was making a fortune

Durg called the Bank of Wroclaw, but couldn’t get a loan. He was desperate.

“I ‘m a bookie, I can’t operate on leverage,” he says. “I have to back my bets with real money.”

In a panic Durg and Bolek called Fat Funzi, a private lender in Red Hook. Funzi drove a hard bargain demanding half of Durg’s action.

“I was carving myself up, but I needed the cash,” Durg says.

In the next hour there was a rash of bank robberies, smash and grabs and senior muggings as Funzi raised the capital for his investment.

But it still wasn’t enough. Durg’s phone was ringing. His web site was crashing.

“I was getting calls from Tiblisi and Kandahar,” he says. “PayPal said they would expedite for five per cent. I had no choice.”

By close of business Durg had $17 million on his books and counting. “I was doing great in this short term bull session,” he says. “As long as the big boys tried to cover up all the bad news I’d be okay. But it would only take a rumor to send the market plunging. I could see myself doing the perp walk…”

Durg panicked. “I called the Treasury Department and got a voice message saying there was a 17 day wait to talk to a bailout specialist.”

Then, Durg had a miraculous visitation. “It was like I rubbed a lamp and a genie appeared.”

Mahmoud, who owns Saudi Sundries on Huron Street came with a proposition of his own. There was a call to Riyadh.

“It was late at night,” Durg recalls. “I could hear music, women laughing. A guy called Bin Taleeb came on the phone. I like your business plan, my friend, he said. I will buy fifty per cent.”

Taleeb bought out Bolek for $100,000 and Funzi for $250,000. By morning with over $30 million on the books and more coming, Durg put an ad on Craig’s list for “Certified Financial Advisors.” In an hour he had eleven thousand applications.

He had been running his operation out of the walk-in box at Golubchik’s, but is now negotiating for the executive suite in the soon to be empty Lehman Building.

It all happened so quickly, he says. “I got rich. There was nothing to it.”

But now Durg has time to plan his next move. He has put together a Board of Directors of Wall Street veterans, among them Stan O’Neal, Richard Fuld and Jimmy Cayne.

“I’m thinking of cutting my bets into tranches and issuing short-sale backed securities,” he says. “Derivatives is where the real money is.”


GREENPOINT, Brooklyn, Aug. 24…Wanna make a fast dollar?

“Find a hacker and go to Harvard.”

That’s what Efraim Durg, CEO of Durgometrics, a hedge fund that specializes in high risk investments, is advising his clients these days.

Durg has just returned from the Federal Reserve Bank’s annual retreat in Jackson Hole, Wyoming, where the mood was dismal. Central bankers from all over the world were puzzled and distressed by the slow but steady erosion in the global economy.

“We are in the midst of the greatest financial crisis since World War 2,” said Stanley Fischer, governor of the Bank of Israel. Yutaka Yamaguchi, former Deputy Governor of the Bank of Japan warned that the world was in a period of “exceptional uncertainty.”

But Durg is optimistic. “The economy is like a seesaw,” he says. “if somebody is down that means somebody else is up.”

Durg says he has found two classes of investors that are doing exceptionally well–US Senators and university endowment funds.

“Our research shows that the net worth of all US Senators has risen almost 20% since 2004,” he says. “And this same period recorded substantial gains for endowment funds.”

Durg quoted a report in the Washington Spectator, which said that Senators who played the market earned an “abnormal rate of return” According to the report: “Senators consistently anticipated movements in stock prices; they often purchased stocks before prices took off like a rocket and revealed an uncanny ability to sell just when a stock was about to flatten out.”

Senators and their spouses outperformed the market by by around ten per cent annually, the report said.

“Nobody gets results like this in the financial world,” said Professor Tom Ferguson of UMass-Boston, “Any manager of a mutual fund who beats the market by two per cent is considered a genius.”

“Just shows you how clever these politicians are,” says Durg with a knowing wink.

University endowments have done almost as well in this down market. The top fifty funds have risen over a 100% in value. The managers of these funds may have done well in former jobs, but they became financial wizards when they went to work in the Academe.

“Must be the food in the campus cafeteria,” says Durg with an ironic tap of his nose.

But Durg says the “numbers really explode” when you pair a Senator with his/her alma mater.

“Take Senator Kennedy (Edward Kennedy, D. Mass.) for example,” he says. “During the periods 2004 to the end of fiscal year 2006 his maximum net worth rose 300% from $51 million to $162 million. As Kennedy contributed less than 1% of his income to charity he was able to spend most of it on his lifestyle, his homes and especially his beloved yacht where he recuperated after cancer surgery.”

At the same time Kennedy (Harvard ’56) was getting rich his alma mater’s Endowment Fund was getting richer, growing at a rate of 23% per annum to $35 billion at the end of fiscal 2007. And this year with the finest minds in finance going bankrupt or to jail the Harvard Fund is up 9%.

This means that it has $1,456, 940 to spend on every student, not counting tuition and grants. But the fund plows most of its profits back into investments.

“University Endowments are run by managers, not educators,” says Durg. “They just want to use their money to make more money.”

What’s behind this incredible success? Do lobbyists and anxious constituents feed inside information to Senators? Do wealthy alumni tip off their endowment fund managers?

Durg refuses to speculate. “If you catch a guy playing with loaded dice, you don’t turn him in, you get a piece of his action.”

Unlike Warren Buffet, Senators and endowment funds don’t share their wisdom.

“You’ll have to get shady to get rich,” Durg says.

He suggests trying to corrupt an employee of the endowment or the senator’s staff–”maybe drugs or sexual blackmail, incriminating e mails or photos–” and getting information on the daily trades.”

Or planting a mole inside the endowment–”an MBA with a streak of larceny–” and have him spy from the inside.

You can always find a cleaning lady or maintenance person to bring you the all the trash from the trading floor.

But the best way is to find a hacker–”some nosepicker in Slovenia or Mindanao–”to plant a keystroke in their computers that sends all their transactions right back to Mama.”

Just be careful not to get caught.

“Insider trading is nothing,” Durg says. “Senators can get away with murder, too.”