Saturday, April 13, 2013

The Mitigator: John Paulson's A Maverick, A Visionary, A Legend! He Founds Firms To Not Make A Profit (And Pays No Taxes!) and The Truth About Obama's Social Security Cuts

Billionaire hedge-fund manager John Paulson, who last month considered a move to Puerto Rico to lower his tax bill, is starting a fund to help investors reduce the amount they owe to the U.S. government.

Paulson’s $18 billion hedge-fund firm invited prospective clients to an April 24 event at Paulson & Co.’s New York offices, where the 57-year-old founder will talk about the Paulson Partners Premium LP Fund, described as a “risk- arbitrage fund for investors looking to mitigate income taxes.”

The 75-minute presentation will include a 15-minute discussion of tax-deferred or tax-free investing in the fund,1 according to the invitation, a copy of which was obtained by Bloomberg News . . . Paulson’s Advantage Plus Fund, once part of the firm’s largest strategy, has fallen about 58 percent from the end of 2010 through March, meaning investors have paid no taxes on the fund in the last two years.

All five of Paulson’s strategies began the year below their so-called high-water marks, putting longer-term clients in a favorable tax position . . . Paulson and his employees may benefit from the new fund, as they account for more than 60 percent of the firm’s assets.
While this is all pretty exciting for Paulson & Co, not everyone is as thrilled.

“He seems to be more focused on avoiding income taxes than on generating returns for his investors,” said Brad Alford, head of Atlanta-based Alpha Capital Management LLC, who runs amutual fund of funds that invests in hedge funds.
What Brad Alford doesn’t understand is that John Paulson is a maverick. A legend. A visionary the likes of which this industry has never seen. He doesn’t think avoiding taxes and caring about investors are mutually exclusive philosophies.

In short, some managers see tax bills as they are and say ‘pay.’ John Paulson sees tax bills that never were, and says “pay not.”

John Paulson to Start Fund to Reduce Clients’ Tax Bills [Bloomberg]

And if you realize how far the deficit has been reduced since 2009 (cut in half!) and how ridiculous an idea (in light of the war/tax cutting borrowing from the Social Security trust fund occurring since Reagan's Junta) it was to try to sell Obama's Social Security cuts as a progressive response to the Republican refusal to vote for any type of tax increase on the wealthy, you'll enjoy Bill Greider's analysis.

When the Congressional Budget Office is required to “score” Obama’s so-called cost-of-living reform, it will be compelled to announce that whacking the old folks contributes not a penny to reducing the federal government’s deficits.

In fact, there is an even bigger lie concealed by the fiscal scolds and ignored by witless media, too. Again and again, self-righteous critics have portrayed Social Security as the profligate monster borrowing from the Treasury and sucking the life out of federal government.

Guess what? It's the other way around. The federal government borrows from Social Security. The Treasury has been borrowing from the Social Security Trust Fund for 30 years, and the debt to Social Security beneficiaries now totals nearly $3 trillion. The day is approaching when that money will be needed for its original purpose: paying Social Security benefits to the working people who contributed to the fund.

That is the real crisis that makes the financial barons and their media collaborators so anxious to cut Social Security benefits. They would like to get out of repaying the debt—that is, giving the money back to the people who earned it. The only way to do this is cut the benefits—over and over again. Count on it. If the president and Congress succeed in this malicious scheme, they will come back again and again to cut more and more. If the politicians join this sordid conspiracy, voters should come after them with pitchforks and torches.

How much will elected progressives budge on Obama's scheme? Read John Nichols's analysis.

And from my man, Dean Baker, we learn even more of the truth:

In November, over 250 economists and social-insurance experts signed a statement opposing the proposal, saying there was "no empirical basis for reducing…Social Security" with the chained CPI inflation adjustment because the elderly experience a higher rate of inflation than the rest of the population.

Dean Baker of the Center for Economic and Policy Research says that switching to the chained CPI would cut about 2 percent of seniors' retirement income over 20 years. By contrast, the hit that the rich got from Obama's New Year's tax increases was only 0.6 percent.

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