Ed Butowsky: Obama ‘Doing Everything (He) Can to Destroy This Country Under the Policies We Have Right Now’

June 9, 2016

Financial manager Ed Butowsky appeared on Breitbart News Saturday with host Matt Boyle to discuss the latest dismal jobs report and how inadequate job growth is under President Barack Obama and will be under Hillary Clinton if she wins the White House. “Anybody thinking about voting for Hillary Clinton in any way, shape, or form needs to understand what I’m about to say,” said Butowsky, adding, “The reason we need new jobs is for tax revenue.”
“We’re doing everything we can to destroy this country under the policies we have right now,” concluded Butowsky.

Butowsky mainly addressed America’s spiraling deficit and what it will take to correct the dangerous trend of out-of-control government spending.

Butowsky also addressed the issue in a recent Breitbart News article:

Write down $500 billion. That was our deficit last year.

Now, divide by two. The result – $250 billion – is how much more we should have paid in income taxes, because income taxes provide half our revenue.

Now, where can we find $250 billion? One way is to raise taxes. The other – and I vote for this one – is to create more people who pay them.

Back to the math. The average American makes $50,000 a year and pays 25 percent – $12,500 – in income taxes. Divide 250 billion by 12,500 and you get 20 million – the number of people we need to put in new jobs in one year to cover our nut.

We’re almost done. Divide 20 million by 12, the number of months in a year, and the result – 1.67 million – is the number of new jobs we need to add every month to overcome half the deficit.

That’s right … 1.67 million new jobs a month.

Returns are big, but the jury is still out on lawsuit investing

May 21, 2016

In addition to risks and returns, advisers need to worry about moral and ethical issues

Published in Investment News
May 20, 2016 @ 9:30 am
By Jeff Benjamin

Heads up, financial advisers, because some of the latest performance from a fledgling investment category known as litigation finance could start catching the attention of your clients.

The idea of investing capital to help finance a lawsuit is not completely new, but the May 16 passage of a provision of the 2012 JOBS Act could pave the way for lawsuit-investing pitches at the retail investor level.

There is no denying the risks that a lawsuit could lose or result in a minimal settlement. But when the latest figures are showing annualized returns in the 90% range, advisers should expect the noise surrounding litigation finance to keep getting louder.

“That’s what you get in these low-interest-rate markets; all the weird [stuff] comes out,” said Ed Butowsky, managing partner at Chapwood Capital Investment Management.

Mr. Butowsky is not a fan of investing in lawsuits, and wouldn’t advise his clients to do so, the same way he is personally opposed to investing in marijuana-related businesses.

Part of his issue with litigation finance is that he believes gathering investment capital to finance lawsuits will lead to more lawsuits.

“I don’t like the business, and no matter how good it looks I’m not going to invest in that because I just don’t like to be associated with that kind of stuff,” he said. “There’s lots of things where the returns look strong, but you also have to check your moral character. I don’t like extortion and that’s what I think a lot of plaintiff attorneys do.”

It would be difficult to dispute that the returns do look good.

TrialFunder, which funded its first lawsuit last summer, is touting a 108.7% return over nine months from the settlement of a police brutality case.

In another investment on the platform, investors gained 98% by advancing the settlement payout from a trip-and-fall injury lawsuit.

Amoush Hakimi, a practicing attorney and TrialFunder chief executive, said he is just weeks away from rolling out a multi-lawsuit fund to be offered on the platform.

For now, the litigation finance platforms are all still limited to accredited investors, but the May 16 expansion of the JOBS Act paves the way for such platforms to potentially solicit capital from retail-class investors.

Mr. Hakimi said he is already eyeing a retail platform, but that he is “waiting for more clarity on the rules.”

The returns on these types of investment are so high, he said, because “most people price the risk way too high, which kind of accounts for the high returns.”

“Part of our mission is to show that this is a viable alternative asset class for non-institutional investors,” Mr. Hakimi added.

Some of the wrinkles that will need to be ironed out on any retail-oriented platforms will involve the fee structures, which currently include a 20% take of the performance, but no ongoing management fee on most platforms.

Another rub that might turn off some investors is the lack of liquidity.

The platforms allocate capital to lawsuits at various stages, but it typically means at least of couple of years of waiting for a payoff in the form of a settlement.

Former investment banker Jay Greenberg co-founded the LexShares litigation finance platform in November 2014 because he saw the potential returns as “incredibly uncorrelated” with traditional investments.

“What drew me to this market is that the return profile is just associated with the courtroom vacuum,” he said. “I did not know a lawsuit could be a capital asset.”

Operating virtually on the opposite end of the type of lawsuits funded on TrialFunder, Mr. Greenberg said his focus is on commercial litigation.

LexShares, which deployed $5 million last year, is slated to deploy $20 million this year helping to finance lawsuits.

Mr. Greenberg said he has so far not funded a deal that lost money, and said his two most recent lawsuits returned 93% and 88% net of fees.

Paul Schatz, president of Heritage Capital, said he had never heard of litigation finance, and described it as “definitely an out-of-the-box, non-correlated investment with huge upside and downside.”

“I would have to put it in the very aggressive category with the potential for a homerun or a strikeout,” he added. “The risks are multi-fold, including the unknown. I would have to get a very deep understanding of the process before I would ever consider investing, but it’s definitely something new and sexy.”

Dick Pfister, founder and chief executive of AlphaCore Capital, attributed the high returns to the relative lack of competition. But said that is changing rapidly, and the investment returns should be expected to start dropping.

“You’ve got more investment platforms searching for lawsuits, so the lawyers now have more options, and the lawyers are going to bid for the lowest loan yield,” he said.

But beyond the investment pros and cons, Mr. Pfister also sees the moral and ethical sides of the debate over litigation finance.

“On one hand, you’ve got the guy who couldn’t fund a lawsuit against a big corporation and now has access to capital,” he said. “But the flipside is that this will start to fund frivolous lawsuits, and those will offer higher yields because they have less chance of winning.”

The $3 Billion Money Manager

December 14, 2015
Published July 23rd, 2008 in D Magazine By: Zac Crain

Ed Butowsky goes to work on holidays. It’s not just because he manages $3 billion in assets for high-profile clients. It’s because he loves his job.

Ed Butwosky shouldn’t be here. It’s Memorial Day. He should be somewhere enjoying himself-the lake, maybe, or anywhere else the flip-flops and shorts he’s wearing would be appropriate attire. At the very least, since it’s not just Memorial Day but the morning of Memorial Day, he should be at home, deciding if he’s ready to get out of bed yet.

But no, he is here, at the suite of offices his company, Chapwood Capital Investment Management, occupies in an Addison high-rise overlooking the Dallas North Tollway. Butowsky not only suggested it, he insisted on it. “I’m going in anyway,” he said, “so you might as well meet me there.”

Ed Butowsky in D Magazine 07-23-2008That he’s here this morning isn’t why Butowsky’s client list is littered with names straight out of the pages of Entertainment Weekly and Sports Illustrated. Showing up to work on Memorial Day isn’t a bonus; it’s an expectation. Athletes and actors and the rest of the high-net-worth set don’t come to Butowsky because of the degree from Wharton either, or because he spent a large chunk of his professional life, from 1987 to 2002, at Morgan Stanley, the last five years of that as the No. 1 guy in the nation. That is part of it, sure. You want whoever is handling your money to have some skins on the wall, especially at this level. Butowsky and Chapwood’s handful of employees manage assets worth more than $3 billion.

The real reason those boldfaced names flock to Ed Butowsky is simple: he doesn’t care.

He doesn’t care if he’s dealing with an A-list celebrity, an All-Star, or an anonymous anybody who happened to fall into a pile of cash. Butowsky is hard to impress, partly because of his New York City upbringing (his father was head of enforcement for the SEC, so he “grew up around the wealthiest people in the world”) and partly because one of the guys he was brought up with happens to be famous (his best friend, Hancock director Peter Berg). He doesn’t even particularly care if the people who come to him decide to hire him and Chapwood to manage their portfolios-though, obviously, that would be nice.

He only cares that the money, no matter to whom it belongs, is invested the right way, even if it isn’t with him. This is the basis of the company’s new division, Chapwood Forensics, which analyzes portfolios, looking for any hint of weakness. In that sense, he cares too much.

“Money doesn’t care if it’s [Los Angeles Angels outfielder] Torii Hunter’s money or somebody else’s money,” Butowsky says. “What money cares about is that it’s compounded properly with low volatility. That’s how I think about it. So I don’t really care whose money it is. It’s kind of fun to have people like that as your client. But I care more about the person who’s sitting there with an account at some investment firm, who thinks he’s being taken care of, and he’s not. He thinks that person has his best interest, and he doesn’t. And I can prove it. I don’t need the big, beautiful suit and the red tie, although I wore it for 20 years. I don’t need that to sit down and prove it.”

Sitting at the long conference table that dominates the dacor at one end of the office suite, Butowsky, 46, looks a bit like a former offensive lineman gone to seed. He’s not tall, but he’s big and broad, his red polo shirt filled to capacity at all angles. His casual dress is his only concession to the holiday. The table in front of him is piled with stacks of paper filled with the sort of research that has made Chapwood a success, even though he’s talking investment strategy with a man whose portfolio consists of an underperforming and long-neglected 401(k). He bobs in his chair as he lets loose with earnest, New York-accented monologues about, among other things, the effect of the demise of the Glass-Steagall Act. (Long story short: institutional chaos.)

So you don’t get the gossipy session one might expect-or at least hope for-from an affable guy who rubs decimals with mostly famous folks for a living. (He does talk briefly about being friends with golfer Sergio Garcia and drops this financial community blind item: “There’s a group here in town that manages money for some athletes that’s overcharging all of their athletes at least 1 percent.”) Instead, you get a lesson on the finer points of modern portfolio theory, which Butowsky, along with the faculty at Wharton, Harvard, and most business schools, believes is the key to smart investment. As quick as he proffers a name-say, an action star who’s hoisted a film franchise or two on his overly muscled back-he pulls it back out of sight, in favor of numbers-heavy treatises on the state of the financial advising industry.

While that discussion isn’t as entertaining as the one that exists merely as possibility, it turns out to be almost as interesting and certainly more eye-opening.

“What is happening in our industry, in my mind, is criminal,” Butowsky says. “Investing has become more of a game of PR and image than the facts. What I saw going on out there just made me sick to my stomach. Because you had portfolios that were so far out of balance, and they still are today, and they’re still being sold today.”

Chapwood Forensics’ analysis-which the company offers free of charge-can be boiled down to three key questions: what is my portfolio’s historical rate of return versus its standard deviation? What is the Sharpe Ratio of my portfolio, and what should it be? What are the total fees being charged? (The answers, in order: 60 percent or less, one or higher, and 1 percent or less.) It’s okay if you don’t understand the answers. It’s okay if you don’t even understand the questions. Butowsky understands. “Because it’s confusing, people don’t talk about it,” he says. “But because it’s confusing doesn’t mean it shouldn’t be talked about.”

Confusion is Butowsky’s biggest enemy. He tells a story about a young NFL player whose financial advisor told the player he couldn’t say how much he was being charged to manage his tax-exempt bonds because of the Patriot Act. “The player said, “Oh, he can’t tell me because of the Patriot Act,’ ” Butowsky says. “I said, “That’s not true. Will you please tell us?’ He said, “No, I can’t tell you.’ Turns out, he’s being charged 2 percent to manage his tax-exempt bonds. But the financial advisor told him what? It doesn’t matter how much we charge you because you can write it off. Well, guess what? When we do our forensics, we do a lot more detail work. You can’t write off the money management of tax-exempt bonds. So this guy is being charged $146,000 more a year than he should be.”

Much worse was the case of a former NFL player. He was being charged $55,000 to do his taxes. He was being charged 1 percent to put his 529 plan on his statement, even though his financial advisor didn’t even manage it. His financial team was using his money to get its own equity positions in private deals, then charging him another 1 percent for that. In all, he was being overcharged to the tune of $294,000 a year, and it had been going on for 10 years.

“That’s probably the worst I’ve seen,” Butowsky says. “But it’s happening everywhere. I don’t want to come across as the guy who’s saying everybody is bad. I want to come across as the guy who says, “Learn. Understand this. Don’t just rely on somebody because they’re nice to you. Don’t rely on somebody just because they got you a seat at their company’s presentation.”

That’s why Ed Butowsky is at work this morning. Not because he has to be. Because he wants to be. Because he needs to be. Because every percent matters.

“Look at me,” he says. “I’ve done this 20-something years and it’s Memorial Day and I’m, like, excited. I’ve got passion about this because I finally found something I’m good at in this world. I mean, this is it. I can’t play an instrument. I’m not a good singer. I’m obviously not good at working out. There’s one thing I really care about. I care about this.”



    Sunny Spin On Employment Numbers Belies Deficit, National Debt Crisis

    December 6, 2015

    By Ed Butowsky
    Published December 04, 2015 FoxNews.com

    The U.S. Bureau of Labor Statistics released its monthly Employment Situation Summary Friday at 8:30 a.m. Eastern Time. Here’s the first paragraph, with a bit of editing on my part:

    Blah blah blah Total nonfarm payroll employment increased by blah blah blah 271,000 in October, and the unemployment blah blah blah rate was essentially unchanged blah blah blah at 5.0 percent, the U.S. blah blah blah Bureau of Labor Statistics reported today. Blah blah blah Job gains occurred in professional blah blah blah and business services, health care, retail trade, blah blah blah food services and drinking places, and blah blah blah construction blah blah blah blah blah.

    So once again, the monthly “Job Report” came out and the media did what the media always does: Regurgitate the press release and recite the numbers – the same old blah blah blah – without providing so much as a shred of context. Prior to the report , economists predicted a number less than 271,000, so the media dutifully reported that the number of new jobs beat the forecast. GOOD NEWS!!!

    Now you can panic. The formula establishes that we need to average 1.67 million jobs per month to offset the half of the $500 billion deficit that must be raised through income taxes.

    That’s how it goes these days when it comes to economic news. The talking heads don’t understand any of it, so they just say the economy added blah blah blah jobs, and we, the people, nod our heads in approval. Jobs up, HOORAY! That’s all we need to know.

    Well, not really all. Let’s dig a little deeper. Let’s put the “good” news into a framework that helps us understand what it all means.

    Now pay attention, because here’s the key point you need to know about the monthly jobs report, the one the media doesn’t tell you, because the general media doesn’t get it:

    America’s annual deficit – $500 billion this year, give or take a couple of billion – is bleeding uncontrollably. And it’s the annual deficit that dictates how many jobs the country needs to add each month. The number of jobs required is dictated by the size of our deficit.

    Read that over a few times and keep it in mind, because now we’re going to figure out how many new full-time jobs we really need to overcome the deficit. And you can put away your calculator. It’s pretty easy arithmetic.

    First of all, you need to know that half of America’s tax revenue – the money the country needs to stay afloat – comes from federal income taxes. So to overcome the deficit, no matter its size, we need to collect half our new money from the federal income taxes that will be paid by people who weren’t contributing before: the people in new jobs.

    And that means:

    • America’s deficit stands at $500 billion this year. Since half of the money we need to eradicate that will have to come from federal income taxes derived from new jobs …
    • That means we need $250 billion from federal income taxes.

    And we can’t come even close to that, because:

    • The average full-time job pays $50,000.
    • At a 25 percent federal income tax rate, each new full-time job will put $12,500 – one-quarter of $50,000 – into America’s bank account.

    Let’s recap quickly: We need $250 billion (half the $500 billion deficit) in new income tax payments, and we’ll be collecting $12,500 from each new job.

    Now, let’s do the math …

    250 billion ÷ 12,500 = 20 million

    That means we need to add 20 million new jobs this year to overcome the deficit. But there’s no need to panic, because that’s $20 million in a year. The monthly figure is much lower:

    20 million ÷ 12 = 1,666,666

    OK, now you can panic. The formula establishes that we need to average 1.67 million jobs per month to offset the half of the $500 billion deficit that must be raised through income taxes.

    No problem, except we’ve been averaging only 209,000 new jobs per month this year – and the year is almost over. And get this: Half of those jobs are part-time. So our 209,000 jobs really add up to 105,000. We need to add 1,666,666 full-time jobs each month, and we’re actually adding only 105,000. That’s just 6 percent of what we need to pay our country’s bills. And If we can’t make up the other 94 percent, we’ll have to add the shortfall to the national debt.

    This jobs report released today , came with all the same fanfare as many of the previous ones.. Blah blah blah.

    Just don’t believe it. Because this “good” news has to be seen through a lens that shows not only how many new jobs have been added, but how many more new jobs needed to be added to offset our spending. We need to deal with the deficit, because failing to do so just adds to our national debt.

    Modern-Day Stagflation Hurting Middle Class

    November 9, 2015

    The 70 percent of Americans that comprise the middle class have been suffering for years from “stealth stagflation” that is driven by high taxes and oppressive regulations.

    Stagflation is defined by Merriam-Webster as a condition of “persistent inflation combined with stagnant consumer demand and relatively high unemployment.” According to the Bureau of Labor Statistics, the official unemployment was at 7.8 percent in January 2009, when President Obama took office. The rate soared to 10 percent in October of that year and has been sinking steadily to 5 percent last month. But the “good news” has not been from an expansion in the percentage of Americans working, but rather millions who ran out of benefits up and stopped looking for jobs.


    If those “discouraged” workers were added back into the mix, the unemployment rate would jump to 11 percent. Today, there are more people out of work now than when Obama moved into the White House.


    America’s growth rate has been averaging about 2.2 percent, following the worst recession since the Great Depression. But historically, coming out of a recession the economy should grow at 3.5 to 4 percent.


    The Consumer Price Index underestimates the true rise in cost of most of the items the middle-class buys. According to the Chapwood Index that tracks the price changes for the top 500 items that middle-class Americans buy, true inflation is up about 9 percent in the last 12 months.


    Despite government statistics and what our political leaders say, middle-class Americans are being devoured by the virus of stagflation.


    And despite promises that government could grow the middle-class from the middle out, ever-rising taxes and the cost of complying with onerous government regulations on businesses have caused prices to rise, unemployment to remain high, the economy to remain stagnant, and the federal government debt to rise to $19 trillion.


    The 2016 election is an opportunity to choose a president who will cut taxes and unnecessary regulations. But Americans must put someone in charge that understands the problem, knows how to fix it and promises actually to do something about it.


    Published at BreitBart by Ed Butowsky on 11/4/2015.

    What Does The Jobs Number Mean To The Government

    September 4, 2014

    In an article published September 4th, 2014 on Fox News Ed Butowsky explains that jobs, while important for our families, are more important to the government. Why? Because jobs is how the government generates revenue to pay for programs our country needs to sustain and expand itself.

    Like clockwork every first Friday of the month at 8:30am the Department of Labor releases these numbers. Whether they are good or bad the market, analysts, individual and institutional investors react accordingly.

    What’s more important is that…

    A job is much more than what you and I need to stay alive, to feed our families, to educate our kids and to save for retirement. A job is how our government generates revenue.

    To learn more about this and other topics by Ed Butowsky go to What the jobs numbers really mean</em>

    Professional Athletes Going From Millions To Broke

    March 2, 2013

    Ed Butowsky, founder of ChapwoodFinance.com, joins America Tonight radio to discuss the lessons any freshman class of any sport industry can learn from their veteran athletes still playing the game or of those who have retired.



    Ed Butowsky is the managing partner of Chapwood Investment Management and is an internationally recognized expert in the investment wealth management industry. Ed is also a frequent guest on other networks such as CNN, NBC, ABC, Fox News, Fox Business, and Bloomberg to name a few.
     


    You Must Read Between The Headlines

    December 5, 2012

    In a recent article published on Fox Business, I discuss why investors need to pay attention to the type of news they are reading and ask basic questions to determine whether headlines should persuade you one way or another in your investment decisions.

    The rule of thumb you should use when determining the impact of the news is ask yourself:

    • Are earnings, earnings forecasts or interest rates going to be impacted?
    • It this a short term or long term impact?

    Read more via Investors Must Drill Through Headlines.

    Ed Butowsky is the managing partner of Chapwood Investment Management, the founder of the Chapwood Finance learning portal, and is an internationally recognized expert in the investment wealth management industry. Ed is also a frequent guest on other networks such as CNN, NBC, ABC, Fox News, Fox Business, and Bloomberg to name a few.

    Why Did President Obama Chose Monetary Policy Over Fiscal Policy

    September 12, 2012

    It’s no secret that President Obama, in his first 6 months in office, chose Monetary Policy over Fiscal Policy. However, most people do not understand what that means. Essentially with Monetary Policy, President Obama cleared the treasury to print more money and infuse the economy with it; however today we are feeling the effects of this effort. With QE1, QE2, and now QE3 the money supply in the US economy has been growing at an alarming rate. This in turn has impacted the cost of goods sold outside the US. Moreover, it has increased the cost of goods Americans buy in our daily lives and will increase in the next 12 months potentially over 10%. That means while your income may be suffering and not growing, the goods you buy like bread, daycare, or even gas will cost more. This upcoming election will be determined by how the voting public perceive the good, the bad, and the ugly aspects of our economy and which candidate will provide the better plan to get out of it. But it all starts with the policies implemented – Monetary vs Fiscal.

    In my recent article on Fox Business, Obama Chose Monetary Policy – And You’re Feeling It, I discuss the detailed impact of President Obama’s choice.

    Ed Butowsky is the managing partner of Chapwood Investment Management and is an internationally recognized expert in the investment wealth management industry. Ed is also a frequent guest on other networks such as CNN, NBC, ABC, Fox News, Fox Business, and Bloomberg to name a few.
     

    Q&A: Ed Butowsky Gears Up To Launch Fund Of Hedge Funds | FINalternatives

    April 30, 2012

    Ed Butowsky has taken a new tact to offering alternative investments to the public.  While the economy and the world along side has changed quite a bit in the last decade so have the correlation of assets for investment vehicles.   Ed’s new venture, Paramount Access Advisors, is set to launch on May 1st a 1940 Act registered fund of hedge funds.  This fund allows access to the world’s top hedge fund managers for a low minimum investment – $25,000.  To read more about this click on the link below.

    Q&A: Ed Butowsky Gears Up To Launch Fund Of Hedge Funds | FINalternatives