Posted on 12/13/2008 4:08:15 AM PST by TigerLikesRooster
The Madoff Dilemma
By mark.gimein
Created 12/12/2008 - 3:57pm
Bernard Madoff, one of Wall Street's best-known brokers and money managers, was arrested [1] on Thursday after allegedly confessing to his sons in a near nervous-breakdown-type meeting that instead of the $17 billion they thought he had in his funds, there was pretty much zip. The whole thing was—as the criminal complaint quotes Madoff himself saying—"basically, a giant Ponzi scheme" in which investors who wanted their money back got paid with earlier investors' money.
/snip
The extraordinary thing that Lo does in the third chapter of his book Hedge Funds, published earlier this year, is to demonstrate mathematically that an excessive degree of serial correlation is a powerful indicator that the holdings of a fund aren't being reported realistically. What Lo shows from the pattern of historical returns in hedge-fund databases is that when funds' returns grow too consistent, it is a sign that the investments are either very hard to value accurately and the returns are just guesses, or, worse, that they've been manipulated in a way that smoothes them artificially. What Lo creates is a mathematical model for judging what "looks too good to be true." Lo's work turns a lot of the conventional thinking about what's safe on its head. It shows that the evenness that investors have traditionally been taught indicates safety and reliability can actually be the best sign risk is being hidden or that the data are unreliable.
(Excerpt) Read more at thebigmoney.com ...
Ping!
Anybody surprised?
Anybody at all?
Didn’t think so.
:”Anybody surprised?”
>>>>>>>>.............
YES COX at SEC, is shocked ,shocked I say.
Giving the bogus business of AIG, "basically" another "Ponzi Scheme", one could apply this to all that do business there.
Anyone remember Hillary Clinton’s screech a few years back, to her CT investor class regarding the coming Bush/Hoover economy. What did she know and when did she know it?
Short of outlawing hedge funds, there isn’t too much the govt. can do to stop this type of swindle.
The thing that attracts people (and capital) to America is the freedom to invest and to prosper.
The desire for big big returns on capital is the reason people just willingly hand over their money to a ‘famous’ hedge fund manager like Bernard Madoff.
Like with everything else, greed is a killer.
There are honest hedge funds. Not many of them launched in the last 10-15 years or so, but alot of the older guys have solid, performing, honest funds.
A hedgie is just someone who puts your money out there at higher risk. That is it. The problem is that many funds (mine included) have to trade offshore or you will get RAPED by the IRS. Allow the same tax protection as an IRA/Keogh/annuity, and you could demand more oversight.....
Of course the "oversight" of the SEC in the last 10 years or so has been an absolute complete freaking joke. I swear, they might as well put up a flashing neon sign saying "CROOKSRUS" and those nimrods at the SEC would not know their butts from a hole in the ground.
If you ever are at an event and some SEC rep is speaking, you can stop the show by asking him to tell you about the most successful prosecution of regsho they have ever done.
Simple logic should have prevailed: If it seems too good to be true, it is.
to tell you about the most successful prosecution of regsho they have ever done.
My guess, zip, zero, nada?
Most whores are more honest, they at least admit they will screw you out of your money.
A story on the web quoted a big investor, on topics about this hedge fund, and the idea of “too consistent” of a return i.e. manipulation of the system - this investor stated, “I thought, and others I knew agreed, that he must have insider information not that he was running a ponzi.” So big money, as in the movie Wall Street, is happy to work with a crook, but don’t let anyone know he is a crook - like regualators and lose our big returns. Ethics are going farther down the toilet and people wonder why “the Average Joe” was happy to see a Sarah Palin - someone who stopped crooks.
How does this apply to GE in the Jack Welch era, when quarterly earnings, as I recall, clocked in regularly to-the-penny on the forecasts?
I run a small hedge fund.
You would not say that to my face....., or at least you would only say it once.
Capitalism CANNOT WORK within a Godless society. It only works with personal responsibility. When money becomes God,and the acquisition of it the only meaning of life, which it has, the ends justify the means. And here we are.
Any wonder why SEC regulation [sic] fails to reduce or uncover the really big corruption (Bear, Merrill, Madoff, etc.)? What SEC staffer (most are lawyers) will seriously investigate a potential employer who will pay them a mid-six figure salary when they leave the SEC? Remember, Madoff's son's dropped the dime while the regulators were counting paper clips.
The regulatory bodies are systemically corrupt. The revolving door is unlike anything you will ever see at the Pentagon. It (the regulatory scheme) is an old boys and girls club to ensure the lawyers, traders and managers in New York (and elsewhere) continue to get rich on your money.
It is pathetic.
There has never been a prosecution on regsho.
The centralization of political power is on parallel with the centralization of financial power. Both lead to further and further corruption. It is a situation endemic to men of all types, yet Christians run around like they never heard of Romans 1-3. The godless infidels like Thomas Jefferson and Ben Franklin and Ethan Allen were more "Christian" in their understanding of human nature than todays evangelicals.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.