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They Told Me That Madoff Never Lost Money (Ben Stein)
New York Times ^ | December 28, 2008 | BEN STEIN

Posted on 12/30/2008 1:32:43 PM PST by nickcarraway

ABOUT two years ago, a little delegation from a major investment bank arrived at my home in Beverly Hills. These nice young people were from the bank’s “wealth management division.” I told them straight away that I didn’t have anywhere near enough wealth to make their trip worth their time, but they smilingly insisted that we could help each other.

They told me that if I invested a certain sum with them, they would make sure that a large chunk of it was managed by a money manager of stupendous acumen. This genius, so they said, never lost money. He did better in up markets than in down markets, but even in down markets he did well. They said he used a strategy of buying stocks and hedging with options.

I protested that a perfect hedge would not allow making any money, because money made on the one side would be lost on the other. They assured me that this genius had found a way to spot market inefficiencies and, indeed, to make money off a perfect hedge.

I thanked them for their time and promptly looked up Bernard Madoff online. Nothing I saw was even a bit convincing that he had made a breakthrough in financial theory. Besides, this large financial firm was going to charge me roughly 2 percent to put my money with Mr. Madoff’s firm. I could invest my few shekels with Warren Buffett for no management fee at all.

(Excerpt) Read more at nytimes.com ...


TOPICS: Business/Economy; Crime/Corruption; Editorial; News/Current Events
KEYWORDS: benstein; madoff
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1 posted on 12/30/2008 1:32:43 PM PST by nickcarraway
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To: nickcarraway

Financial geniuses are exceedingly rare, and by definition, proven to be so, usually in the past tense, when it doesn’t really matter any more.

A Random Walk Down Wall Street by Burton Malkiel should be a required read for anyone putting their faith in a single investment guru.


2 posted on 12/30/2008 1:38:22 PM PST by EyeGuy
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To: nickcarraway
“I protested that a perfect hedge would not allow making any money, because money made on the one side would be lost on the other.”

Funny, but Enron’s Skilling always bragged about their “perfect hedge” also. Perfect, because --- you see Enron had all these “smart people” running the “Risk Management Group”. And this RMG just never F&%^ed up!

3 posted on 12/30/2008 1:39:48 PM PST by TRY ONE (NUKE the unborn gay whales!)
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To: nickcarraway

Glad Ben’s still got it! After reading some of the comments to his articles, I was worried he’d gotten too rich and soft.


4 posted on 12/30/2008 1:43:00 PM PST by x
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To: x

Ben doesn’t have it anymore. You should see his blathering about versus Peter Schiff. Peter had correctly called in 2006 the market turmoil we are now in the midst of.

http://www.thenewamerican.com/economy/commentary-mainmenu-43/524

The only problem I have with Peter’s ideas is that global investments are down 50% or more in most cases. There has been no “de-coupling” between the US economy and the rest of the worlds economies.


5 posted on 12/30/2008 1:53:14 PM PST by SFC Chromey (We are at war with Islamofascists inside and outside our borders, now ACT LIKE IT!)
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To: x

here are some videos to take a look at:
http://www.youtube.com/watch?v=2I0QN-FYkpw


6 posted on 12/30/2008 1:56:03 PM PST by SFC Chromey (We are at war with Islamofascists inside and outside our borders, now ACT LIKE IT!)
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To: nickcarraway
So...... Madoff tried to win Ben Stein's money??

had to say it....

7 posted on 12/30/2008 1:56:47 PM PST by Tanniker Smith (Teachers open the door. It's up to you to enter. Before the late bell. When I close the door.)
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To: nickcarraway

I once had the majority share-holder/owner of a publicly traded company tell me to buy his stock, because certain, specific things would happen and it would go up.

The comments were made at a small, informal dinner of a mutual friend, who was quite close to this CEO. So, I decided to “invest” a few thousand bucks.

The stock proceeded to lose 50% of its value over the next 6 months. I dumped it and eventually the company fell on hard times and was bought by another company for pennies on the dollar.

The moral of the story? Don’t even trust “inside” information.


8 posted on 12/30/2008 1:58:27 PM PST by PGR88
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To: nickcarraway
None of us could see how Mr. Madoff could do what his friends said he could do. I politely passed and went on my way,

This is why it's hard to be sympathetic towards the Madoff victims. Even the most rudimentary kind of diligence would have informed these people that there is no financial magic bullet.

9 posted on 12/30/2008 1:58:34 PM PST by denydenydeny ("Banish Merry Christmas. Get ready for Mad Max.."-Daniel Henninger)
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To: nickcarraway
protested that a perfect hedge would not allow making any money, because money made on the one side would be lost on the other.

It's like betting on both Black and Red at Roulette. But in both cases you will lose money, because there is a fee for buying options, and there is a green 0 and 00 on the Roulette wheel.

10 posted on 12/30/2008 2:05:21 PM PST by Yo-Yo
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To: x

I lost a lot of respect for Ben when he endorsed Al Franken. A lot.


11 posted on 12/30/2008 2:06:52 PM PST by eureka! (Dear Lord: Some epiphanies for some of the 'rats now in charge, particularly BO? Please...)
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To: SFC Chromey

Okay, he was right. Amazingly, accurately right. What is Schiff saying NOW?


12 posted on 12/30/2008 2:10:35 PM PST by Choose Ye This Day (B.O. ? BOHICA!!!)
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To: nickcarraway
Too bad this fellow wasn't as wise. (Click)
13 posted on 12/30/2008 2:11:41 PM PST by genefromjersey (So much to flame;so little time !)
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To: nickcarraway

Investment tip #1: Never get involved in any kind of transaction that begins with someone saying “Psssst!! Buddy!”.


14 posted on 12/30/2008 2:16:20 PM PST by Reaganesque
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To: PGR88
Don’t even trust “inside” information.

Especially don't trust "inside" information - it's either illegal to trade on (because it's not public knowledge), deliberate fraud, or worthless because it's something the tipster is speculating on.

15 posted on 12/30/2008 2:20:08 PM PST by garbanzo (Government is not the solution to our problems. Government is the problem.)
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To: Choose Ye This Day
Okay, he was right. Amazingly, accurately right. What is Schiff saying NOW?

Dow = 1 oz of gold.. Said it last night on CNBC..

16 posted on 12/30/2008 2:22:25 PM PST by EVO X
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To: Reaganesque

I only ever made money on one tip, and I thoroughly checked it out before investing, and I almost held it too long. I forgot to monitor it, until I heard on CNBC that the company was going to have a management succession problem. I looked into it again, and found that the price had gone up so much that it no longer fit my profile of a worthwhile investment. So I sold it, and it was at its peak at that moment. It went down right after I sold it.

Luck is where opportunity meets preparation.

A tip may be worthwhile, but investigate before investing.


17 posted on 12/30/2008 2:35:00 PM PST by Daveinyork
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To: eureka!
I didn't know that. Apparently they worked together at Comedy Central and did corporate gigs as Franken/Stein or Stein/Franken.

I understand how you feel. That doesn't seem like a good reason to endorse someone like Al Franken.

18 posted on 12/30/2008 2:37:58 PM PST by x
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To: PGR88
Don’t even trust “inside” information.

I got some good inside info once. I bought a stock for ~$0.50 and rode it for a while and kept in touch with the shareholder services department. It shot up to $1.25. I sold and felt like a genius. I called the shareholder people and asked which of their other companies (the management company managed several penny stock companies.) I should invest the profit into. He told me (insisted?) I should be in the company I just sold. I couldn't justify buying back in at a price higher than I had just sold at and waited. Stock hit $4 and I finally bit the bullet. I quickly rode it to $13 and bailed. It peaked at ~$16. I could kick myself for not staying in the whole ride. Still made quite a few bucks.

I don't think the info was illegal. It was his job to attract investors. I do suspect he knew the info that was driving the stock so high.

19 posted on 12/30/2008 2:42:55 PM PST by Onelifetogive (Let's get to altering or abolishing!)
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To: x

I understand the Hollywood bond but Franken strikes me as such an arrogant, despicable being. I still can’t figure why Stein would do it...


20 posted on 12/30/2008 2:58:57 PM PST by eureka! (Dear Lord: Some epiphanies for some of the 'rats now in charge, particularly BO? Please...)
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To: nickcarraway

Good think Madoff didn’t “Win Ben Stein’s Money”


21 posted on 12/30/2008 3:02:46 PM PST by dfwgator (I hate Illinois Marxists)
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To: Black Birch

22 posted on 12/30/2008 3:08:17 PM PST by Travis McGee (--www.EnemiesForeignAndDomestic.com--)
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To: nickcarraway
You may have a lot less money as this year ends than you did two years ago. But you are just as good or bad a person as you were then. It is a myth that money determines who you are, and if you have gotten over that myth by now, then 2008 will have been a very good year

It's all grace, Ben. Amazing Grace.

23 posted on 12/30/2008 3:13:59 PM PST by xzins (Retired Army Chaplain, Pro Deo et Patria)
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To: Black Birch

He thinks the Dow is going to 873????

The guy IS nuts.


24 posted on 12/30/2008 3:23:59 PM PST by Choose Ye This Day (B.O. ? BOHICA!!!)
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To: Black Birch
"Dow = 1 oz of gold.. "

Gold is at $875 an ounce today. Now a Dow at 875 is scary!

25 posted on 12/30/2008 3:38:26 PM PST by Enterprise (No Presidency for illegal aliens from Kenya.)
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To: Enterprise

Or gold and the DJIA could both go to 2000.


26 posted on 12/30/2008 4:11:05 PM PST by reformedliberal
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To: nickcarraway
We are more than the year-to-year or day-by-day changes in our net worth. We are what we do for charity. We are how we treat our family and friends. We are how we treat our dogs and cats. We are what we do for our community and our nation. If you had $100 million or $100,000 a year ago and now you have a lot less, you are still the same person. You are not a balance sheet, at least not one denominated in money, as was explained to me recently.

Losing and making money are not moral issues so long as you are being honest.

Ben Stein's a good and wise man. He adds needed perspective.

27 posted on 12/30/2008 4:21:59 PM PST by GOPJ (GM's market value is a third of Bed, Bath and Beyond. Why is GM "too big to fail"? Steyn)
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To: reformedliberal

And THAT’S scary too! I did hear a prediction of DOW 4,000 recently, but I am just sitting here with my hands over my eyes.


28 posted on 12/30/2008 4:47:15 PM PST by Enterprise (No Presidency for illegal aliens from Kenya.)
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To: Choose Ye This Day
He thinks the Dow is going to 873????

I wasn't paying that close of attention, but I heard him say the dow to gold ratio..

29 posted on 12/30/2008 4:52:32 PM PST by EVO X
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they were kinda right, I’ll bet Madoff never lost HIS OWN money.


30 posted on 12/30/2008 5:15:05 PM PST by isom35
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To: eureka!

Endorsed him and gave money to his campaign......


31 posted on 12/30/2008 5:21:15 PM PST by ButThreeLeftsDo (MERRY CHRISTMAS!!)
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To: denydenydeny
This is why it's hard to be sympathetic towards the Madoff victims. Even the most rudimentary kind of diligence would have informed these people that there is no financial magic bullet. I agree with you. As this mess has unfolded, there have been some people/groups that passed on the opportunity or advised clients not to invest with Madoff. The first one I heard of was the New York Community Trust. They passed and advised the foundations under their umbrella not to invest. It seems they had a list of basic questions that Madoff couldn't answer. One would think these questions would be in an investing primer or textbook.
32 posted on 12/30/2008 5:55:59 PM PST by PrincessB ("I am an expert on my own opinion." - Dave Ramsey)
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To: nickcarraway

The best investment for my money right now is securing the matching funds from my company and dumping the rest into my Navy Federal Savings account at 3% interest.

NFCU is run by ELECTED ex Admirals and Captains. They are tight as hell in loaning out money and play it straight.

They even cancelled a $500 credit card on my for making two late payments in a year. (note: payments did not exceed 30 days.)

Tough crowd!


33 posted on 12/30/2008 6:22:34 PM PST by Hammerhead
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To: nickcarraway
I protested that a perfect hedge would not allow making any money, because money made on the one side would be lost on the other.

Puhleese. From about 45 seconds after the inception of the term, it was understood to be term of art. Nobody expected "hedge funds" to be perfectly hedged -- there'd be no point.

And, hey, why don't you name names? Who was the investment bank that fed you that line of crap? 'Cause they're accomplices. Nobody pitches something that hard unless there's plenty of chop.

34 posted on 12/30/2008 6:49:56 PM PST by the invisib1e hand (revolution is in the air.)
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To: Enterprise

We are out of the market for the first time in over 30 years.
No growth is scary, but every day that I saw further erosion was scarier.

To tell the truth, I am just about beyond being frightened by it all. I am sort of numb. Whatever happens, happens.


35 posted on 12/30/2008 7:43:09 PM PST by reformedliberal
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To: nickcarraway

At least Stein is honest. And I can honestly also say that I have “inventive” ways to lose money in the stock market. Unfortunately that seems to be the way one learns to stop losing money. I dumped five losers the other day when I should have dumped them years ago. And they still are losing money. Cramer had some good suggestions today and you might still be able to catch his program where he discusses those 25 rules of investing.


36 posted on 12/30/2008 9:17:00 PM PST by RichardW
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To: EyeGuy
Financial geniuses are exceedingly rare...

This CAN'T be true, for I am one!

It's real simple, and I'll let you in on it for FREE!

(Don't get better than this; does it?)

Buy Low: Sell High

See how simple that is?!


What I really need, however, is a TIMING genius!

37 posted on 12/31/2008 5:50:03 AM PST by Elsie (Heck is where people, who don't believe in Gosh, think they are not going...)
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To: Tanniker Smith
Madoff tried to steal Ben Stein's money.
38 posted on 12/31/2008 6:00:35 AM PST by Thumper1960 (A modern so-called "Conservative" is a shadow of a wisp of a vertebrate human being.)
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To: Reaganesque

Investment tip #2: If it sounds too good to be true, it is.


39 posted on 12/31/2008 6:20:07 AM PST by Kozak (USA 7/4/1776 to 1/20/2009 Requiescat In Pace)
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To: Black Birch
Dow = 1 oz of gold.. Said it last night on CNBC..

So is the DOW going to 900, or is gold going to 9,000?
40 posted on 12/31/2008 6:21:42 AM PST by Kozak (USA 7/4/1776 to 1/20/2009 Requiescat In Pace)
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To: Onelifetogive
I should be in the company I just sold. I couldn't justify buying back in at a price higher than I had just sold at and waited. Stock hit $4 and I finally bit the bullet. I quickly rode it to $13 and bailed. It peaked at ~$16. I could kick myself for not staying in the whole ride.

Remember

Bulls get rich
Bears get rich
PIGS get slaughtered
41 posted on 12/31/2008 6:23:50 AM PST by Kozak (USA 7/4/1776 to 1/20/2009 Requiescat In Pace)
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To: Elsie

I used to be securities licensed and it was unusual to come across a client who didn’t know about “Buy Low, Sell High” but never, EVER followed it. See, they read this article in a magazine... Sigh.


42 posted on 12/31/2008 6:26:06 AM PST by Reaganesque
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To: Kozak
So is the DOW going to 900, or is gold going to 9,000?

The question is do you buy gold now?

43 posted on 12/31/2008 6:48:44 AM PST by EVO X
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To: Black Birch
The question is do you buy gold now?

Not my question as I bought plenty at 240 to 300 an oz.....
44 posted on 12/31/2008 6:56:09 AM PST by Kozak (USA 7/4/1776 to 1/20/2009 Requiescat In Pace)
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To: Kozak
Not my question as I bought plenty at 240 to 300 an oz..... Nice call! I didn't get any that low. I bought some in the $400 - $500 range.
45 posted on 12/31/2008 7:03:14 AM PST by EVO X
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To: ButThreeLeftsDo

Re#31 Good morning and yes, money too. Ben, Ben, what were you thinking? *sigh*


46 posted on 12/31/2008 9:08:48 AM PST by eureka! (Dear Lord: Some epiphanies for some of the 'rats now in charge, particularly BO? Please...)
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To: Reaganesque

Never ever....

It’s too easy.

Like trusting in Jesus for salvation - “It CAN’T be that easy!”


47 posted on 01/01/2009 5:44:40 AM PST by Elsie (Heck is where people, who don't believe in Gosh, think they are not going...)
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To: Black Birch; Kozak

But...

Do you guys actually HAVE the gold in your hot little hands or do you have a piece of paper stating that...

;^)


48 posted on 01/01/2009 5:47:13 AM PST by Elsie (Heck is where people, who don't believe in Gosh, think they are not going...)
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To: Elsie
Do you guys actually HAVE the gold in your hot little hands or do you have a piece of paper stating that...

Oh, 90%A. 10%B.
49 posted on 01/01/2009 6:17:55 AM PST by Kozak (USA 7/4/1776 to 1/20/2009 Requiescat In Pace)
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To: Elsie
Do you guys actually HAVE the gold in your hot little hands or do you have a piece of paper stating that

A few coins in the bank vault. If I were to buy more, I would go the ETF route.

50 posted on 01/01/2009 6:23:29 AM PST by EVO X
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