If You Ever See a Chart Like This, Run Away Fast

We've all heard how Bernie Madoff's returns sounded too smooth and consistent to be true. In picture form, however, the returns are even more eyebrow raising. The chart below shows the cumulative returns of $1 invested in the hedge fund Fairfield Sentry Limited, which was a fund run by Fairfield Greenwich Group that essentially directed all of its assets to the stewardship of Bernie Madoff.

As shown, $1 invested in Madoff back in 1990 was supposed to be worth $6.75 today. NPB Bank, out of Zurich, even offered a version of this fund with three times the leverage. Talk about too good to be true.

click to enlarge

Comments

[drl274:]

yeah but don't run away until 2007 when you have $6.00

2008 Dec 19 04:19 AM

[fatcat:]

Hardly a wrinkle in that line.....

2008 Dec 19 04:22 AM

[maelstrom:]

Looks like my entire portfolio...in reverse ha

2008 Dec 19 05:36 AM

[Asbytec:]

LOL @ everyone... :)

2008 Dec 19 08:20 AM

[Stephen Kanitz:]

"Fooled By Un Randomness" is the correct title of this article.

2008 Dec 19 09:37 AM

[Burton A. J...:]

What's next for Madoff? It's too late for a "contribution" to the Clinton Library followed by a pardon.

Bernie, however, would make a terrific Commisioner of Social Security.

2008 Dec 19 10:11 AM

[auto44:]

Thanks, It seem to me that Fairfield Greenwich is as culpable or more so than Madoff. They were doubling the costs of their fund holders and doing the most dangerous thing by investing in a single entity. Where is the due diiligency that their investors paid for. Why coulld't they see the danger of the chart and run as you suggest?

Merry Christmas and may (YOUR) holiday bring you peace.

Bob

2008 Dec 19 10:25 AM

[double beta:]

What a gig.. 17-years of being a middleman and calling it a hedge fund. 2 and 20 off someone elses work?

2008 Dec 19 10:50 AM

[jjc7477:]

Doublebeta,

He was getting 2 and 20, now he'll have a chance at 5 to 10!

2008 Dec 19 11:32 AM

[Hefaistos:]

Actually, growth rate is declining over the years. Probably the guy never understood that if you want to stick to constant growth and still be able to use your good old ruler, you need a logarithmic diagram...
Or maybe he just used a moving average cash smoothing algorithm, with heavy cleptokurtosis.

2008 Dec 19 12:22 PM

[HaavBline:]

Followed the "three times the leverage" link to this NPB Bank, and I got "Site doesn't exist". Hmmm...

Once again, too slow to catch an opportunity ;)

2008 Dec 19 07:04 PM

[jstratt:]

It takes stealing more than 50 billion to send someone to jail. Perhaps it takes a Trillion to get thrown in jail immediately!

How safe can it be to invest your money when massive fraud isnt even penalized.

2008 Dec 19 07:44 PM

[Old Trader:]

"heavy cleptokurtosis"...I hear they've got a cure for that, now..

2008 Dec 19 10:02 PM

[Asbytec:]

On Dec 19 10:02 PM old trader wrote:

> "heavy cleptokurtosis"..... hear they've got a cure for that, now..

It's called jail time...massive doses are required.

I got a thumbs down laughing at the first few comments...cuz they were funny. Hmmm...times must be tough. :)

2008 Dec 19 11:27 PM

[secmaven:]

Bring on the lawsuits. Walter Noell is toast.

2008 Dec 19 11:40 PM