Don't Be Scammed by Madoff Investor Sob Stories 91 comments
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When you click on the SIPC website, you will see a pop-up screen for "Madoff claims." I've been reading stories about the hard-luck investors and charities that invested with Madoff all over the place. In fact, Saturday's WSJ could almost be called propaganda designed to make readers feel sympathy for Madoff investors (thank God for the James Grant article, which salvaged the issue). Don't fall for it. These investors knew what they were getting themselves into when they invested with a hedge fund.
First, only sophisticated investors can invest with hedge funds. A hedge fund is a private investment fund open to a limited range of investors. Such a fund is less regulated and allowed to undertake a wider range of activities than other investment funds. Basically, the rich have created a separate avenue of investment designed to make them even more rich--or, in some cases, less rich. Hedge funds come with unique risks--and everyone knew that going in. That's partly why few people asked questions--a hedge fund is designed to be less regulated, so there's more allowances made for secrecy.
Second, you should always be wary when the government or the media says Wall Street should have more protection or attention than Main Street. Investors like you and me are limited to KKR Financial (KFN) or Blackstone (BX) if we want a piece of the hedge fund mystique. How are those stocks doing? Well, KFN is around 57 cents per share. BX is about $6/share, with a 52-week high of $23.87/share. In short, Main Street investors didn't do much better than Madoff's investors--and the SIPC isn't going to help us. Why should Madoff's investors--who already had access to a special fund--get special help or special sympathy? I don't see sob stories featuring Blackstone or KKR investors.
I am deeply concerned that taxpayer monies may be used to reimburse Bernie's rich investors more than the usual $500,000 SIPC coverage. Taxpayers are already paying Bernie's investors half a million dollars each. I fear that Congress will increase the cap of SIPC insurance, purportedly as a populist move (I can already hear the words, "For our protection")--and then make the increased limits retroactive. If that happens, taxpayers will be on the hook for even more money, all to be paid to sophisticated, rich investors.
Don't be scammed. Madoff's investors were doing fine before Madoff, and they are still better off than 99% of the American population today. If they convince you otherwise, perhaps they really do deserve to be called sophisticated investors--after all, if Madoff's rich investors are smart enough to get reimbursed for 100% of their losses when they knowingly invest in a less regulated fund, the American taxpayer is indeed unsophisticated.
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This article has 91 comments:
This statement is technically incorrect. The SEC only imposes wealth and income thresholds in order to qualify to invest in a hedge fund. You make a huge leap of faith in assuming that wealth and income equals sophistication, and therefore entitles them to less protection from outright fraud. The majority of high net worth individuals who have amassed wealth generally have done so in non-Wall St professions (i.e., small business owners), so I do not believe that wealth translates to sophistication.
"Such a fund is less regulated and allowed to undertake a wider range of activities than other investment funds"
Again, technically incorrect. It is the fact that hedge funds do not REGISTER with the SEC that allows them to undertake a wider range of activities than other investment funds (derivatives, futures, short selling, etc). They forgo registration, are permitted to use the additional tools, and agree to limit the way they can market and accept limitations on the total number of investors they can take. These are simple trade offs, the motivation of which is not intended to shirk regulation, but to increase investment flexibility. I am so tired of this misconception that hedge funds are not regulated, or are less regulated. If a hedge fund manager breaks securities laws, he goes to jail, just like a mutual fund manager. The level of regulation is not a material difference, and is totally overplayed by sensational journalism.
You choose to play, invest or whatevery you will call it.
You choose to. You are not forced. There are no promises
or commitment arrangements by the rest of us out here to bail
ANYONE out at all because the outcome of something that they chose to do
is unfavorable either by the unethical or illegal actions of another or otherwise. blah blah blah. What is sad is that right now there are kids fighting for their lives in hospitals and not complaining over the loss of appetite or hair and we have to hear and read about the poor investors.
Turns out - Madoff was just a common shyster, a ripoff artist who conned people into thinking he had a way to beat the market, when experts were all but proving it was a scam.
When you provide money to someone you think is running a fund that engages in some sort of dodgy activity to make a profit in the markets, you are not an investor - you are a part of what I would call a racketeering operation, and are no better than a mobster who provides backing to a guy running a crap game in the basement of some bar. You are abetting illegal activity, and you expect your cut.
I sincerely hope that the SIPC is not corrupted by these rich, greedy bloodsuckers - and I wouldn't give them one thin dime of taxpayer's money. It is bad enough that the SIPC and the FBI will spend tens of millions to sort out the crimes of this ba$tard Madoff - that is far more than I would like to pay to rectify the crimes and make the pain equal to all who got taken in - but that's as much as they deserve, period!
@ lets make money Dec 21 4:10pm.
You said that "The majority of high net worth individuals who have amassed wealth generally have done so in non-Wall St professions (i.e., small business owners), so I do not believe that wealth translates to sophistication"
You are implicitly assuming that wall st professionals = sophistication, I think my friend you will agree after the debacles we have witnessed that assumption is a stretch, folks who have created wealth through other avenues have as much ability if not a better understanding of the fundamentals of risk taking. These investors were successful and were rewarded for their efforts off wall street, they got greedy and fell for the con man who literally "made off" with their money.
Their greed was their undoing not their lack of sophistication.
1. Many of the individuals were not investing in a hedge fund. They opened segregated brokerage accounts in a registered broker/dealer, and otherwise provided Madoff with discretionary investing over these accounts.
2. The concept that these people thought that Madoff was making money for them by 'front running' is preposterous.
3. Its not as if other fund 'managers' weren't delivering similar, if not greater returns over the past decade. Paulson (John, not Henry); Paul Jones; George Soros (his returns were more volatile, perhaps), and even lesser-known people such as Israel Englander's Millenium Partners. So receiving 8%-10% per year, when more high profile funds were reporting 2x that amount was nothing short of brilliant on the part of Madoff. He appealed to the investors sense of conservatism and low-risk tolerance.
4. SIPC provides no more than $500,000 in protection.Nobody knows what the average account size was. Let's guess the mean was $2.5 million--but because at least 50 individuals had more than $10 million on depsoit, and at least two dozen had $50 million+, and some representing the absolute entirety of their assets (excluding their home, or perhaps two homes), those people, at best, will be able to recover $500k. The vast majority are in their late 60's to early 80's. That means that those that lost every penny will have to wait at least two years before they see any SIPC money, if they do at all. OK, they'll have $500k to support themselves for the next 15-20 years.
So the typical profile, a 73year old man and his wife, will need to survive on a budget of $25,000 per year. That's about $2000 a month.
Is that what you wish on your parents or your grandparents?
Sure, most of the people were smart enough to put in no more 50%, and many are left with at least several million to live off. So to that extent, you're right, many will simply have to learn to less in a less glamorous manner. B
Before you post more comments on this topic, you might want to do a bit more research, and actually speak to people that were impacted.
This will stop immediately!!! It's not just the wealthy that gets hurt, it will hurt everyone and our society now has far less trust in each other.
And most of these investors trusted other professionals who put them into Madoff. Believing it was safe and did not touch the principle investment. Greed is not after 20- 30 years. That is what you think is safe!
The fact that ONE man and ONE company can hurt so many people, is the main issue. And the fact that he got away with it for so long is pathetic. Where is the SEC? We pay taxes for Government services to regulate and help the American people. Clearly it did not work!!
2. Some of these investors are doing some sort of off-shore account to avoid taxes, so they are taking a hit but they have no way of complaining without having to explain to the IRS.
3. I feel sorry for the charities; as they are the only ones having legit reason to make public their losses. I wish the donors didn't decide to use some shady hedge fund to manage thier funding.
Because Cox cozied up to the hedges, at the expense of real investors, and let them run amuk with shorting the crap out of the market, most of the honest investors have suffered great loses, totalling TRILLIONS.
What's in it for us?
Certainly, our sleazy governemnt can't take care of Madoff's orphans alone....
Or dare they?
Revolution is breathing hard and ready to run.
Watch out SEC. Watch out Gov't.
We're watching you.
I really do feel badly for those individuals and investors and charities that lost big in this fraud, even though it doesn't sound like it. I'm tired of throwing tax dollars at the finance industry (including their greedy, inept, and highly overcompensated execs) , auto companies, and any other of the power elite who is "too large to fail." If I lose all my money to a huckster, I'm not too big to fail, and the top 1% in this country would let me sink like a stone (after expressing regret that I didn't know any better and will have to live with the consequences...tough love). They wouldn't give a rat's you know what how I would survive through my retirement years.
I suspect that ultimate irony here is the anticipated change in attitude of the formerly rich regarding the importance of the middle class they've been sneering at for so long.
So...for anyone unfortunate enough to join us in the imperiled middle class, I truly am sorry. Good luck. Same goes for their heirs.
On Dec 21 05:27 PM PBB wrote:
> Matthew-In all due respect, you have no idea what you're talking
> about. And the comments posted indicated others are equally uninformed
> as to what the investors were told, and what they thought.
> 1. Many of the individuals were not investing in a hedge fund. They
> opened segregated brokerage accounts in a registered broker/dealer,
> and otherwise provided Madoff with discretionary investing over these
> accounts.
> 2. The concept that these people thought that Madoff was making money
> for them by 'front running' is preposterous.
> 3. Its not as if other fund 'managers' weren't delivering similar,
> if not greater returns over the past decade. Paulson (John, not Henry);
> Paul Jones; George Soros (his returns were more volatile, perhaps),
> and even lesser-known people such as Israel Englander's Millenium
> Partners. So receiving 8%-10% per year, when more high profile funds
> were reporting 2x that amount was nothing short of brilliant on the
> part of Madoff. He appealed to the investors sense of conservatism
> and low-risk tolerance.
>
> 4. SIPC provides no more than $500,000 in protection.Nobody knows
> what the average account size was. Let's guess the mean was $2.5
> million--but because at least 50 individuals had more than $10 million
> on depsoit, and at least two dozen had $50 million+, and some representing
> the absolute entirety of their assets (excluding their home, or perhaps
> two homes), those people, at best, will be able to recover $500k.
> The vast majority are in their late 60's to early 80's. That means
> that those that lost every penny will have to wait at least two years
> before they see any SIPC money, if they do at all. OK, they'll have
> $500k to support themselves for the next 15-20 years.
>
> So the typical profile, a 73year old man and his wife, will need
> to survive on a budget of $25,000 per year. That's about $2000 a
> month.
> Is that what you wish on your parents or your grandparents?
>
> Sure, most of the people were smart enough to put in no more 50%,
> and many are left with at least several million to live off. So to
> that extent, you're right, many will simply have to learn to less
> in a less glamorous manner. B
>
> Before you post more comments on this topic, you might want to do
> a bit more research, and actually speak to people that were impacted.
>
Are investment firms in USA same as the ones in Nigeria!. It seems to me that he believes that this type of operation should be expected by the investors because the returns were too good although I believe many mutual funds boast about 10% return that I know they never deliver and neither did this one.
Is it expected that the investors would be hiring private detectives when publicly designated institutions for the purpose fail to monitor these firms. I expect that public institution to monitor all active investments firms and I expect to be compensated by those who profited by fraudulent operations if I was a client.
Unfortunately, you are misinformed. Largely all of the Madoff accounts, in quantity of numbers, were held as segregated brokerage accounts with registered broker dealer Bernard L. Madoff Investment Securities LLC, no different than opening up an account with an E-Trade, Interactive Brokers, or Charles Schwab. Power of Attorney to only effect trades, not withdraw monies, was given to the individual person, Bernard L. Madoff. Daily P&S confirmations along with monthly activity & balance statements were sent to each account owner via first class U.S. Postal Service mail from Bernard L. Madoff Investment Securities LLC.
The trading occurred over a 20+ year period with never a substantive SEC or then NASD audit ever occurring. It's as if one took a prescription Rx over 20+ years and everyone taking it in year 20 developed cancer and, later, found out that, "Oops, the FDA never tested the Rx because they were, at the least, too busy, or, at the extreme, compromised to look the other way."
SEC, which is it?
If it's to be otherwise, my hand is out too.
Brother, can you spare a million?
Damn the moral hazard!
Damn the torpedoes!
Goodbye American capitalism!
It's that simple.
survive on a budget of $25,000 per year. That's about $2000 a month.
Is that what you wish on your parents or your grandparents?"
"Sorry, I don't wish that on any one. But my parents/grandparents made do with that and less. Thousands if not millions of others do too. And it isn't their fault, either. It's life."
On Dec 21 05:27 PM PBB wrote:
> Matthew-In all due respect, you have no idea what you're talking
> about.
And
> the comments posted indicated others are equally uninformed as to
what
> the investors were told, and what they thought.
> 1.
Many
> of the individuals were not investing in a hedge fund. They opened
segregated
> brokerage accounts in a registered broker/dealer, and
otherwise
> provided Madoff with discretionary investing over these
accounts.
>
> 2. The concept that these people thought that Madoff was making money
> for them by 'front running' is preposterous.
> 3.
Its
> not as if other fund 'managers' weren't delivering similar, if not
greater
> returns over the past decade. Paulson (John, not Henry); Paul
Jones;
> George Soros (his returns were more volatile, perhaps), and even
lesser-known
> people such as Israel Englander's Millenium Partners. So
receiving
> 8%-10% per year, when more high profile funds were reporting
2x
> that amount was nothing short of brilliant on the part of Madoff.
> He
appealed
> to the investors sense of conservatism and low-risk tolerance.
>
>
> 4. SIPC provides no more than $500,000 in protection.Nobody
knows
> what the average account size was. Let's guess the mean was $2.5
million--but
> because at least 50 individuals had more than $10 million
on
> depsoit, and at least two dozen had $50 million+, and some
representing
> the absolute entirety of their assets (excluding their
home,
> or perhaps two homes), those people, at best, will be able to
recover
> $500k. The vast majority are in their late 60's to early 80's.
That
> means that those that lost every penny will have to wait at least
two
> years before they see any SIPC money, if they do at all. OK,
they'll
> have $500k to support themselves for the next 15-20 years.
>
> So
the
> typical profile, a 73year old man and his wife, will need to
survive
> on a budget of $25,000 per year. That's about $2000 a month.
> Is that what you wish on your parents or your grandparents?
>
> Sure,
most
> of the people were smart enough to put in no more 50%, and many
are
> left with at least several million to live off. So to that extent,
you're
> right, many will simply have to learn to less in a less
glamorous
> manner. B
>
> Before you post more comments on this topic,
you
> might want to do a bit more research, and actually speak to people
that
> were impacted.
1. actually might have lost in the recent financial crunch which has affected just about every investor and company
2. what was diverted out of the Madoff Fund(s) and concealed by accounting techniques
The question is could #2 have gone for a longer time had not #1
occurred.
Andre Haeff 12-21-08
The trading occurred over a 20+ year period<<
In this case, the people who were part of this scam for 20 years should pay back into a fund to compensate those who got in later. Nobody should be allowed to walk away from this (complicit??) fraud with anything resembling a profit - ESPECIALLY the "fund-of-funds" types who are just parasites on the real economy.
Rather, the fellow travelers of "Bernie" should put everything they took out back into the pot, deduct the entirety of the huge sums that the Feds will spend (er...perhaps waste is a better term) and then split it up according to an equitable distribution scheme. That is the only way to deliver justice, without raping the American taxpayer. Or, is that (rape) what you think should happen here??
All that being said, I don't believe any investors should be bailed out. I've heard the idea tossed around and this would only encourage people to continue to make investments without doing adequate due-diligence.
Of course the curve isn't as smooth as Bernie's. But it has a 0.84 beta and has spent about 95% of it's time above Bernie's no-drawdown straigtline plot. So such a thing can be done with equities - even over two horrendous bear markets.
simply read this if you think madoff investors did not deserve what was coming...
Pretty soon there will be TARP 2 - Investors Who Lost Money Relief Fund. Investments = Risk.
There are no bail outs for stupidity.
There still seems to be a correlation.
Just one word if you guys pull that one off: Brilliant!
I'm 41 with 12 years of business activity, with some knowlege of banking and investment due to my previous career as securities broker and in bank industry (which I happily both quit).
As for my opinion and comments, they are as follow:
1) those individual "investors" got what they deserved (lost their money, pity not all lost all), as they well knew they were part of illegal activities, the same applies to "foundations" and other pseudo-noble purpose entities if they "invested" with Bernie as the result of previosly metioned individual "investors"' decisions or under their influence,
2) the only real victims are overseas investors, clearly fooled by that Mr Noel's feeder funds, and feeder funds set up by one more "pillar of community" from GMAC, or others.
USA have been the world leader for 100 years, admired and positively envied worlwide. Unfortunately American nation was fooled by the Friedmanists. Extreme concentration of wealth resulting from Friedmanism is major threat to the very foundations of American nation.
1) FINRA is the regulator, not SEC.
2) SIPC is on the hook for compensation, up to $500K.
So, FINRA should be taking the blame. Markopolos was complaining to the wrong agency, and of course its undertandable why. FINRA is a "self-regulation" authority which is stuffed by wall-street shills, it always takes the view of the industry and never of the investor rich or poor. Congress should shut it down and give all authority to an improved SEC. And instead we get Obama promoting a FINRA person to SEC, what a joke. Trust the wolf to protect the lambs, because wolf is the most knowledgeble and dedicated to lamb (meat).
As to not wanting Grandparents to live on $2500. a month? Well, they still would get social security. And of course there is a reverse mortgage.
That ought to pop them up to about $6500. a month. Not rich; certainly comfortable. There's cable tv, decent food, a healthclub membership, and a night out on the town occasionally. Not bad!
On Dec 21 06:01 PM Jim G. wrote:
> PBB, you raise good points. However, I think it's time the wealthy
> learn to live in a tough love world the way they are fond of lecturing
> to those who are beneth them.
>
> I really do feel badly for those individuals and investors and charities
> that lost big in this fraud, even though it doesn't sound like it.
> I'm tired of throwing tax dollars at the finance industry (including
> their greedy, inept, and highly overcompensated execs) , auto companies,
> and any other of the power elite who is "too large to fail." If
> I lose all my money to a huckster, I'm not too big to fail, and the
> top 1% in this country would let me sink like a stone (after expressing
> regret that I didn't know any better and will have to live with the
> consequences...tough love). They wouldn't give a rat's you know
> what how I would survive through my retirement years.
>
> I suspect that ultimate irony here is the anticipated change in attitude
> of the formerly rich regarding the importance of the middle class
> they've been sneering at for so long.
>
> So...for anyone unfortunate enough to join us in the imperiled middle
> class, I truly am sorry. Good luck. Same goes for their heirs.
>
>
>
> On Dec 21 05:27 PM PBB wrote:
pay more attention next time.
To which I say:
"Awwww, isn't that just to bad.
Now junior is actually going to have to work hard, and save his own money for things like a house, his future children's education, and his own future. I guess all his best friends will dump him now, seeing as he won't fit into the "I appear wealthy thanks to my parents, though I pass it off as my own self made worth, club" as so many 20,30, and 40 year olds do in the New York City, Tri-state area.
Junior Ross should thank his daddy for losing his inheritance. Now he can go and make a real effort, at being truly self made, and make a real difference in today's world.
Welcome to the world of the New York City, Tri-state area, where 50% of those 20,30,40 years old, secretly have mommy and daddy watching their backs and padding their wallets, while all the while putting on a face to the rest of the country that they have it all as a result of their own hard work.
How do I know this? Let's just day I live there and being self made myself, are able to know what others think is a well kept secret.
some penalty so that others in the future will not view all these bailouts as a floor on their investments (IF EVEN THAT MUCH)
- We pay taxes because we are forced to do so
- 90% of all charitable contributions are going to their management collecting quite often 6-digits compensations
- This "poor soles" can either get themselves a job (if they are not too old and/or sick) or, in addition to their $2,500 per months, they are getting another $2,500 from the Social Security for a total of $6,000 per years. This is even more that the majority of working Americans are living on
- Finally, it is the time for people to become responsible for their own activities and following consequences.
On Dec 21 the poster wrote:
> You have no idea what you are talking about. Many people who invested with Madoff gave away money to charities who ended up helping the poor and others. <
Most people outside New York have a sense that unless you have "inside" information or you are connected with an "insider" your "investments" will become someone elses profit to someone living
in New York. Sorry for you hair splitters out there, that is just a fact.
Violation of financial ethics / laws need to be criminalized impacting corporate heads. Crimial liability is an important first step to regain trust on Wall Street. Financial settlements for illegal or unethical activities without admitting responsibility should be abolished immediatly.
The prospect of being held in a 8' x 8' concrete cell (thrown in with general criminal population) with a friendly cellmate for 20 years should be enough to temper the ones greed?
So what is the deal with Maddof being allowed to remain in his penthouse? He confessed to a crime that is clearly understood by the AGs and SEC offices. Treat him and his accomplises like the crackheads they are by throwing them in jail now.
People in the heartland are being told they need to help fund the stupidity and greed of a few, the heartland needs to feel people responsible are being held accountable as they would be for 1/1000th the crime in Peapod, KS.
"3. Its not as if other fund 'managers' weren't delivering similar, if not greater returns over the past decade. Paulson (John, not Henry); Paul Jones; George Soros (his returns were more volatile, perhaps), and even lesser-known people such as Israel Englander's Millenium Partners..."
I'm sorry, how is this an argument? The fact of the matter is that if I couldn't figure out how these guys were making their money, and they refused even a moderate level of transparency (not to mention the self-custody or shell accounting firm), then you could be damn sure I or any other rational investor wouldn't invest. That is except for 3 reasons : a) sheer stupidity ("A fool and his money are soon parted" - Thomas Tusser), b) no respect for your own or someone elses money, or c) complicity.
a) stupidity - self-explanatory. there are lots of people who didn't invest. if you did, and b and c don't apply, then you shouldn't be making any decisions about investing. if you delegated responsability, this applies as well - nobody is more careful with your money than YOU. people need to get educated and take responsibility for their actions, rather than crying "victim" all the time.
b) respect - a lot of these people didn't work for a dime of it, and the managers who were entrusted with a lot of it were lazy and took the easy way out by dumping a large amount of it with this madoff clown. a litttle due diligence and care could have avoided a lot of pain for all.
c) complicity - the most sinister. i would say that a majority of these banks and institutions knew that something was up. something was fishy. and they were greedy and wanted a part of it, so they went along thinking that they were part of some special club and would never get caught. there is no way that banks and huge fohf don't do their due dil before investing billions, or even millions. just doesn't happen. see the note from ubs on friday to their clients which said:
"The investment presented the opportunity to participate in a unique return stream that combined a splitstrike option strategy with the market information of one of the world’s largest market-makers in equity
securities... In essence, the perceived edge was Madoff’s ability to gather and process market-order-flow information and use this information to time the implementation of the split strike option strategy.
this is UBP admitting to participating in what they thought was front-running. THIS IS UBP - A MAJOR SWISS BANK. unbelievable that they are so brazen to say this. the sheer arrogance of these institutions will be their downfall.
i'm neck-deep in this part of the industry, so save your comments. they people who got burned - most got what was coming to them.
self-regulation of the industry and education are the key to preventing another one of these disasters. if we come to rely on regulation to save us, we'll become lazy and another one of these will slip under the radar.
On Dec 21 05:31 PM You are clueless wrote:
> Where is the SEC? We pay taxes for Government services
> to regulate and help the American people. Clearly it did not work!!
How many of you get audited every year? How about in the last 15 years. My guess is very few have ever had an audit. IRS looks for red flags, but without that they only audit a small percent of all taxpayers every year. Seems crazy considering the wealth of revenue that would be produced both by recouping monies denied and also by scaring more taxpayers into being more honest. The fact is the federal government can't support all the auditors it might take even if it means more revenue.
So how can we expect the government could ever regulate our way to a future protection us from a ponzi scheme. Criminals will always circumvent the system. This is all about buyer or investor beware. These investors, many of them professional, did not do any due diligence. They rested in the assurance that Madoff had been around a long time and was practically seen as an institution. That's their due diligence. I'm not saying we don't need regulation. We need smart regulation, but their has never been a criminal who couldn't separate a sucker from his money.
Note that this is not the winning attitude of a rising nation.
BUT MOST BROKERS HAVE ADDITIONAL INSURANCE THAT GOES FAR ABOVE THAT.
AND THESE "INVESTORS" WANT TO CLAIM IT WAS A THEFT LOSS RATHER THAN A MARKET LOSS SO AS TO GET A FAT INCOME TAX BENEFIT!!!!!!!
I can't wait to see what happens when all these Insurance Cos. selling Annuitites with...Guaranteed 7% Step-Ups and Guaranteed 2x your money in 10 years, start going under. Oh well, by the time that happens we'll be just about done paying for this bailout and what's one more for the tab! Can't wait for them to start dragging out the old ladies for that sympathy party...they'll of course use a tight cropped image so we can't see the Mercedes CLK and $80K RV in the drive way.
On Dec 22 10:20 AM Beam me up Scotty wrote:
> Unfortunately, our federal government is a ponzi scheme but no one
> has got around to letting our administrators know it. Trying to get
> one ponzi scheme to regulate another is wishful thinking. Let's just
> hope none of our involved governmental administrators or their close
> friends lost money or, for sure, the SIPC paybacks will indeed be
> increased and there's not much we can do about it.
On Dec 21 10:02 PM Gregory Skidmore wrote:
> I don't know how you can't feel badly for investors who lost money.
> I personally don't like to see any honest person lose money. They
> may have made a mistake to invest with Madoff, but they did not deserve
> to loose out in a ponzi scheme.
>
> All that being said, I don't believe any investors should be bailed
> out. I've heard the idea tossed around and this would only encourage
> people to continue to make investments without doing adequate due-diligence.
>
>
When greed meets greed, both usually wind up disappointed.
That's part of the problem!! People raised Rad Flags to SEC about Madoff's strategy for years!!!! For whatever reason they either chose to not investigate it, for were in some way complicite in not investigating it.
On Dec 22 01:36 PM Duude wrote:
>
> On Dec 21 05:31 PM You are clueless wrote:
I lost money, but hey, I was an idiot and didn't pay attention. But I was diversified so the net result wasn't *that* bad and since I live below my means I am doing OK.
I only have one thing to say to Madoff's victims: JOIN THE CLUB. If you had all your eggs in one basket then you've learned a harsh lesson.
I watched an interview with Arthur Levitt the long running SEC chairman under Clinton. It was asked of him about the SEC response under Cox but also under himself because the call for investigation of Madoff went back to the mid 1990's. He said regulators will always react after the fact. Its because they are set up and manned to regulate. Investigation only comes after its exposed. Unfortunately, they aren't the ones that expose it. This is a judge of the attorney general of the state of New York. That is their domain. Neither Guiliani nor Spitzer did any investigation of the Madoff scheme.
On Dec 22 04:42 PM TomF75 wrote:
I am not rich, but I advocated for a laisse faire economic system because it made sense. Come to find out, that laisse faire only applies when things are going good, when things go bad everyone runs under Uncle Sams SKIRT! There shouldn't be a SIPC, it should be a privately run institution collecting premiums comeasurate with the amount of risk they assume, with the companies they underwrite subject to the terms, conditions and audits of the covering insurer. This would be a lot more expensive with the result of people determining if they A.: want the coverage and willing to pay for it in which case who cares what happens? Or B: They don't want the coverage in which case who cares what happens? Either way I don't want this debt falling on cherubic heads of my offspring.
Now tell me what is the difference between a sub-prime borrower who borrows more than his affordabiilty ratio can support and a so-called sophisticated investor who doesn't have the acumen to make sure his account doesn't exceed the SIPC maximum so as to make sure his account is COVERED!
These "investors" earned an above market return based on a false ponzi scheme and if they were covered by SIPC will be made whole if not they will transfer their wealth to someone else who is more astute, its strong hands to weak and hopefully everyone LEARNS somethining.
This incident really pulls the cover off of all these so called "masters of the financial universe types" and reveals how lazy, inept,incompetent and greedy these guys really are. After the dust settles on WS you can bet that these guys are going to have to WORK and hustle for a living again instead of walking around with their well coiffed nose hairs blocking the lights acting like shuffling money from point A to point B is the Lords work and should be compensated as such.
I just SIPC don't give more to the winners (criminals), but hey.. it all depends on if SIPC can win or lose. Just like the whole global credit market "house take it all" scam that's been running in the last.. what "10" years, hmm, coincident..
Anyways, one day the whole world will respond to the cowboys game. cowboys watch out!! ww3 is imminent if this continues. Time for obama to play the peace game. haha, man.. that was brutal, cowboys!
My view of the bailout is that its payback to the industry for all the money they gave to the politicians!
On Dec 21 05:27 PM PBB wrote:
> Matthew-In all due respect, you have no idea what you're talking
> about. And the comments posted indicated others are equally uninformed
> as to what the investors were told, and what they thought.
> 1. Many of the individuals were not investing in a hedge fund. They
> opened segregated brokerage accounts in a registered broker/dealer,
> and otherwise provided Madoff with discretionary investing over these
> accounts.
> 2. The concept that these people thought that Madoff was making money
> for them by 'front running' is preposterous.
> 3. Its not as if other fund 'managers' weren't delivering similar,
> if not greater returns over the past decade. Paulson (John, not Henry);
> Paul Jones; George Soros (his returns were more volatile, perhaps),
> and even lesser-known people such as Israel Englander's Millenium
> Partners. So receiving 8%-10% per year, when more high profile funds
> were reporting 2x that amount was nothing short of brilliant on the
> part of Madoff. He appealed to the investors sense of conservatism
> and low-risk tolerance.
>
> 4. SIPC provides no more than $500,000 in protection.Nobody knows
> what the average account size was. Let's guess the mean was $2.5
> million--but because at least 50 individuals had more than $10 million
> on depsoit, and at least two dozen had $50 million+, and some representing
> the absolute entirety of their assets (excluding their home, or perhaps
> two homes), those people, at best, will be able to recover $500k.
> The vast majority are in their late 60's to early 80's. That means
> that those that lost every penny will have to wait at least two years
> before they see any SIPC money, if they do at all. OK, they'll have
> $500k to support themselves for the next 15-20 years.
>
> So the typical profile, a 73year old man and his wife, will need
> to survive on a budget of $25,000 per year. That's about $2000 a
> month.
> Is that what you wish on your parents or your grandparents?
>
> Sure, most of the people were smart enough to put in no more 50%,
> and many are left with at least several million to live off. So to
> that extent, you're right, many will simply have to learn to less
> in a less glamorous manner. B
>
> Before you post more comments on this topic, you might want to do
> a bit more research, and actually speak to people that were impacted.
>
A Madoff bailout would be particularly harmful to capitalism as a whole, because it would pervert it into a tool for the rich and well-connected.
I called the WSJ article propaganda because it focused not on the investors who made substantial returns over the 25+ years of investing with Madoff, but on charities and the elderly. Thus, it was deliberately designed to pull on our heart-strings for a class of people who are generally well-off.
The real victims are non-Madoff investors who will suffer diminished returns from their mutual funds. Their mutual funds hold companies like UBS and other entities that invested with Madoff. No one will be bailing out these Main Street investors, but they are the real victims. Yet, all the attention is being given to Madoff's investors, who are a highly exclusive group of hedge fund investors and investors who failed to diversify their investments.
In the end, a bailout is wrong because it would cause the transfer of wealth from people America should support rather than penalize. Basically, rather than reward people for making wise decisions or providing utility to others, a Madoff bailout ensures that Main Street will continue to suffer for bad decisions made by the rich and investors who failed to diversify.
If we wish to serve as a non-exploitative economic model for the rest of the world, we must allow some failure. We must not allow well-connected investors to make bad decisions and then escape the consequences because of their friends in Congress, on Wall Street, and in the Dow, Jones & Company publishing firm.
More important, if we want the U.S. dollar to continue being the world's reserve currency, then we must ensure the rich as well as the poor suffer the slings and arrows of bad decisions. The alternative is printing more money, which will lead to inflation, and reduced stature.
1- In hindsight, everybody looks like a finacial genius, and playing monday morning QB does not make you smarter than those who invested with Madoff.
2-Although the word "Bailout" is trendy" where do you get the idea that any of the investors are looking for a bailout. This is nothing more than your own guessing based on what appears to be a complete misunderstanding of SIPC
3- Madoff was not a hedge fund. Repear after me. Madoff was not a hedge fund. People were invested either through a hedge fund which in turn invested in Madoff or investors placed money DIRECTLY with Madoff which was a registered broker dealer. SIPC is insurance to cover lost funds from the failure of the firm, not trading losses. I believ the money comes from the industry, not the gov't.. The failure of the firm entitles those who had accounts there to SIPC coverage although it will mostly be a fraction of teh amount lost.
4. The author's random musings on changes to increased and retroactive coverage is not based on any factual evidence. What he thinks MAY or BELIEVES or FEARS will happen is complete speculation and in all probability, very unlikely. Why SA allowed this hypothetical crap to be posted is beyond me.
5-Some posters seem quite sure that the investors knew it was fraud. YOU DON'T KNOW SQUAT SO STOP PRETENDING LIKE YOU DO.
6- Most ponzi schemes do not last this long so after 5-10 years most investors probably belived it was legit and safe. remember, there has never been anything like this in the past in terms of size and longevity and madoff was a highly respected member of the industry. That gave people comfort to invest more than they should have and it is easy to criticize them in hindsight. You may have felt different if you were an investor but many of you seem way to stupid to ever become wealthy enough to be able to be in that position.
7-many of you seem to take a perverse pleasure in seeing wealthy people wiped out. Where do you think donations come from to build new hospital wings, fund college scholarships, support research for curing diseases like cancer, provide funding for new start up companies, support the arts, theatres + museums, and other charitable work. It sure doesnt come from poor or middle class people so the next time there is no scholarship money for your kid to go to college or your local hospital doesnt have the latest equipment to treat your illness, you may not be so critical of the wealthy.
8-If you bothered to read the articles before shooting off your mouths, you would know that not all of the investors were multi-millionaires and many lost their entire savings. Also, many people continued to reinvest their gains and therfore lost ALL of their investment.
9- The tax laws are pretty clear and no one seems to be looking for more than they are entitled to. a loss via theft is fully deductible against future income, and most investors will be able to claim refunds on billions of capital gains taxes paid on gains that never existed. It is also likely that those who got money out before the collapse may have to give it back. If you have a problem with any of this- go call the IRS
The author created a controversy where none existed based entirely on a hypothitical situation that he dreamed up with no basis in facts. The fact that so many of the comments are equally ignorant, factually incorrect, contain statements that the poster has absolutely no way to prove, and in which the poster belives he knows what the investors were thinking.
My suggestion is that most of you guys should spend less time on message boards and more time hitting the books and reading and learning. That way you won't sound so stupid and ignorant the next time you post and maybe it will help you become more succesful in life and not be so petty and jealous.
1. You said, "[W]here do you get the idea that any of the investors are looking for a bailout. This is nothing more than your own guessing." Actually, Madoff's investors have already asked for a taxpayer bailout:
"[S]ome government aid is a very logical request," said Robert Schachter, [who] is representing several Madoff victims. "If we're bailing out Wall Street and the auto industry, maybe these individuals should be bailed out too."
sg.news.yahoo.com/ap/2...
2. You said, "Madoff was not a hedge fund." Main Street could not invest with Madoff--they had to go through a hedge fund, or, in some cases, through personal connections with wealthy investors.
3. You said, "[M]any people continued to reinvest their gains and therfore [sic] lost ALL of their investment." You admit these investors failed to diversify; therefore, they violated the #1 rule of investing.
4. The problem is that the SIPC does not have enough money to cover all the Madoff claims. As a result, if you favor full reimbursement, the money must come from taxpayers. It is possible--though not likely--that private brokerage insurance may have the money to reimburse all of Madoff's investors. In any case, once Madoff's investors--most of whom are wealthy--record a loss for tax purposes, all taxpayers will suffer.
Many of the investors knew their promised returns were too good to be true. An article by one who was "wiped out" noted that in the back of his mind he had been expecting it all along. He knew he and his wife should diversify, but the longer the 15% to 22% kept rolling in, the more he and others convinced themselves there was no problem. It couldn't go on so long, with so many "important" investors, if it were a scam, now could it?
I find myself unable to sympathize with Madoff's "victims," or with most victims of scams (and please note I say "most", not "all"), because it is so simple to avoid them in the first place. All any investor need do is ask:
Does the investment GUARANTEE a rate of return, either a specific percentage, or a percentage range?
Is that return a percentage greater than twice the highest money market/CD return available?
If so, stay away. No legitimate investment outside of short-term instruments such as CDs or bonds guarantees a ROI. No legitimate investment guarantees a rate of return far higher than the norm for money market instruments. It is the guarantee itself that proves you are dealing with a crook). There are no guarantees in investing, unless the return is rigged to appear guaranteed.
Want to ante up a few million anyway? Then don't expect a handout if you lose your bet. If you don't know the classic signs of a con, pyramid scheme, Ponzi, etc., do the world a favor, and give your money to charity. You're going to be without it anyway, so why not do some good with it?
Most of the investors knew things smelled fishy, but greed convinced them to hold their noses and jump in. Which is why I end with the quote that so often follows my opening:
"You can't cheat an honest man."
"In any case, once Madoff's investors--most of whom are wealthy--record a loss for tax purposes, all taxpayers will suffer."
Wow, i also wonder how SA thinks this author is worthy... here is why:
so if i pay taxes on money i never made and the tax code says i can't get back my money after 3 years, that's okay. It's the IRS TAX CODE.
On the other hand, if a thief Mad[e]off with my money and i want to "record the loss" for tax purposes... also my right within the tax code, then that's no good becuz "all taxpayers will suffer"...
yes, Matthew Rafat... sacrifice the one for the many... forget about fairness and tax code and any sense of morality... we can't have someone try to get 1/100th of their stolen money back by getting a tax break after over-paying taxes for 20 years - that would be bad for "the taxpayers".
FREAKIN AMAZING sense of justice and morality.
(and please don't spout off another bunch of crap in response to this... i am addressing one comment of yours and you should be held accountable for EVERYTHING that comes out of your mouth)
If Madoff's investors had diversified or at least done adequate due diligence, most would have paid taxes on their capital gains at some point. As it stands, with around 50 billion dollars of wealth evaporating, the average citizen/taxpayer has lost a major source of tax revenue, because no gains actually occurred, so no taxes will be paid.
The evaporation of so much wealth also caused harm because of the lost opportunity cost. Wealth invested in non-IPO stocks is taken out of the economy. For example, when I choose to invest long-term in Coca-Cola stock, I reduce my disposable income. Assuming I would have spent the money I invested, everyone from local retailers--which might have increased hiring to handle higher demand--to local government--which won't get any sales taxes--loses. The tax code recognizes that, and requires a tax to be paid when an investor recognizes a gain. Here, we have around 50 billion dollars that will never provide tax revenue. In short, Madoff's wealthy investors not only punished themselves by their inadequate due diligence, but local governments, schools, universities, fire departments, and police departments. Most people understand that taxpayers pay for all the aforementioned services, and voters are loathe to lay off teachers and police officers; thus, at some point, taxes will be raised, or the dollar devalued. Assuming neither higher taxes nor a devalued dollar is desirable, Madoff's investors have harmed all American taxpayers.
You seem to believe that 10%-15% return should have flagged a ponzi scheme which is absurd because it didn't happen that way and nobody would have invested their money with them if they had any inclination it was a ponzi scheme.
A low return can not sort that out either. A ponzi scheme is a case of fraud and it can not be detected by investors if a firms is very established and has a long history. Most people use an establishment's history as a gauge for verifying authenticity and excluding fraud otherwise all firms are suspects.
Madoff's investors could _not_ have reasonably believed that they were receiving 10 to 15% every year without some insider information. Madoff's position as a Nasdaq chairman probably convinced investors they had access to something no one else did. See link below for more:
finance.yahoo.com/tech...
At the end of the day, Madoff's investors should have diversified or at least attempted to do more due diligence. Their failure to follow the well-known and cardinal rules of investing--diversify and buy only what you understand--is the sine qua non of their current situation.
Most important, most of Madoff's investors were _not_ unsophisticated investors--most were educated, English-speaking, and affluent. This is why Madoff slept soundly at night--in his mind, even if someone invested a million dollars with him, most had plenty of money left over. He may have even believed himself to be a modern-day Robin Hood--stealing from the rich to give to the poor and the charities.
At the end of the day, the blame belongs on Madoff and the fiduciaries of charities and other entities who failed to diversify donors' money. Rather than excuse negligence, Madoff's investors should serve as an example to those who fail to diversify or who do not question impossible returns. Bailing them out would result in the following:
1. It would tell the world America will print money and devalue the dollar when its citizens--especially the rich and well-connected--make avoidable mistakes. If the Japanese, Chinese, Swiss, and British begin to question the U.S. dollar's integrity, it will be the beginning of the end for our entire country. We have major deficits and are currently dependent on foreign investors to finance our expenditures. When we have a surplus, we can afford to be generous. Right now, we can afford to be sympathetic only with our hearts, not with our wallets.
2. It would weaken faith in our country's sense of fairness. Anytime a government gives money away arbitrarily, others not part of the largess rightly cry foul. What about all the other victims of investment fraud, like the Baptist Foundation of Arizona or Sunrise Equities Inc.? What about the mortgage brokers who ripped off ordinary Americans by submitting mortgage applications with false income information? (And where's the perp walk for those people?)
To those of you who say I have no sense of compassion or morality, let me say this: if anyone ought to receive taxpayer money, it should be the families of Americans who were slain in Iraq. They are also victims of government inaction and negligence and have lost more than just money. The list of more deserving victims is endless, but if we go down that path, we will transform America into a land of sympathy-seekers, not strength. For a country that has been the symbol of hope for so many people worldwide, such an image shift is unacceptable.
Although I opposed the auto and bank bailouts, they will help hundreds of thousands of ordinary Americans who had little power to avoid their current situation. Auto workers themselves did not cause their current financial mess--the banks, their unions and the Big Three did. In contrast, Madoff's investors failed to do due diligence, failed to diversify, and/or must have believed Madoff had inside information. As a result, they do not have clean hands.
Any regulation that occurs should require nonprofits and other charities to fully disclose to the public (preferably on a website) not just basic P&L statements or budgets, but where they are holding their donations, and what specific investments they have bought. As long as taxpayer money is not involved, some good may come of this yet.
1) GMAC got $9.4 Billion dollars on Friday
2) GMAC owns 49% of GMAC
3) A main reason GM is doing so poorly is because of GMAC
4) The chairman of the board of GMAC is J. Ezra Merkin
5) J. Ezra Merkin runs a hedge fund (Ascott Partners) and charges a 2/20% fee for operations.
6) J. Ezra Merkin invested 100% of Ascott Partners assets into the Madoff Ponzi scheme (this shows he knows nothing of derivatives; asset allocation; or diversification)
So, ask yourself the following: why did we just give $9.4 billion to a company that has a subsidary whose chairman got burned by a ponzi scheme? The bailout has already happened.
Sad, sad and sadder!
In the meantime, my retired school teacher wife, and I, a retired sales rep., at the age of 70, lost about all we had saved. We were in a general partnership, whose partners, or investors, were mostly churches, pastors, priests, charities, 401K holders(as we had been before we rolled over into IRAs) none of who how our money was invested. Most people in the partnership didn't even know what a hedge fund was, and if they did, they would not have invested in it. We all expected a 7-8% return(after management fees) as a conservative, and reasonable return. Our quarterly reports were written from Madoff's quarterly reports.
Now, I ask, would you have not believed that Madoff Securities was not legitimate in light of his industry standing, his skills in investing, etc?
Of course you wouldn't have believed he was crooked.
If the result of the investigation shows that certain SEC lawyers/accountants were "sleeping with the enemy", then you must believe them culpable in this fraud, and they must be held accountable, and the SIPC will have to come up with the money. Believe me, if this would have happened to you, I would go to bat for you in any way I could.
I do not see what negative articles like Mathews does to help the cause of innocent people who have been defrauded of their life savings. If this forum is only for the purpose of getting "hits" for the purpose of selling advertising, Mathew is defrauding all of us.
Phil....another Madoff victim
On Dec 21 05:27 PM PBB wrote:
> Matthew-In all due respect, you have no idea what you're talking
> about. And the comments posted indicated others are equally uninformed
> as to what the investors were told, and what they thought.
> 1. Many of the individuals were not investing in a hedge fund. They
> opened segregated brokerage accounts in a registered broker/dealer,
> and otherwise provided Madoff with discretionary investing over these
> accounts.
> 2. The concept that these people thought that Madoff was making money
> for them by 'front running' is preposterous.
> 3. Its not as if other fund 'managers' weren't delivering similar,
> if not greater returns over the past decade. Paulson (John, not Henry);
> Paul Jones; George Soros (his returns were more volatile, perhaps),
> and even lesser-known people such as Israel Englander's Millenium
> Partners. So receiving 8%-10% per year, when more high profile funds
> were reporting 2x that amount was nothing short of brilliant on the
> part of Madoff. He appealed to the investors sense of conservatism
> and low-risk tolerance.
>
> 4. SIPC provides no more than $500,000 in protection.Nobody knows
> what the average account size was. Let's guess the mean was $2.5
> million--but because at least 50 individuals had more than $10 million
> on depsoit, and at least two dozen had $50 million+, and some representing
> the absolute entirety of their assets (excluding their home, or perhaps
> two homes), those people, at best, will be able to recover $500k.
> The vast majority are in their late 60's to early 80's. That means
> that those that lost every penny will have to wait at least two years
> before they see any SIPC money, if they do at all. OK, they'll have
> $500k to support themselves for the next 15-20 years.
>
> So the typical profile, a 73year old man and his wife, will need
> to survive on a budget of $25,000 per year. That's about $2000 a
> month.
> Is that what you wish on your parents or your grandparents?
>
> Sure, most of the people were smart enough to put in no more 50%,
> and many are left with at least several million to live off. So to
> that extent, you're right, many will simply have to learn to less
> in a less glamorous manner. B
>
> Before you post more comments on this topic, you might want to do
> a bit more research, and actually speak to people that were impacted.
>
With power comes responsibility. You had the power not to invest in a certain fund or investment. Instead, you apparently delegated power to a mutual fund manager, who failed to do due diligence and invested with Madoff. You admit this when you wrote, "We were in a general partnership, [and] none [of us knew] how our money was invested."
The general taxpayer had no involvement in your decision to invest with your mutual fund or other investment vehicle, which then apparently chose to over-invest with Madoff. Given the lack of general taxpayer involvement or culpability, it is difficult to see any rational reason taxpayers should bail you out. The appropriate recourse is with your mutual fund manager, Madoff, or insurance (SIPC), not with the general taxpayer.
You mention you have lost your life savings and are in your 70's. Medicaid, Medicare, and Social Security income will prevent you from being impoverished. Thus, the general taxpayer is already assisting you and protecting you from dire poverty. You appear to want the general taxpayer to provide you with more of their money because you failed to diversify your investments. To paraphrase Barry Goldwater, a government that is big enough to help you avoid all your mistakes is also big enough to tell you exactly how to live your life.
You appear willing to hold other Americans and the general taxpayer responsible because you and your mutual fund manager/trustee made a mistake. Your mistake should not hurt responsible Americans, the overwhelming majority of whom diversified their investments, still lost thousands of dollars, and won't get a bailout.
Disclaimer: I don't have (or earn) a lot of money and I have significant debt. I just want to clarify that I am not trying to "defend my own." Instead, I'm trying to step back and look at things from different perspectives.
As history tends to repeat itself, the same axioms still hold true:
1. Diversify, NO MATTER WHAT.
2. If things look too good to be true, they usually are.
And as a note to more astute investors, do you really think an investor as big as Madoff, would be able to continuely beat the market, year after year?? The higher % of the market the participant becomes, the more likely he/she will earn the market return.