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Matthew Rafat

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  • Five Reasons the Market Could Crash This Fall [View article]
    With the S&P above 1000, I agree with the overall bearish sentiment. The market has gone up too much, too soon, on very little positive news. I sold most of my equities yesterday:

    Good luck to all.
    Aug 4 03:30 PM | 23 Likes Like |Link to Comment
  • Madoff's Investors Don't Deserve Compensation or Sympathy [View article]
    martyg: When people talk about widowers and senior citizens, I always think, "Where were the kids?" I help my parents manage their investments. Also, my mom usually sets aside her junk mail and financial offers, including credit card solicitations, for my review. Madoff may have unwittingly taught us another lesson--children and parents should work together to evaluate appropriate investments. In a world of sophisticated scam artists, it no longer makes sense for parents to shield their financial information from their children, who oftentimes have no idea what to expect until after their parents die. Perhaps post-Madoff, families will be more open about their finances and more willing to let grown children see their investments. In most cases, another set of eyes can't hurt.
    Jul 1 02:40 PM | 16 Likes Like |Link to Comment
  • Madoff's Investors Don't Deserve Compensation or Sympathy [View article]
    EJL: I don't mind Madoff investors getting SIPC funds--the SIPC is funded by member broker-dealers, not taxpayers. Above all, the special tax breaks bother me, as well as the speed by which Congress changed tax laws to benefit Madoff's investors.

    I am also bothered that our government is spending so much time prosecuting Madoff when more urgent matters exist, especially ones that affect all taxpayers. When was the last time you saw the government move so quickly on issues that primarily impact middle-class and poor Americans?
    Jul 1 08:59 PM | 8 Likes Like |Link to Comment
  • Dow 10k: The Higher They Rise, The Harder They Fall [View article]
    Correction/revision to article: Currently, Chinese and Indian culture tend on family and tradition, not unbridled individualism. Such a family-oriented, traditional approach dampens unreasonable or wild materialism."
    Oct 15 05:32 AM | 7 Likes Like |Link to Comment
  • Is Yahoo CEO Carol Bartz 'The One'? An Open Letter [View article]
    ph@ntasm: Thank you for your comment! I've had a Yahoo email since they first offered free lifetime accounts. I have a soft spot in my heart for Yahoo, and I really hope they get back on track.

    BTW, I disagree that Yahoo wasn't made for me--years ago, they managed to publish mostly quality articles, and I don't remember quite so many hateful comments until recently. I understand the 2008 election may have energized certain groups of people, but I still don't understand the reasons Yahoo doesn't adapt and institute some form of quality assurance. Even SeekingAlpha, with its small full time staff, does a fine job deleting hateful comments and spammers. Why doesn't Yahoo take a page from SeekingAlpha?
    Aug 20 03:13 PM | 4 Likes Like |Link to Comment
  • Madoff's Investors Don't Deserve Compensation or Sympathy [View article]
    From Reuters:

    "Walker-Lightfoot, a lawyer in the SEC's Office of Compliance Inspections and Examinations, sent emails to a supervisor saying information provided by Madoff during her review didn't add up and suggesting a set of questions to ask his firm, the report said. One of Walker-Lightfoot's supervisors on the case was Eric Swanson...Swanson later married Madoff's niece."

    Here are some quick responses to the comments above:

    1. Someone wrote, "If you were one of those who lost a lifetime's savings, your article would have a slightly different sentiment." Perhaps you are right; however, I diversify my investments and I buy investments available to the public. I do not and cannot invest in hedge funds or other non-transparent clubs.

    2. Two people have criticized my grammar and spelling--please point out specific mistakes. One person wrote that "investors like you and I could not get Madoff" should have been written as "investors like you and me..." I disagree, but I will check my Strunk and White manual later.

    3. An anonymous person implied that I would feel differently had Madoff's investors been of a different religion, more specifically Islam. That's the kind of irrelevant, divergent thinking that Madoff's investors want to avoid if they want any chance of sympathy. People are upset because of perfectly rational factors:

    a) Madoff's investors should have diversified their investments;

    b) Madoff's investors are receiving special treatment from the government in the form of special tax breaks (paid for by general taxpayers) and more-than-usual government resources;

    c) Madoff's investors are seeking to portray themselves as poor widows when most of them are probably still more affluent than 95% of Americans (take a look at Madoff's client list, and you'll see many trusts, private banks, foundations, corporations, and LLCs);

    d) most Madoff investors would not have invested heavily with Madoff unless they believed he had an unfair edge or special connections unavailable to the public investor;

    e) Madoff's investors believed Madoff was using investment strategies unavailable to the general public (they were right--it just wasn't the strategy they expected);

    People are also upset because they see a fundamental shift in values. In the old days, the rich believed they had a duty to do public service. They recognized that capitalism necessarily results in winners and losers, and the government could not solve the problems of vast inequality and disparate opportunities by itself. Look at Theodore Roosevelt, John D. Rockefeller, Jr., and John Pierpont Morgan. It's hard to remember now that JP Morgan bailed out the federal government, but it really did happen.

    I'm not saying all rich persons have lost their moral compasses. Eli Broad, Warren Buffett, Ted Turner, and Bill and Melinda Gates are doing wonderful things, but most of us work hard every single day and will probably never be worth millions of dollars, or even one million dollars.

    Most of Madoff's investors got to the financial promised land and squandered their chance at permanent retirement. They did so voluntarily--no one forced them to violate basic investing rules and to invest heavily with Madoff. Thus, it is hard to stomach the general media's sympathetic coverage of Madoff's investors when so many Americans are homeless, out of work, and live paycheck to paycheck.
    Jul 2 02:12 PM | 4 Likes Like |Link to Comment
  • Pensions: The Biggest Story of the Week - Or the Year [View article]
    Excellent, excellent article--I've been trying to warn the public about the danger of underfunded public pensions. The government's actuarial projections border on being deceitful. Links to my articles are below:



    Mar 3 03:01 PM | 4 Likes Like |Link to Comment
  • Notes From Accuray's 2010 Shareholder Meeting [View article]
    @Mattie Brock: I've reviewed numerous shareholder meetings and have been critical of executives whom I felt deserved criticism. For example, feel free to read my recent article on Electronic Arts' CEO John R.

    In this case, however, I didn't see anything especially terrible about Accuray's CEO. Do you have any specific criticisms about him, other than the decline in the stock price? If so, please feel free to share your concerns. While a company's stock price is an important barometer of executive performance, reasonable people understand that many companies have experienced major declines in their stock price over the last three years, not just Accuray.

    When a company is small, even one mis-step can be fatal. As a result, if you believe CEO Thomson is too conservative, then we disagree on the level of risk appropriate for a small company.

    Finally, you are incorrect when you allege that I have somehow benefited financially from my review of Accuray's shareholder meeting. Your willingness to make such allegations without any evidence whatsoever gives us excellent insight into your credibility, or lack thereof.
    Nov 26 10:04 PM | 3 Likes Like |Link to Comment
  • The Congressional Bailout of Madoff's Investors [View article]
    On WallStreet: you do not cite the law that allows the SIPC to charge transaction fees on securities transactions. Please include a citation. Also, your proposal fully reimburses all of Madoff's direct investors. As far as I know, the SIPC coverage is limited to 500K per direct investor and should continue to be limited to a total of 500K per direct investor. Maintaining or even reducing the 500K limit makes sense, because it creates incentives for investors to spread their wealth among different brokers/brokerages, thereby gaining a minimal form of diversification. Anything that promotes diversification is a good thing. Post-Madoff, we shouldn't have to hear the words, "too big to fail."

    logicalthought: I understand your point; however, insurance coverage is a non-moral issue. If you have an insurance policy and some event triggers the policy, whoever issued the policy should pay. Here, the taxpayer may become the insurer because the banks and other SIPC members failed to properly fund the SIPC. SIPC members only had to pay $150 per year into the SIPC fund. (That's not a typo--it really is only $150.) The proposed new law only increases the amount to $1,000. Why not increase the minimum annual assessment to $5,000 or $10,000 per year until the SIPC fund reaches a reasonable amount?

    The only part of the proposed bill I like is section (d), which creates civil and criminal penalties for misrepresenting SIPC membership or protection. However, even this part is watered down, because the penalties are too low. The maximum financial penalty is only $250,000 and the maximum prison term is five years--hardly enough to faze a future Madoff. You almost have to wonder if white collar criminals have a PAC or group of lobbyists.
    Jul 5 09:09 PM | 3 Likes Like |Link to Comment
  • Madoff's Investors Don't Deserve Compensation or Sympathy [View article]
    User 349707: if you're going to make wild accusations, stop hiding--print your full name like I do when I write something here. Also, try to provide some evidence or statements that support your statements. You haven't done so--and you won't be able to.
    Jul 3 01:53 PM | 3 Likes Like |Link to Comment
  • At the Precipice: When Everyone's Fearful ... Sell? [View article]
    You've set up an "either/or" S&P 1010 or 1130 premise. In doing so, you've neglected another possibility--that the market stays within a range of 1010 and 1130 until after the elections or until after next year, when more data becomes available.
    Aug 25 12:01 PM | 2 Likes Like |Link to Comment
  • Reactions to My Madoff Rant: No Apologies [View article]
    User 439971 writes, "The IRS was by far the biggest beneficiary of the Madoff fraud." First, you are ignoring the tens of millions of dollars spent in law enforcement time and resources solely to benefit several thousand Madoff investors. We, the taxpayers, pay for the DOJ, SEC, and other government watchdogs. When they use our money to focus on matters that primarily benefit an educated, affluent group, people ought to be upset.

    Second, you are wrong in saying that Madoff's investors will only get back what they paid to the IRS. After the CPAs and tax lawyers are done, many Madoff investors will get credits for much more than they actually paid. These changes will result in taxpayer-funded windfalls for early Madoff investors. For example, let's say you invested $5,000 with Madoff in 1975. Over time, your investment becomes $50,000. The problem is, most Madoff investors will submit claims for the full 50K, even though their original investment was only 5K.

    Also, you misinterpreted my article and somehow conflated widows with banks. I talked about "the general media's sympathetic coverage of Madoff's investors." In my previous article, I linked to a WSJ article that focused on a small, select group of investors who were not representative of a typical Madoff investor. If you review the actual list of investors--or, as the WSJ calls it, "Madoff's *Victim* List," the typical Madoff investor was not a poor widow.

    Bottom line: Madoff's investors didn't invest in a fund directly available to the public, like a Vanguard or T. Rowe fund. It isn't a crisis of confidence or a public interest issue when fund managers, trusts, corporations, private banks, and rich people go "off-the-grid" to find a sure thing. Investors may choose to go "off-the-grid" if they want; however, if their exotic investment fails, why should taxpayers' money and resources be involved?
    Jul 2 07:03 PM | 2 Likes Like |Link to Comment
  • California's Tipping Point [View article]
    Dear "allscrewedup": I didn't say police had no impact whatsoever on crime--I said, "police and firefighters are only two components in the public safety analysis." That means other components affect the balance, too.

    For example, you wrote, "Crooks and criminals from East Palo Alto, Oakland, Salinas, etc. all commit therir [sic] crimes in Santa Clara County. In fact, the majority of our criminals hail from those cities." Don't these cities also have police officers who risk their lives every day? Under your own example, Oakland, East Paly, and Salinas should be very safe because they have police officers who work hard and risk their lives every day. But you admit these cities are not as safe as San Jose. Why is that? I believe it's differences in education levels and the high cost of living, as I pointed out in the article. If we switched the Oakland PD with the SJPD, I don't think there would be much difference in crime rates post-switch.

    Now, the NYPD is an interesting example. It did a great job cleaning up NYC, especially the areas around Times Square. Even so, it's hard to conclude that NYPD single-handedly caused the crime rate in NY to decline. Too many different people were involved in the turnaround effort, including local residents. Was the prior decline in crime a result of having a better economy, which usually leads to less crime? Was it having more officers? Better training? More resident involvement? A mayor willing to try new approaches? Better drug rehabilitation efforts? It's probably a combination of all these factors. My point is, having good police officers is definitely one relevant component in analyzing NY's crime cleanup. But it's only one component in a complex, ever-changing picture. The fact remains that in most major cities, if you switched police departments, you probably wouldn't see a major difference in crime rates.
    Jan 27 01:42 PM | 2 Likes Like |Link to Comment
  • Public Pensions: Rotting from Within [View article]
    Reddleman: I am not anti-teacher. I actually favor increasing teacher salaries, as long as their benefits are similar to what private sector employees receive.

    Since you brought up teachers, Chuck Thompson has two funny paragraphs about them in his book, _Smile When You're Lying_:

    "And, yes, poor unappreciated teachers. I did say sweet deal. American public school teachers have the world's best PR operation going. Whining every chance they get about how demanding their jobs are, how many 'extra hours' they put in, how little they make, how much of their own money they have to spend just to do their jobs, how noble they are working this job that nobody ever asked them to do--welcome to the f**king world...

    You think you got it tough? You don't got it tough. American teachers would crumble if they ever had to work the real hours of a cabbie, doctor, bartender, fisherman, truck driver, small-business owner, hotel clerk, mechanic, architect, janitor, musician, surveyor, accountant, or the million other jobs that don't observe weekends, much less every city, county, state, and federal holiday on the docket, almost three months' paid vacation a year, and pension programs funded out of the public trough. How is it we go through school painfully aware that half our teachers are lazy or incompetent or pathological control freaks, then turn around and let them convince us what a bunch of saints they are as soon as we become taxpayers?" (p. 100)
    Jan 14 09:26 PM | 2 Likes Like |Link to Comment
  • Don't Be Scammed by Madoff Investor Sob Stories [View article]
    I've read all of your comments with the hopes that our outrage will prevent another ill-advised bailout. Carnegie Mellon economist Allan Meltzer once said, "Capitalism without failure is like religion without sin." In other words, capitalism doesn't work unless we allow losers. Having losers creates two positive outcomes: one, it shows others what doesn't work (in this case, not diversifying or not doing due diligence when investing); and two, it creates shame--a powerful motivator--by warning others that bad actions lead to real consequences.

    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.
    Dec 23 05:26 PM | 2 Likes Like |Link to Comment