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Matthew Rafat

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  • Don't Be Scammed by Madoff Investor Sob Stories [View article]
    SPK, you make some very good points. My article was primarily against the idea of bailing out Madoff investors using taxpayer funds. Sympathy is one thing--taking taxpayer funds is another.
    Feb 6 04:46 PM | Likes Like |Link to Comment
  • California Bonds Downgraded Again [View article]
    To "devassocx": I don't claim to know exactly how much undocumented workers cost or add to California's finances. I was just pointing out that a reasonable analysis of the net gain or loss of undocumented workers must include the children of these undocumented workers and their future contributions. For me, the turning point is the reality of the situation--it would be nearly impossible to collect all the undocumented workers and deport them to Canada, Mexico, etc. Once I realized this, I started to focus more on how to make the children of undocumented workers productive, taxpaying residents.
    Feb 6 02:12 PM | Likes Like |Link to Comment
  • California Bonds Downgraded Again [View article]
    Some people have made comments about undocumented workers on this post. For the record, I do _NOT_ agree that undocumented workers are a cause of California's budget crisis. Once you factor in the amount they pay in sales taxes and gasoline taxes, it's hard to say whether undocumented workers are a financial net positive or negative.

    in addition, without the immigrant population, both legal and illegal, America's population would be declining--which would be bad news for all entitlement programs, especially Medicare and Social Security. You have to factor in the children of undocumented workers and the taxes these children will pay over the next 60 years if you want to make a reasoned analysis.
    Feb 6 12:20 AM | Likes Like |Link to Comment
  • Don't Be Scammed by Madoff Investor Sob Stories [View article]
    To "Phil the Victim": I did _not_ favor the corporate or auto bailouts; however, I recognize that the auto bailout helped thousands of Americans who suffered because their unions and irresponsible boards made poor decisions. That's the difference between Madoff investors and the auto workers and lower level banker employees: one group (Madoff investors) could have diversified or chosen to do better diligence before investing, while the other group (lower level corporate and auto employees) had little power or say in any substantive decisions.

    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.
    Jan 25 12:09 PM | Likes Like |Link to Comment
  • Madoff Investors Deserve Sympathy, Not a Bailout [View article]
    SJACOBS: read the first line of the article again:

    "A consistent 15% return over 25+ years, without any losses, is impossible without some illegal advantage..."

    On my own blog, the phrase, "without any losses," is emphasized.

    Last week, a letter to the WSJ talked about a plan similar to yours. You may want to read it and post a link here for everyone's benefit.
    Jan 6 01:18 PM | Likes Like |Link to Comment
  • Dick Kovacevich on Banks and This Financial Crisis [View article]
    Oops, the line above should be "$1.5 trillion," not "$1.5 billion":

    I said, "Today, they are $610 billion. When our merger with Wachovia (WB) is completed, we will be nearly $1.5 billion." It should be $1.5 trillion, with a "t."

    As Senator Everett Dirksen once said, "A billion here, a billion there, and pretty soon you're talking real money."
    Jan 3 04:20 PM | Likes Like |Link to Comment
  • Don't Be Scammed by Madoff Investor Sob Stories [View article]
    Tesa, you said, "You seem to believe that 10%-15% return should have flagged a ponzi scheme." You are correct that a 10-15% return doesn't reveal a Ponzi scheme; however, a consistent 15% return over 25+ years, _without any losses_, is impossible without some illegal advantage, like inside information.

    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:

    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.
    Dec 25 04:17 PM | Likes Like |Link to Comment
  • Don't Be Scammed by Madoff Investor Sob Stories [View article]
    I suppose I need to clarify this earlier comment: "In any case, once Madoff's investors--most of whom are wealthy--record a loss for tax purposes, all taxpayers will suffer."

    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.
    Dec 25 12:33 AM | Likes Like |Link to Comment
  • Don't Be Scammed by Madoff Investor Sob Stories [View article]

    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."

    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.
    Dec 24 12:00 PM | Likes Like |Link to Comment
  • Problems That Detroit Bailout I Doesn't Address [View article]
    Great article--here's another take on the bailout ("An Auto Bailout is Unjust"):

    Dec 11 12:06 AM | Likes Like |Link to Comment
  • Big Three Bailout: Not Like Japan's Automakers in the 90s [View article]
    Thornton: despite all evidence to the contrary, you've somehow interpreted my article as support for the $800 billion banking bailout. In fact, Congress's bailout of the financial companies is what created the slippery slope allowing the Big Three to demand taxpayer money. Sadly, it appears we are following in the footsteps of Japan, which may cause our own "lost decade."
    Dec 10 04:02 PM | Likes Like |Link to Comment
  • Foreign Debt Holders and U.S. National Debt [View article]
    Smarty_Pants' comment directly above is right on. I couldn't have said it better.
    Nov 3 04:44 PM | Likes Like |Link to Comment
  • The Shallowest Generation [View article]
    If you like this article, check this out out--A Nation of Debtors:
    Nov 1 07:21 PM | Likes Like |Link to Comment
  • Visa's First Annual Shareholder Meeting a Non-Event [View article]
    Art Rimbaud: the annual shareholder is the one time ordinary investors can directly question a company and gain insight into their culture. Companies, like countries, have their own culture. I favor open, humble corporate cultures, because the more open a company is to criticism, the less likely it is to end up like Enron (just view Skilling's response to an analyst in the documentary, _The Smartest Guys in the Room_). Your comment on the number of shares I own is irrelevant, because it is precisely a company's attitude towards small investors that indicates how open it is. In addition, your comment is based on the premise is that public companies should only pay attention to institutional investors or large investors and that small investors have nothing to add. Your premise is incorrect and fails to recognize the importance of Regulation FD and the role of the small investor in keeping companies honest and responsive to the public. Recent events should demonstrate what happens when only large players are involved in decisionmaking, or when large players are insulated from public feedback.
    Oct 20 12:50 AM | Likes Like |Link to Comment
  • Notes on VMWare's Special Shareholder Meeting [View article]
    RTFM, you've given one of the better explanations that exist about VMware's business. Thank you. In some ways, this sounds like an arms race--perhaps VMWare's products aren't absolutely necessary for a company, but if companies do not adopt the more advanced technology, they will be left behind. I realize my knowledge is extremely limited, but I am not a techie. Thank you again for your detailed post.
    Sep 11 01:41 PM | Likes Like |Link to Comment