Bernie Madoff arrested over alleged $50 billion fraud

[tippy]

.

[Tom Storer]

Originally Posted by tippy

.

Did you mean to point to this?

[tippy]

That works, thanks Tom.

[Dr Dave]

"How could it happen? How could it happen? How could it happen?"

It happens like this: If something seems too good to be true, it most likely is.

[tippy]

I guess he was well respected. Who wouldn’t I suppose - following your thinking, dave – be pleased with a magician? Should one be suspicious of profits in a downturn? I guess so.

[Gordon B]

Originally Posted by tippy

I guess he was well respected. Who wouldn’t I suppose - following your thinking, dave – be pleased with a magician? Should one be suspicious of profits in a downturn? I guess so. I know personally that he crashed several non-profits that were doing good work.

I wonder where it ranks in length of duration for Ponzi schemes.

One shouldn't be suspicious of profits in a downturn.

What was suspicious about Madoff was the extremely low volatility in his monthly returns and other things that didn't add up. He claimed that he didn't show large positions in quarterly filings because he flattened out all his positions at quarter ends but how would one do that with a large fund without moving the markets and getting slaughtered?

His market-making business was successful and probably on the up-and-up creating cover for his asset management business.

Here's a comment on Henry Blodgett's yahoo blog:

One friend who saw this coming said Madoff had his own broker-dealer and a relative as his finance guy; another friend said he was suspicious because of the 1-2%/month returns with never a down month (much less quarter or year), combined with never showing anyone his portfolio. 99% of the time, if it sounds too good to be true, IT IS!

[tippy]

Thanks for that explanation, Gordon.

[Uli]

Another thingy that has made some suspicious earlier was that his auditors
"Friehling & Horowitzhad" consisted of 3 employees. A 78 yo in Florida, a secretary and an accountant in NY with a 20 m2 office (der Spiegel on line)

[tippy]

The briefest local news report last night said that there had been a couple of investigations within the last 3 years (I think) but with nothing significant that stuck. (I’m sorry I don’t have details of those investigations to provide for you.)

[Jazzooo]

I haven't really been following this story, but in the linked article it sounds like he's admitting everything, and then in the final paragraph his attorney says he will 'fight the charges'?

[tippy]

His attorney will make more money fighting the charges.

[Mike Schwartz]

Originally Posted by Gordon B

I wonder where it ranks in length of duration for Ponzi schemes.

One shouldn't be suspicious of profits in a downturn.

What was suspicious about Madoff was the extremely low volatility in his monthly returns and other things that didn't add up. He claimed that he didn't show large positions in quarterly filings because he flattened out all his positions at quarter ends but how would one do that with a large fund without moving the markets and getting slaughtered?

His market-making business was successful and probably on the up-and-up creating cover for his asset management business.

Here's a comment on Henry Blodgett's yahoo blog:

One friend who saw this coming said Madoff had his own broker-dealer and a relative as his finance guy; another friend said he was suspicious because of the 1-2%/month returns with never a down month (much less quarter or year), combined with never showing anyone his portfolio. 99% of the time, if it sounds too good to be true, IT IS!

In an age of instant online results and research data up the wazoo, this guy apparently had his own reports on paper.

[Gordon B]

Some investors invested with Madoff because they knew he was cheating. The joke's on them.

Of course they didn't realize the nature of the cheating.

[jesus marion joseph]

Originally Posted by tippy

His attorney will make more money fighting the charges.

Damn straight.

[Monte Smith]

You're surprised some guy called Madoff made off with your money? True story: I only care about reading, so when I was in Seattle I had an investment guy called Reed Moore.

[Jon Abbey]

what's funny/tragic is that the only things separating the federal government from being a "Ponzi scheme" is that the people they owe money to aren't asking for it back (and somehow keep lending them more), and that they're allowed to keep printing more.

from "E Pluribus Unum" to "Too Big To Fail", we should all be so proud...

[Ron Thorne]

What you said, Jon!

[Tom Storer]

Say, Gordon (or whoever), what is "market-making"?

[Gordon B]

Originally Posted by Tom Storer

Say, Gordon (or whoever), what is "market-making"?

A market-maker makes bids and offers on the same instrument; "he makes a market" on it.

For example, I might go to Intrade and see that Coleman is trading around 48 to win the Senate race. Nobody on JC has an account at Intrade except me. So I make a market for everybody, 46 50. I am willing to by Coleman at 46 or sell him at 50. If you hit my 46 bid, I may change my next price to 45 49 for the next person. If Monte pays me at 49, I've made 3 points.

When my business makes a trade in the currency markets, the positions are held at a major bank. If anybody wanted to ask if I was legit, I could show brokerage statements, end of question.

Madoff's investment fund held its positions with Madoff's own firm, rather than an independent bank or broker. The positions were fictional.

[Gordon B]

SEC fell down on the job.

[rollhead]

SEC fell down on the job?

Hell, under Republicans the job of government IS to fall down.

[Monte Smith]

Originally Posted by Gordon B

A market-maker makes bids and offers on the same instrument; "he makes a market" on it.

For example, I might go to Intrade and see that Coleman is trading around 48 to win the Senate race. Nobody on JC has an account at Intrade except me. So I make a market for everybody, 46 50. I am willing to by Coleman at 46 or sell him at 50. If you hit my 46 bid, I may change my next price to 45 49 for the next person. If Monte pays me at 49, I've made 3 points.

When my business makes a trade in the currency markets, the positions are held at a major bank. If anybody wanted to ask if I was legit, I could show brokerage statements, end of question.

Madoff's investment fund held its positions with Madoff's own firm, rather than an independent bank or broker. The positions were fictional.

To put it another way, Tom, "HUH?"

[jesus marion joseph]

Originally Posted by Monte Smith

To put it another way, Tom, "HUH?"

Ha ha! I'm glad I'm not the only one!

[Tom Storer]

I think it means this: one person, the market-maker, buys and sells a given kind of thing and offers to let others buy the things from and/or sell them to him, rather than on an open market with other buyers and sellers. The market-maker can then set the buy and sell prices at any given time in such a way as to help his or her own profits. What I don't get is why people who go to a market-maker don't have access to the wider market, where they might get a better deal.

[PHILLYQ]

Originally Posted by Tom Storer

I think it means this: one person, the market-maker, buys and sells a given kind of thing and offers to let others buy the things from and/or sell them to him, rather than on an open market with other buyers and sellers. The market-maker can then set the buy and sell prices at any given time in such a way as to help his or her own profits. What I don't get is why people who go to a market-maker don't have access to the wider market, where they might get a better deal.

Some stocks are thinly traded, so a market maker can, for example, take a few sells and hold them until there are some buys or vice versa. Market makers also balance a stock when there is an excess on the buy or sell side.
Market makers can also be 'front-runners', an illegal scheme where the market maker gets a large buy order and then buys some for himself before entering the large buy order.

[Tom Storer]

Why is that an illegal scheme? Because the market-maker knows that the large buy order will cause the price to rise, due to higher demand, after which the shares bought prior to the large buy order can be sold for a profit? I guess that would be cheating since other potential investors could not have equivalent knowledge?

[Gordon B]

Originally Posted by Tom Storer

Why is that an illegal scheme? Because the market-maker knows that the large buy order will cause the price to rise, due to higher demand, after which the shares bought prior to the large buy order can be sold for a profit? I guess that would be cheating since other potential investors could not have equivalent knowledge?

Tom, the market-making business was legit with one caveat. The phony asset management business booked its fictitious trades with the market-making business.

The SEC failed big time here, just like S&P and Moodys failed big time in other aspects of the financial crisis.

[Tom Storer]

Gordon, I was referring (in a digression from the thread topic) to PHILLYQ's immediately preceding post, where he said:

Market makers can also be 'front-runners', an illegal scheme where the market maker gets a large buy order and then buys some for himself before entering the large buy order.

So my question was general, not directed specifically at Madoff's business.

But to get back to Madoff, has anyone come up with any particular motive for him to have orchestrated a gigantic Ponzi scheme? The initial articles make it seem he admitted everything to the feds, as if he knew there was no point denying it, as if he knew that once anyone had a look it would all be over. It doesn't even look like he tried hard to hide what he was doing, since "sophisticated investors" reportedly assumed for some time that it was a fraud of some sort, not just from the unvarying rates he offered but because of his hiring of dullard in-laws, etc. What were his motives? I'm sure he wasn't hurting for money. Was he a megalomaniac just too pumped up from being master of the universe to resist a huge, malicious risk? Or was it a death wish? My instinct is to think it was the latter.

[rollhead]

Originally Posted by Gordon B

Tom, the market-making business was legit with one caveat. The phony asset management business booked its fictitious trades with the market-making business.

The SEC failed big time here, just like S&P and Moodys failed big time in other aspects of the financial crisis.

But aren't you a big free market, anti-regulation advocate?

Or just a capitalism for the poor, socialism for the rich advocate?

The fact is, Gordon, the people you support politically encourage this kind of activity, just like they encouraged the Enron debacle.

It all boils down to this: "Just trust the rich, and the economists (or the accountants or pump-and-dump artists or other various ponzi scheme architects) who do their bidding."

Or this: Madoff is rich. The rich are smarter than anyone else, so let them run things and do what they want.

Gordie, get out your Herrnstein-Murray Bell Curve charts and explain to us why you and other affluent, priviledged white men should be even richer and more privileged.

I have to laugh at this Madoff ponzi scheme because the ones who apparently got stuck the hardest were the surgically enhanced, collagen-lipped, tea-cup poodle toating people in Florida in the same sun-soaked communities you want to retire to Gordon.

Huffington hit the nail on the head with a recent column:

http://www.huffingtonpost.com/ariann..._b_151219.html

See if this sounds familiar:

An ambitious and risky undertaking carried out with hubris, and featuring the weeding out of anyone who raises alarm bells, little-to-no transparency, an oversight system in which no central authority is accountable, and the deliberate manufacturing of ambiguity and complexity so that if -- when -- it all falls to pieces, the excuse "who could have known?" can be used....

Is it Iraq? Fannie Mae? Citigroup? Bernie Madoff?

The correct answer is: all of the above.

When you look at the elements that were crucial to the creation of each of these debacles, it's amazing how much in common they all have. And not just in how they began but in how they ended: with those responsible being amazed at what happened, because...who could have known? Well, to paraphrase James Inhofe, I'm amazed at the amazement.

In fact, when historians look for a name that sums up the Bush II years, they could do worse than calling them The "Who Could Have Known?" Era.

Each of the disasters listed above was entirely predictable. And, indeed, was predicted. But those who rang the alarm bells were aggressively ignored, which is why it's important that we not let those responsible get away with the "Who Could Have Known?" excuse.

[stonemonkts]

Many of the people bilked deserved what they got, in spades.

Living the high life in Palm Beach, angling for access to this criminal, so they can feel even more privileged. Fuck them all.


The ones who were left out, or asked too many questions, and hence shunned, are the lucky ones.

Money flowed from a collection of rich idiots into the hands of one very rich con artist. I'm sick of all the hero worship rampant in these uber-rich enclaves.

So once again, fuck all of them.