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Dave, re: sophistication, I think what I meant to say is that people who, by all appearances, ought to have been sophisticated enough, nevertheless put all their money in Madoff’s fund without kicking the tires at all. Anyone with the means to invest with Madoff had the ability to at least hire some sophistication if they didn’t have it themselves. I don’t have a lot to invest, and I do not consider myself financially sophisticated, but even I know enough not to invest all my savings in one place, and not to take risks I don’t understand on at least an elementary level.
My guess is that the current baby bubble in Brooklyn is likely to burst soon.
The Breeders Cup races will resume operations in the suburbs where they really belong.
denton…you’re right. I think it wasn’t able to be replicated because the sums of money he was “supposedly” managing were too large for that type of strategy.
DIBS, I disagree that he never put out his strategy. It was an option-based strategy that was too sophisticated, perhaps, for your average unsophisticated investor to understand, but it was out there all the same. Those investors that attempted to replicate it were smart enough to realize he couldn’t have been generating those returns. That’s when he claimed it was a modified black-box thing.
They may have been “of means” but they certainly were not “of sophistication.” I’m hearing a lot of stories coming out about many people looking at Madoff and his firm and just turning away with no more than a cursory look/see.
Thanks, Dave. That all makes sense. I knew #3 and I think I just learned something like #4 today, and find it truly astonishing. Any word on whether any regulator did any actual forensics and missed it, or just a sit-down or two with Bernie. Given #1 and 2, I find it perplexing that any investor would invest “everything” in one, very opaque bucket. But apparently many of means and sophistication did.
1. it was a proprietary (if you want to call it black box) strategy that he rarely, if ever, expalained.
2. Don’t know what he provided as far as statements of what assets were held. Hedge funds do not but if your assets are in separate accounts (usually long only accounts) then you would get one. I think he was more the former.
3.. Thirdly, these listed investments and performance numbers were apparently audited by that one man shop where no one ever was in the office!!!
4. There have been numerous meetings with the SEC and Madoff over the years and they never figured it out. How come????
5. There have been numerous people who have complained “in depth” to the SEC
6. It came out in today’s FT that the chief investment officer at Merrill’s Asset Management division sounded the warning internally before 2006 and Goldman Sachs Asset Mgmt said “it never felt comfortable with Madoff” because “it never understood the investment process or the returns.” There’s no financial incentive to become a whistleblower nor is there any penalty not to.
I’m just wondering if there’s enough money left to pay all the lawyers!!!!! LOL
Alright, to change the subject, here is a question for DIBS and some of the other financial types on this site. I am curious about one aspect of the “Made Off” scandal that I can’t seem to find addressed in the coverage. What did he tell his investors his basic strategy was? Or did he present his fund as a black box and simply advise would-be investors to assume he knew what he was doing based on his experience and purported returns? Did his phony statements to investors provide any detail as to where the money supposedly was? And, if so, was the money actually invested where he said it was, just not returning the gains that he put in his statements? Some analysts who say they raised questions a long time ago say that their numbers indicated that Madoff could not have legitimately earned his returns. What benchmarks or models were they using to try to mirror what Madoff was supposedly doing?
I am sure I missed some of this stuff as I wasn’t paying attention the first day or two that the scandal broke, so sorry if this is old aht for some of you, but I really am curious.
Dave, re: sophistication, I think what I meant to say is that people who, by all appearances, ought to have been sophisticated enough, nevertheless put all their money in Madoff’s fund without kicking the tires at all. Anyone with the means to invest with Madoff had the ability to at least hire some sophistication if they didn’t have it themselves. I don’t have a lot to invest, and I do not consider myself financially sophisticated, but even I know enough not to invest all my savings in one place, and not to take risks I don’t understand on at least an elementary level.
My guess is that the current baby bubble in Brooklyn is likely to burst soon.
The Breeders Cup races will resume operations in the suburbs where they really belong.
“I notice BRG does not get QOTD yet again!!! Flatbush stomps on Bay Ridge!! News at 11”
– Posted by: daveinbedstuy at January 5, 2009 3:44 PM (HOTD)
I noticed DIBS NEVER got QOTD. Bay Ridge kicks Bed Sty in the posterior!!
denton…you’re right. I think it wasn’t able to be replicated because the sums of money he was “supposedly” managing were too large for that type of strategy.
DIBS, I disagree that he never put out his strategy. It was an option-based strategy that was too sophisticated, perhaps, for your average unsophisticated investor to understand, but it was out there all the same. Those investors that attempted to replicate it were smart enough to realize he couldn’t have been generating those returns. That’s when he claimed it was a modified black-box thing.
For the details see:
http://blogs.wsj.com/marketbeat/2008/12/16/madoffs-not-so-unique-options-strategy/
They may have been “of means” but they certainly were not “of sophistication.” I’m hearing a lot of stories coming out about many people looking at Madoff and his firm and just turning away with no more than a cursory look/see.
Thanks, Dave. That all makes sense. I knew #3 and I think I just learned something like #4 today, and find it truly astonishing. Any word on whether any regulator did any actual forensics and missed it, or just a sit-down or two with Bernie. Given #1 and 2, I find it perplexing that any investor would invest “everything” in one, very opaque bucket. But apparently many of means and sophistication did.
From what I know:
1. it was a proprietary (if you want to call it black box) strategy that he rarely, if ever, expalained.
2. Don’t know what he provided as far as statements of what assets were held. Hedge funds do not but if your assets are in separate accounts (usually long only accounts) then you would get one. I think he was more the former.
3.. Thirdly, these listed investments and performance numbers were apparently audited by that one man shop where no one ever was in the office!!!
4. There have been numerous meetings with the SEC and Madoff over the years and they never figured it out. How come????
5. There have been numerous people who have complained “in depth” to the SEC
6. It came out in today’s FT that the chief investment officer at Merrill’s Asset Management division sounded the warning internally before 2006 and Goldman Sachs Asset Mgmt said “it never felt comfortable with Madoff” because “it never understood the investment process or the returns.” There’s no financial incentive to become a whistleblower nor is there any penalty not to.
I’m just wondering if there’s enough money left to pay all the lawyers!!!!! LOL
Alright, to change the subject, here is a question for DIBS and some of the other financial types on this site. I am curious about one aspect of the “Made Off” scandal that I can’t seem to find addressed in the coverage. What did he tell his investors his basic strategy was? Or did he present his fund as a black box and simply advise would-be investors to assume he knew what he was doing based on his experience and purported returns? Did his phony statements to investors provide any detail as to where the money supposedly was? And, if so, was the money actually invested where he said it was, just not returning the gains that he put in his statements? Some analysts who say they raised questions a long time ago say that their numbers indicated that Madoff could not have legitimately earned his returns. What benchmarks or models were they using to try to mirror what Madoff was supposedly doing?
I am sure I missed some of this stuff as I wasn’t paying attention the first day or two that the scandal broke, so sorry if this is old aht for some of you, but I really am curious.