Monday, December 15, 2008

Madoff and the Western Economic Paradigm.

Of all the articles out there on Bernie Madoff's investment fraud racket, I think this one best sums up the reality of the situation. His investors, including big names in the Jewish world, wanted something-for-nothing, wanted to cheat the honest system.

Yahoo Finance
I Knew Bernie Madoff Was Cheating, That's Why I Invested with Him
Posted Dec 12, 2008 12:45pm EST by Henry Blodget in Investing, Newsmakers, Banking
From, Dec. 12, 2008:

Interesting tidbits coming in about Bernie Madoff...

Specifically, we're hearing that the smart money KNEW Bernie had to be cheating, because the returns he was generating were impossibly good. Many Wall Streeters suspected the wrong rigged game, though: They thought it was insider trading, not a Ponzi scheme. And here's the best part: That's why they invested with him.

For years and years I've heard people say that [Bernie's] investment performance was too good to be true. The returns were too steady -- like GE earnings under Welch -- and too high given the supposed strategy.

One Madoff investor, himself a legend, told me that Madoff's performance "just doesn't make sense. The numbers can't be straight." Another sophisticated Madoff investor actually went through trade confirms in order to reverse-engineer the strategy and said, "it doesn't add up."

So why did these smart and skeptical investors keep investing? They, like many Madoff investors, assumed Madoff was somehow illegally trading on information from his market-making business for their benefit. They didn't consider the possibility that he was clean on that score but running a good old-fashioned Ponzi scheme.

And another from Whitney Tilson:

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 a 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!

Same old, same old - another (supposedly) Orthodox Jewish con-man with no regard for rule-of-law or his social contract (or legal contract, for that matter) obligations to his investors. Did he consider his investors sub-human or just stupid? We may never know, but the outcome is the same either way - he enriched himself at other people's expense, with nary a though as to the morality of it all, not a second glance at the ethical implications.

And the investors themselves - many aren't blameless here, as we see. They KNEW something was not above-board, but their GREED outweighed any morality or ethical issues. They made the mistake of presuming he was cheating FOR them, instead of just CHEATING THEM. They thought that they were fellow human-beings to him. Even the Chereidi individual investors and Chereidi institutional investors thought this. They had no idea they were just prey - just "other" to him.

Nor will they ever acknowledge that their own teachings led to this ugly end. A bit of sweet irony there, don't you think?

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