Wednesday, September 23, 2009

Bernie lost but half his clients won!

The following is an update of a June post which originally appeared on my WordPress site. I'm closing that blog, and because of recent events I am revisiting my take on the Madoff Ponzi scheme.


Old Bernie Madoff carries the right moniker, Madoff. It was originally reported that Bernie made-off with 50 billion of his trusting clients’ money. It now appears that Bloomberg.com and others have over-estimated Bernie’s accomplishments.

Although it was claimed he controlled $50 billion, he may have had well less than $17 billion in deposits. If he had invested it, he might have grown it, but he didn’t and it didn’t.

Former SEC head Harvey Pitt said that Madoff “probably inflated the amount of money he had under management.” Pitt predicted the actual loss would fall below $17 billion. As of September 23, 2009, a search of financial records, including microfilm records dating back to 1979, show investors suffering net losses exceeding $13 billion — a mere fraction of the original estimates.

How much is left? Hard to say but as of September 23 the Huffington Post tells us that "authorities have identified more than $1 billion in assets that can be distributed to victims."

Wait, Bernie only lost 94% of the money — maybe less! That’s it! Edward Zore, Chief Executive Officer of Northwestern Mutual Life Insurance, said recently, “We have stocks in our portfolio that lost 95 per cent.” And do you remember Providian Financial? It lost 95% of its value amid a spectacular run of credit card defaults. Oops!

Investors who bought into the American mutual fund ProFunds UltraOTC,when it was at its peak and rode it down to its June 2009 low, watched 95% of their wealth disappear. Will anyone go to jail? Of course not. This is legal. Losing money in the market is an everyday occurrence.

Silly Bernie just cut out the middle man and lost the money directly. Dumb. He could have invested the money, taken his well-earned bonuses for losing the investments and gotten on with his life.

Now, The Huffington Post reports, "Federal prosecutors said Tuesday that a review of most accounts held by financier Bernard Madoff's customers when he was arrested show that about half of the customers had not lost money because they withdrew more money than they originally invested."

For fun, I took a quick look at Canadian mutual funds using globefund.com (my fave). Check out this winner. Just think, if you had invested in this fund less than a decade ago, you would have achieved Madoff like losses as of Sept. 23, 2009. Silly Bernie.

1 comment:

  1. Bernie Madoff didn’t act like a typical mastermind of a Ponzi scheme. The typical mastermind knows that the pyramid has to topple someday and he plans for it by stashing his money in countries with no relations with the US. He also plans very carefully for his escape.

    What did Bernie do? He bravely faced Congress. He brazenly lied to them, saying there are too many eyes on the market for any serious irregularities to be perpetrated. He didn’t hide his money. He didn’t try to escape when it got hot for him. When the G-men grabbed him, he confessed. He took all the blame on himself and he tried to protect his associates.

    Some men are courageous when facing their enemies but, when it comes to giving bad news to friends and to people who trusted them, they are cowards. They’d rather lie to them and hope that their fortunes with change, that it will somehow work out in the end. It hasn’t worked out for Bernie so far. He bares the public hatred we have for the greedy bankers that caused the crash of the financial system. But there are thousands of others that are worse than him. They are hiding in the shadow of the spotlight that glares on Bernie Madoff.

    He is a tragic figure and he will be redeemed when cooler heads prevail.