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Old 12-30-2008, 10:03 AM   #21
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I was watching a “finance” show, On the Money, on CNBC. A couple was on, victims of the Madoff Ponzi scheme. They’d been retired four years (the guy had been a NYC Corrections Officer) and have been taking their retirement money from the Madoff “fund” during that period. They had (on paper) $1.6 million dollars in the fund and, if I understood them correctly, they’d been in the bogus fund for twenty-eight years. At any rate, they were understandably upset and wanted to get some of their money back from somebody.

I’ve been thinking, if they had $1.6 million dollars in the Madoff account now, and they first put their money in twenty-eight years ago, at the phony percentage growth stated by Madoff they might have put in to the Madoff scam somewhere between $200,000 to $250,000 dollars (at around ten percent return, in the time frame they spoke of, that amount would grow to just about the $1.6 million dollars they thought they had in that account.).

So, if they took out their interest for three or four years, they may, in fact, be technically whole ($160,000 a year for three or four years of withdrawals would be a larger amount then the original monies they put in – again, if I’m understanding them correctly).

Don’t misunderstand me, these folks have still been royally screwed over. But, to make their situation even worse, I’m not sure they’re going to have any recourse in regard the return of money to them.

Rich
Right. In the thread "where is the $50 billion now?", I thought the correct answer is that some if it never existed other than on the statements Madoff sent to his clients.

The real loss is (cash in) - (cash out), possibly adjusted for the returns on other investments these individuals would have made. If you assume the S&P 500 for the "other investment", it hasn't done real well in recent years, either.
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Old 12-30-2008, 10:07 AM   #22
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Then, same as Social Security, the early joiners got "windfall benefits", while the late comers are left sucking air.
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Old 12-30-2008, 10:18 AM   #23
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Wasn't AIG heavily regulate Firedreamer?

I know what you are saying, and I have significant $$$ in Vanguard funds, and can sleep at night that my mula is safe. I'm just being devils advocate, but Madoff has really opened my way of thinking as to "Question Everything!"
The insurance business at AIG was heavily regulated for sure. But that's not what got AIG in trouble. AIG's insurance business is still sound. It's the other, less regulated (and supposedly more profitable), business that sunk AIG's ship.

There is a thin line between a critical mind and a paranoid one. Yes you should question everything (I am a big advocate of critical thinking). But you have to do your research and remain rational. And if you do both, there is no way you can compare Madoff Investments and Vanguard.
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Old 12-30-2008, 10:35 AM   #24
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I'm not Paranoid. Oh wait, maybe I am. Why is everybody always reading my post! Stop it. It makes me nervous.
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Old 12-30-2008, 10:39 AM   #25
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Well I know you're not paranoid. And I know that, deep inside, you don't really think Vanguard is a Ponzi scheme. Otherwise you would have moved your money to safer grounds (mattress, coin jar, gold bullions buried in the backyard, etc...).
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Old 12-30-2008, 11:22 AM   #26
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Ya, I don't really think Vanguard is a Ponzi scheme. The latest scandals are making me think about my investments and the stock market in general though. I'm starting to think, maybe I should add one more tangeable security to my portfolio. "LAND" If the market/property values tank, at least I could grow/raise food.

MY current conservative investments thus far have been:

Paid off house,
300k in CD's
200k in Vanguard IRA/401k Lifecycle

And my future coin will buy property and maxed out 401k. Land, not rentals. I don't like people enough to deal with rentors.
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Old 12-30-2008, 11:30 AM   #27
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"LAND" If the market/property values tank, at least I could grow/raise food.
Only real problem with raw land in my mind is the expense of property taxes, come hell or high water. Maybe RE tax rates are low enough in your area that it isn't a problem, but definately something to consider.
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Old 12-30-2008, 12:05 PM   #28
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Ya, I don't really think Vanguard is a Ponzi scheme. The latest scandals are making me think about my investments and the stock market in general though. I'm starting to think, maybe I should add one more tangeable security to my portfolio. "LAND" If the market/property values tank, at least I could grow/raise food.

MY current conservative investments thus far have been:

Paid off house,
300k in CD's
200k in Vanguard IRA/401k Lifecycle

And my future coin will buy property and maxed out 401k. Land, not rentals. I don't like people enough to deal with rentors.
Are you sure your money is invested in actual CDs? How can you be sure?

I own several acres of raw land. Brewer is right, keep an eye on taxes because raw land typically doesn't provide income to pay for those taxes. So you will typically have a negative cash flow on raw land properties. And raw land is often considered a speculative investment. I go around that by mostly owning wooded land. Harvesting the trees every 20-25 years usually provide enough income to easily cover the property taxes and even make a profit. Owning farm land, on the other hand, can be harder on your wallet unless you actually farm it. You can try to rent it to a nearby farmer for extra cash flow, but in my case I have found that property taxes on farm land is often higher than on wooded land, yet the income potential is lower. But in any case, once you buy a piece of land, you have to take care of it (cleaning, clearing, harvesting, monitoring, reseeding, etc...). It takes time if you do it yourself and money if you ask somebody else to do it for you. You should factor all those things in before making a decision.
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Old 12-30-2008, 12:23 PM   #29
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Ya, taxes are a definite issue to consider. The plan would be to buy property adjacent to mine (when it goes up for sale) to increase my doomstead parimeter. I love privacy. The land is wooded, and has potential to be built on in the future (Lake View). The land is a bit land locked for the current owners due to terraine contour. The owners have been begging us to grant access. I've offered to buy the land, but so far they are looking at other options. Since they haven't built yet, I know they're option are limited.

Taxes are very cheap on the land because it is completely undeveloped, and we live in the boonies, yet somewhat desirable location. We are talking $300/yr.

The Madoff scandal has pushed me this direction as to be the right decision for future money investments.
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Old 12-30-2008, 12:39 PM   #30
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My paternal grand-parents built their wealth by investing almost exclusively in raw land. They only trusted hard assets. I definitely understand your need to increase your doomstead. My dad keeps buying properties adjacent to his and his house now sits in the middle 3-acre homestead composed of many contiguous lots, about 1/2 farmland, 1/2 woodland. Right now he is in talks to buy yet another 1-acre wooded lot on the west side of his property.
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Old 12-31-2008, 08:47 AM   #31
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Here's a good example of the issue raised by the OP. So, did Yeshiva University lose $110 million, or $14.5 million, or some other amount?

Quote:
The full picture remains unclear. Yeshiva University, which had initially estimated its losses in Madoff's alleged scheme at $110 million, offered a clarification Tuesday, saying that its actual losses had been much smaller.
The university's chief financial officer, J. Michael Gower, said in an e-mail that the school's actual principal investment in a hedge fund linked to Madoff had been only $14.5 million.
On paper, that stake had exploded in value over the past 15 years to $110 million, but Gower said all of those "profits" now appear to be entirely fictitious, meaning that the losses were mostly fictitious too.
(By my calculation, that's a 14.5% compound annnual growth.)

Madoff Faces Deadline to Reveal Assets - AOL Money & Finance
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Old 12-31-2008, 08:55 AM   #32
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Then, same as Social Security, the early joiners got "windfall benefits", while the late comers are left sucking air.
Madoff's scheme is no different than how SS is run currently.......

What if the GAO came out and said that SS was a fraud, there's no money, they're wiped out?
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Old 12-31-2008, 08:57 AM   #33
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Madoff's scheme is no different than how SS is run currently.......

What if the GAO came out and said that SS was a fraud, there's no money, they're wiped out?
One major difference - Bernie couldn't print money, Uncle Sam can.
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Old 12-31-2008, 09:05 AM   #34
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Then, same as Social Security, the early joiners got "windfall benefits", while the late comers are left sucking air.
Like almost everything else related to retirement and financial security these days -- each successive young generation gets a crappier deal than the one before them.
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Old 12-31-2008, 09:28 AM   #35
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Hey when I think about it I guess SS is a Ponzi....they need to find a lot more new investors and ask them to put more in and ask the older ones to wait longer to get their money...sigh

[quote=FinanceDude;765975]Madoff's scheme is no different than how SS is run currently.......
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Old 12-31-2008, 10:31 AM   #36
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Madoff's scheme is no different than how SS is run currently.......

What if the GAO came out and said that SS was a fraud, there's no money, they're wiped out?
I could make a comment,
but that would make this look like a Soapbox thread,
so it would get bumped to the Soapbox,
then it would get killed tonight.
Not worth the trouble.
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Old 12-31-2008, 10:38 AM   #37
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I could make a comment,
but that would make this look like a Soapbox thread,
so it would get bumped to the Soapbox,
then it would get killed tonight.
Not worth the trouble.
Remember that when the Soapbox is closed, we will open up a FIRE Related Political Topics thread. If your comments don't stray into "this would have never happened if the effin' Republicans/Democrats/Bush/Obama/Palin/Biden/McCain/Clinton/Cheney/etc. hadn't turned a blind eye" territory, it would probably* be fine. Hard to deny the future of SS is related to FIRE.

*Subject to moderator review, of course.
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Old 12-31-2008, 10:48 AM   #38
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Like almost everything else related to retirement and financial security these days -- each successive young generation gets a crappier deal than the one before them.

I disagree..... up until NOW, each successive generation usually had it better than the previous ones... it is US that wants it all but don't want to pay for it....
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Old 12-31-2008, 10:52 AM   #39
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I disagree..... up until NOW, each successive generation usually had it better than the previous ones... it is US that wants it all but don't want to pay for it....
Well, I'm talking about *now* -- and in the last few years, and into the future.

The problem is that even after the economic/retirement "deal" some were getting decades ago became unsustainable in the face of the changing global economy, they just borrowed from the future prosperity of their kids and grandkids to maintain the unsustainable good deal for themselves.

This, IMO, is dooming each successive generation -- starting with the younger half of the Boomers on down through Gen X and beyond -- to a less prosperous and secure financial future than the generation which preceded them.
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Old 12-31-2008, 11:22 AM   #40
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I was watching a “finance” show, On the Money, on CNBC. A couple was on, victims of the Madoff Ponzi scheme. They’d been retired four years (the guy had been a NYC Corrections Officer) and have been taking their retirement money from the Madoff “fund” during that period. They had (on paper) $1.6 million dollars in the fund and, if I understood them correctly, they’d been in the bogus fund for twenty-eight years. At any rate, they were understandably upset and wanted to get some of their money back from somebody.

I’ve been thinking, if they had $1.6 million dollars in the Madoff account now, and they first put their money in twenty-eight years ago, at the phony percentage growth stated by Madoff they might have put in to the Madoff scam somewhere between $200,000 to $250,000 dollars (at around ten percent return, in the time frame they spoke of, that amount would grow to just about the $1.6 million dollars they thought they had in that account.).

So, if they took out their interest for three or four years, they may, in fact, be technically whole ($160,000 a year for three or four years of withdrawals would be a larger amount then the original monies they put in – again, if I’m understanding them correctly).

Don’t misunderstand me, these folks have still been royally screwed over. But, to make their situation even worse, I’m not sure they’re going to have any recourse in regard the return of money to them.

Rich
I saw the same show you did and did the same mental math coming to the same conclusion ie. contributions were in the neighbourhood of $200 -250k.

What struck me the most was the wife's emphasis on the fact that they had 1.6 mill as of the Nov 30th and they do not retain records of the past 28 years showing their actual contribution.

Don't get me wrong, I do have the utmost sympathy for them and all others that were victims to the scam. It could happen to anyone. But c'mon, no records? It seems awfully convenient. In the same time frame we have moved 5 times & I've retained records of our investments (gains and losses) since 1982. But maybe I'm just OCD? It just felt like the scammed were trying to scam.
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