Comment on victims of the Madoff scam

[DAYDREAMER]

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.

 

[brewer12345]

"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.

 

[FIREd]

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.

 

[DAYDREAMER]

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.

 

[FIREd]

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.

 

[Independent]

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?

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

 

[FinanceDude]

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?

 

[REWahoo]

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.

 

[ziggy29]

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.

 

[Danny]

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

Madoff's scheme is no different than how SS is run currently.......

 

[Independent]

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.

 

[REWahoo]

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.

 

[Texas Proud]

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....

 

[ziggy29]

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.

 

[canadianteddy]

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.

 

[Rich]

..... It just felt like the scammed were trying to scam.

I didn't mention this in my original post, but the fact that the man was a retired Corrections Officer from NYC (I'm retired from the NYPD) also meant that he should have more then the "small" pension" they alluded to from that job. Again, neither here nor there in relation to the crime Madoff committed, but their representations had me wondering.

Rich

 

[Nords]

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....

For those focused on the "better/worse" debate, two most excellent books on the topic are "The Way We Never Were" and "The Way We Really Are".

Essentially for the last century it's been really good to be middle-class, white Anglo-Saxon, male, Catholic or Protestant, and a citizen of a country whose infrastructure wasn't destroyed by a world war. Pretty much everything else has been anecdotal (luck or individual hard effort), not statistical.

 

[Texas Proud]

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.

So you are saying the older baby boomers are the problem? That they want to much and are unwilling to pay for it... at the expense of the young baby boomers and younger?

If that is what you are saying, I will tend to agree with you... I am one of the younger boomers and most definatley have a better life, but that is from education that my parents did not have..

 

[Nords]

So you are saying the older baby boomers are the problem?

We prefer the term "greedy geezers"...

 

[2B]

We prefer the term "greedy geezers"...

Hey. I resemble that remark.

I don't think SS is in as bad of a shape as people think. It's "failure" if you believe in the trust fund approach is all based on some very conservative assumptions about mortality, wage growth and inflation. The big problems I see are Medicare which is horribly underfunded the way it's currently set up and the total absence of an actual SS trust fund. SS depends on our elected reps continuing to pay out tax money to non-workers.

 

[ziggy29]

So you are saying the older baby boomers are the problem? That they want to much and are unwilling to pay for it... at the expense of the young baby boomers and younger?

If that is what you are saying, I will tend to agree with you... I am one of the younger boomers and most definatley have a better life, but that is from education that my parents did not have..

I don't blame any one generation or look to point fingers; it is what it is. But I do think we've been in denial that the largesse we've given out in past decades is no longer sustainable, and we've been borrowing from future prosperity to keep the illusion alive that we can still afford it.

 

[ziggy29]

I don't think SS is in as bad of a shape as people think.

Well, now that the cratering of 401K plans is going to keep a lot of boomers w*rking longer, it may not be as dire as it was a couple years ago. I guess that's one silver lining about the terrible market in '08 -- it may keep Social Security a little more solvent for a few years...

 

[mickeyd]

There is no Mr. Vanguard. No mythical figure at the helm who can fudge the numbers, undetected.

Besides that, Jack Bogle is looking over their shoulder and does not hesitate to ask the tough Q.