Madoff - how to protect yourself?

[audreyh1]

Nords - I wasn't talking about the accredited "high-net-worth" investor. I was talking about the regular guy (i.e. retail investor) investing in mutual funds, ETFs and stocks. Doing away with the uptick rule, not going after naked shorters, allowing investment banks to take on ridiculous leverage, limiting enforcement of rules due to "limited staff" while at the same time not seeking adequate staffing to do the enforcing. These are the things that have made it appear to the retail investor that the deck is stacked against him and makes him reluctant to invest.

Whatever short term benefit Wall Street got with the above enforcement/rules change biases, they've blown it for themselves long term. Dis the retail investor, and the retail investor leaves the game. Oh they blew themselves up anyway I guess.

Hoisted by their own petard (that in fact means blown up by their own bomb)

Audrey

[Bestwifeever]

Today's Madoff story--hard to see how the little guy could protect him/herself from crooks when big institutions with presumably more analysts looking at where to put money cannot:

Alleged Madoff fraud hits Europe and Asia - Yahoo! News

[ERD50]

Quote:

Originally Posted by Bestwifeever Today's Madoff story--hard to see how the little guy could protect him/herself from crooks when big institutions with presumably more analysts looking at where to put money cannot: Alleged Madoff fraud hits Europe and Asia - Yahoo! News

Simple actually. Don't invest in what you don't understand. If it is so complex that you have to rely on 'analysts', it is too complex for us 'little guys'.

You would not have honestly invested with Madoff, would you (assuming you had the minimum amount to invest)? There is no way I would turn my money over to one guy, with that sort of lack of transparency.

I'm sure there is some fraud and problems among the 500 companies in the SPY ETF, but I have diversification on my side.

-ERD50

[SteveL]

From Fortune Mag on-line site: Madoff investors burned by SEC, too - Dec. 15, 2008

This has five suggestions for avoiding the Madoff kind of crime.

Still, avoiding fraud is difficult. Audits often don't find it. Even the best set of financial controls can be fooled, especially when supervisors don't review the things they are supposed to. You can't count on rating agencies, or regulators either.

About the only thing you can do is avoid more complex investments, widely diversify, and don't let some advisor have control over your decisions.

[saluki9]

Quote:

Originally Posted by brewer12345 I haven't sat for any Series XXX exams, but as far as I understand things, insider trades in any securities issued by a company (stock, bonds, preferred, derivatives, etc.) are reportable on form 4. I have seen insiders enter into total return swaps on an equity and the arrangement was reported on form 4, so I don't see why another OTC derivative (CDS) would not be reportable.

You are correct, all derivative trades are required to be disclosed on form 4.

In many cases corporations will have their own rules that are even more restrictive that the SEC on this issue. We have had many clients with letter stock who we tried unsuccessfully to collar because their employer had regulations against this.

[haha]

Here is a piece about an exclusive country club in Palm Beach with many Madoff victims. It shows how many of these rich people are looking out for their social standing more than for their finances. It's an old story. Always easier to get you swindle prospects from a group where you have membership, and prestige.

http://www.nytimes.com/2008/12/15/bu...agewanted=1&em

In the small town where I used to live there was a huge swindle by a deacon in a local church.

I think many of us on this board are way too contrary in general, and maybe even semi-immune to social issues to fall for something like this.

Ha

[mickeyd]

Quote:

I think many of us on this board are way too contrary in general, and maybe even semi-immune to social issues to fall for something like this.

I like to think this way also haha, but I'll bet that every one of his investors thought the same way up until a few days ago.

I understand that they did not have access to heir accounts online as we do and only received the status of their accounts when Mr. Madoff physically handed them the paper document. Imagine if Vanguard ran their operation like that?

[REWahoo]

Here's an interesting - and chilling - story of someone who got taken by Madoff. It seems even the 'experts' were fooled by this guy. Robert Powell, retirement columnist for MarketWatch, tells a very personal story:


MarketWatch -- For much of my life, the name Bernie Madoff has meant nothing to me. Now, however, it means far more than it should in my household and countless others across America. In my household, the net effect of the Madoff scheme is that my wife has lost all the money in her 401(k) account and her job as well.


MarketWatch - Robert Powell

[mickeyd]

Check out this video link.

I think these twoguys are pretty sharp. I'm guessing that they did not get stuck in this web-of-bernie

http://finance.yahoo.com/tech-ticker...5Egspc,%5Eixic

[brewer12345]

Quote:

Originally Posted by haha Here is a piece about an exclusive country club in Palm Beach with many Madoff victims. It shows how many of these rich people are looking out for their social standing more than for their finances. It's an old story. Always easier to get you swindle prospects from a group where you have membership, and prestige. Ha

Of course. How do you think annuities, amway, oil and gas partnerships, etc. get sold to the masses?

[BunsGettingFirm]

Quote:

Originally Posted by haha Here is a piece about an exclusive country club in Palm Beach with many Madoff victims. It shows how many of these rich people are looking out for their social standing more than for their finances. It's an old story. Always easier to get you swindle prospects from a group where you have membership, and prestige. http://www.nytimes.com/2008/12/15/bu...agewanted=1&em In the small town where I used to live there was a huge swindle by a deacon in a local church. I think many of us on this board are way too contrary in general, and maybe even semi-immune to social issues to fall for something like this. Ha

Yes, I spurn the United Way every year.

[lazygood4nothinbum]

homes of the swindler who took, the patsy who lost and the writer who will gain.

[Dennis]

A Familar Word in investing> Diversify..
not more than 10-15% into any One Investement
stick with the big boys/ Fund Families
Speculate with max 5%

Cases Like Murdoffs are rare.. and predictiable..
It was basically Other Rich peoples Free $..
Would you feel bad if It Was Jerry Seinfelds $ and he Has lost $10 Million out of his $300 Million Portfolio?
It was also a Network of a Religous Sect so to speak.. A Group of Jewish wealthy people that were basically "Required" or Obligated to join to become Successfull within it's Own kind and to support otehrs of their own kind...Much like when Italians , Irish, Polsih & German immigrants lived among themselves and stuck together .. Notice How many Irish Cops there were in the Old Days, same for Firemen , and the Plumbers, Streets and Sans controlled by the Italians..Like the "Free Masons" or other organizations, Where there is Money, there are bad apples in everygroup...Some more than others..

Mort Zukerman's story, although blown out of proportion, he More or less Had to Put a Few Dollars ( 10%) of his Wealth into it.. He made more On his Own investments..He didn't loose 30 or 50% of his personal Wealth either, it was from his Charitible trust account..although he advocates Not wanting to be "In the Market" and is Negative about it, Stands to reason, He made and still makes Most of his $ From where? RealEstate and Publishing business...Like asking Donald Trump does he invest his Money in Index Funds...LOL

Much like Having to Join any Society to get Up the Ladder.. a Club if you will..and Ck out those Charities and what their purpose is for? Where do they send their Money too? Ans> Isreal..and other Jewish related programs .. .. all very Good and Upstanding of course..

And they made 10% apy? They got their $ back in 7 yrs... others just were just foolish in Putting all their Eggs in one basket. and just another reminder and Lesson learned by others not to do that..

and maybe just bring the subject up with your Parents and Other Older Relatives as well.. ' Max 10% in anything outside That isn't FDIC Insured Pop or Aunt Peggy" I have a vested Interest in your $ that will be Mine you know! LOL.. I used to say that all the time to them..and it worked.. They mostly Owned nothing but CD's and Treasuries their Last 5-10 yrs ..and kept the Insurance -Annuity And Chatholic Charites sales people out of their Checkbooks too...LOL

To a Lessor degree, It's also why I own several Balanced Funds and not just 1, no matter how good it is..( Like some DODBX people found out the hard way too I know)

Happy Chanukah
and Happy Holidays !

[lazygood4nothinbum]

Quote:

Originally Posted by Dennis Much like Having to Join any Society to get Up the Ladder.. a Club if you will..and Ck out those Charities and what their purpose is for? Where do they send their Money too? Ans> Isreal..and other Jewish related programs .. .. all very Good and Upstanding of course.. Happy Chanukah and Happy Holidays !

are your freaking kidding me with this? happy holidays to you too.

[haha]

Interesting Video interview about the Madoff affair.

'Multiple Failures' by SEC in Madoff Case Cox's (Not So) Stunning Confession: Tech Ticker, Yahoo! Finance

Ha

[brewer12345]

Quote:

Originally Posted by haha Interesting Video interview about the Madoff affair. 'Multiple Failures' by SEC in Madoff Case Cox's (Not So) Stunning Confession: Tech Ticker, Yahoo! Finance Ha

Uhuh. Cox seems awfully eager to throw the staff under the bus. Remind me: who was in charge while all this was going on?

[audreyh1]

It it quite clear that Cox's mission from the outset was to render the SEC null and void. Well, after getting rid of all the rules that hedge funds didn't like and giving investment banks the go ahead to greatly expand their leverage. Then it was just a matter of not bothering to enforce hardly anything at all.

Audrey

[samclem]

Avoiding schemes like the one Madhoff ran isn't very difficult for us, the unwashed masses. If you invest in mainstream products there's no risk of this (particular) kind of ripoff. If you invest "with a guy known by my friend" in an effort to get a really hot deal no one else knows about, then you are open to being taken for a ride.
When investors get burned after actively seeking to avoid the wide array of highly regulated and publicly scrutinized products, I don't see it as a clarion call for more regulation. We've got laws on the books against behavior like Madhoff's, just poor enforcement of those laws.

[FinanceDude]

My only thought: WHY have ALL your money invested with a guy named MADOFF? Like, "he MADE OFF with my money, and I was wiped out"............

[ls99]

I was never good at high finance. Simple rules kept me out of heaps of problems.
If I did not understand what was offered, did not buy in.
If it was an invitation only type of operation, decline the invitation.

Madoff's scheme reminds me of a variation of Jackie Mason's comedy schtick about the Jewish old lady describing her doctor:

He is the best, the head of hospital, head of the department, no one is better, but you just can't get in. The wait is six months and somebody has to recommend you. He is so good, but you just can't get in.

So Madoff's clients had to beg to get in, for the privilege of investing their money with him.

Besides loosing their dough, they must really be teed off for having had to beg to get in.