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Old 12-19-2008, 09:42 AM   #41
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A bit of a digression but my question is, what did Madoff do with all that money? You can't just spend $50B (or $25B, if the 50 is with expected returns). Heck, if he just stored it in a MM most of it would still exist. How badly would he have to invest it for the whole shebang to evaporate?
I figure he just lost money one year but thought - keep up appearances, pay nice dividnds, and more investors will come in and we'll do better in the market next year. Only made 9% that year, but paid out 12% to keep the money coming in. etc. How many years of returning 12% does it take to return an investor's original investment? Think many of the investors got their money back in dividends in 7-8 years. See that some here who have been in the market for decades are back to their original investment amount of 15 or more years ago (Audrey1?). So doesn't that mean an investment with Bernie was smarter? Don't see that Bernie lived any more extravagantly than other CEO/wall street movers & shakers.
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Old 12-19-2008, 09:46 AM   #42
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A bit of a digression but my question is, what did Madoff do with all that money? You can't just spend $50B (or $25B, if the 50 is with expected returns).
I'd like to try! 25 billion would allow me to get a LOT done. A billion for me, the rest towards public hospitals and clinics, and for rebuilding and beautifying New Orleans. And with that first billion for me, what a shopping spree!
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Old 12-19-2008, 09:47 AM   #43
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A bit of a digression but my question is, what did Madoff do with all that money? You can't just spend $50B (or $25B, if the 50 is with expected returns). Heck, if he just stored it in a MM most of it would still exist. How badly would he have to invest it for the whole shebang to evaporate?
I'm sure he skimmed quite a bit for himself and friends but probably most of it went out as payout to investors to keep the scheme going. Those 10 to 12 % regular annual returns were just new investors money being distributed to the old investors. To get the money back just go to the oldest investors and ask them to fork up on a progressive scale oldest to newest Good luck!
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Old 12-19-2008, 09:57 AM   #44
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I'm sure he skimmed quite a bit for himself and friends but probably most of it went out as payout to investors to keep the scheme going. Those 10 to 12 % regular annual returns were just new investors money being distributed to the old investors. To get the money back just go to the oldest investors and ask them to fork up on a progressive scale oldest to newest Good luck!
That's probably pretty close. If he has $25 billion under "management," if he gets another $5 billion he could take (maybe ) $3 billion and pay it out to the existing account holders, they think they're getting a good positive return even in a horrible market (which *should* have been a glaring red flag), where Madoff and his pals skim the rest as pure profit.

Classic Ponzi scheme.
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Old 12-19-2008, 10:29 AM   #45
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I'm sure he skimmed quite a bit for himself and friends but probably most of it went out as payout to investors to keep the scheme going. Those 10 to 12 % regular annual returns were just new investors money being distributed to the old investors. To get the money back just go to the oldest investors and ask them to fork up on a progressive scale oldest to newest Good luck!
Yep. Some of the $50 billion got paid out to people who got a very good return on their "investments" with him. I haven't seen any stories about them.

Some of it never existed. The people who say "I lost $30 million with Madoff" could have given him $10 million 10 years ago and let it "grow" without any withdrawals. Their last statements showed account balances of $30 million, but there was never more than $10 million in cash for Madoff or other "investors".
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Old 12-19-2008, 05:32 PM   #46
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Heck, I am going to convert all my assets to "experiental pleasures", something that I will keep and cherish in my memory later, when I will be lying in the street gutter.
If you can remember your experiential pleasures then you aren't doing it right...

Now, regaining consciousness waking up and starting a hangover thinking "Where the heck did THAT come from?!?"... that's probably closer to the right approach.

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Uh, you are aware that insurance companies are heavily regulated, right?
Good thing, too, because I hear that the SEC is going to start regulating the stock markets...
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Old 12-19-2008, 06:02 PM   #47
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Good thing, too, because I hear that the SEC is going to start regulating the stock markets...
Well they need to start sometime, maybe this is a good time.

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Old 12-19-2008, 06:08 PM   #48
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Madoff needs a tiny bit of the cash for the $152K annual property taxes on his Florida house (and do you think he has more than one house, just maybe?). And perhaps he was planning to use some to purchase a Senate seat--I hear at least one empty seat is for sale.
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Old 12-20-2008, 12:11 AM   #49
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A bit of a digression but my question is, what did Madoff do with all that money? You can't just spend $50B (or $25B, if the 50 is with expected returns). Heck, if he just stored it in a MM most of it would still exist. How badly would he have to invest it for the whole shebang to evaporate?
I'm waiting patiently for some reasonable investigation. As I know it, Madoff himself claimed it was $50B...we know he's reliable, right? Two thirds is probably paper loss. A lot of the investment has been returned, so there's no honey pot to distribute. The story just would not sound so spectacular if it's a measly $20B. I have not heard reports that he lived an ultra-lavish lifestyle....OTOH maybe its all offshore someplace. No way he's a lone wolf.
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Old 12-20-2008, 05:45 AM   #50
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If you can remember your experiential pleasures then you aren't doing it right...

Now, regaining consciousness waking up and starting a hangover thinking "Where the heck did THAT come from?!?"... that's probably closer to the right approach.
I've been that drunk only once in my life, at 16 yr of age.

Call me a romantic geek, but I am thinking more of a genteel experience, like wandering the streets of Montmartre, with the song "La Boheme" by Charles Aznavour stuck in my head.



I am sitting here, in the deserted cold atrium of the Mayan Palace where there is WiFi, waking up early, not wanting to turn on the TV and to wake up my wife. It's lower than 60 deg F in here, probably near 50. I am dying for a shot of cognac, whisky, gin, anything...
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Old 12-21-2008, 11:07 PM   #51
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I'm waiting patiently for some reasonable investigation. As I know it, Madoff himself claimed it was $50B...we know he's reliable, right? Two thirds is probably paper loss. A lot of the investment has been returned, so there's no honey pot to distribute. The story just would not sound so spectacular if it's a measly $20B. I have not heard reports that he lived an ultra-lavish lifestyle....OTOH maybe its all offshore someplace. No way he's a lone wolf.
I would be willing to bet he squirreled away some "rainy day" billions in a Swiss bank............
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Old 12-22-2008, 04:07 AM   #52
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The fact is: If someone perpetrates internal fraud, made stupid mistakes, or takes an unsanctioned risk... and it results in losses on a large scale; it is all over except the crying.

We often take it for granted that employees cannot do something because the basic rules say they can't or the charter indicates the fund will only invest in certain securities, etc... But that all hinges on the company not letting it happen (prevention) and early detection if it does happen. One of the most common prevention methods is not letting a single person have the power completely execute certain activities. This reduces the chances unless there is collusion. But that even has to be backed up with regular reviews/audits to detect if someone got around the prevention mechanism.

Thinking that it cannot happen at a venerable company is naive. Remember Barings. http://en.wikipedia.org/wiki/Barings_Bank


After seeing the Madoff fraud. I think it is a prudent to consider splitting ones assets across 2 or 3 large reputable (and conservative) firms to mitigate the risk.

Apparently Massachusetts Mutual Life Insurance bought Tremont (hedge fund Advisor). Tremont Capital Management has an asset management division (Rye) that used Madoff as a subadvisor to run $3.1B in assets.

http://www.forbes.com/markets/2008/1...markets31.html


Almost all mutual funds use subadvisors to run money. Hopefully they are doing their due diligence. Remember... you cannot hold one entity responsible if a second entity perpetrates a crime. Investors may try to make Tremont and MassMutual cover the losses... but they will probably have a difficult time of it... they will have to prove negligence. If they do recover, it will only be because the holding group is very large and actually owns the assets so they can pay up. Having to pay up $3.1B would break many companies.
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Old 12-22-2008, 09:49 AM   #53
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they will have to prove negligence.
This will be interesting. Someone who pays an investment manager is expecting at least some level of analysis. The plaintiffs are going to claim that Madoff's operation was so opaque that their advisers weren't doing anything other than collecting fees. The advisers are going to claim that Madoff was simply following standard practice in the hedge fund world, so "nearly nothing" is the standard.

Here's one that claimed
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It said that it would independently calculate the value of the funds it invested at Mr. Madoff’s firm at least once a week. It promised to reconcile statements from individual trades with Mr. Madoff’s custodial records.
I can't imagine that the investors can get more than a few pennies on the dollar by suing their advisers, but I also expect they would like to bankrupt the advisers if they can.

http://www.nytimes.com/2008/12/22/bu...nted=1&_r=1&hp
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Old 12-24-2008, 09:21 AM   #54
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How do we know who you are? This is exactly the type of info Vanguard would give out to back up their complicated lie.

How do I know that this whole board isn't just a big Vanguard Potemkin Village run by a special staff. Gee--and in this time of tight budgets, Vanguard would be trying to reduce their costs in running this big deception--any coincidence that the Soapbox is going away and non-financial posts are to be discouraged! Less work for them, downsizing of the deception staff, no doubt! It's all falling into place now.

Hey, there's someone at my door. If I don't come back---they've gotten me just like they got CFB!

"Ahh, but the strawberries that's, that's where I had them. They laughed at me and made jokes but I proved beyond the shadow of a doubt and with ... geometric logic ... "
Hmm...if I were a Vanguard employee, would I tell you to go sober up first and then come back here to post? Oh, man, I strayed off my VG manual on what to say in the company e-village. There goes my bonus.
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Old 12-24-2008, 11:50 AM   #55
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LOL but as with anything..DIVERSIFY.. Not just into different Funds in teh same family, but into Different Fund Co.'s.. Example? VFITX & the other 50% in FIBIX, VUSTX and FLBIX... VWINX & OAKBX, PRPFX, GLRBX,BERIX.

and don't be a Pennywise and a Dollar Foolish either.. even @ .05% per $1 million difference is only $500 yr cost.. Chump change and a tax dedution or cost you about $3-400 after taxes.

Has worked for me and I sleep & play alot better.. and FYI? You don't really think all those Rich People gave him ALL their $ do you? Eg: Mort Suckerman even said " about 10% of my Charitable trust , which is about 2% of my total assets"...

And if J. B and Vangaurd ever fold up overnite? It will be our Countries Armageddon and Won't mean much anyway..They all will Fold , like it did in 32..' and during the Bank Collaspped in the 80's... Keep a few Months bills of Gold Coins in your safe at home..underneath your handgun.. :0)
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Old 12-24-2008, 12:30 PM   #56
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FYI - Try looking up "100 Vanguard blvd, Malvern, PA" on Google Maps. All the buildings you see are Vanguard's.

I've been there and it's very nice, especially the statue of Bogle.

- Alec
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Old 12-24-2008, 12:43 PM   #57
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Ah, one of the classic problems of philosophy, that of epistemology, or how we know the things we know (or think we know). The truth (if there is such a thing) is that we may not really know the things we know. Depends on your point of view perhaps.

Vanguard may not be real, but it seems the most real of any investment company out there, so I think I'll stick with them for now. Plus they have low expenses, right?
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Old 12-24-2008, 08:25 PM   #58
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Old 12-24-2008, 08:29 PM   #59
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Ah, one of the classic problems of philosophy, that of epistemology, or how we know the things we know (or think we know). The truth (if there is such a thing) is that we may not really know the things we know. Depends on your point of view perhaps.
"...as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know." - Donald Rumsfeld
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Old 12-26-2008, 08:12 PM   #60
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"...as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns -- the ones we don't know we don't know." - Donald Rumsfeld
I know. Only George W could have said it more bester than that. (not trying to soapbox this, but tis the truth!)
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