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What if Vanguard is just a giant ponzi scheme?
Old 12-18-2008, 12:15 PM   #1
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What if Vanguard is just a giant ponzi scheme?

The latest scandal has made me think...how do I know Vanguard really exists? What if it's just a PO Box in a strip mall in Valley Forge? Sure, they send me nice statements every quarter, but it's not that hard to generate nice looking letterhead. They're audited, but so was Madoff. Vanguard has, at times, refused to take my money (closed funds) just like Madoff did to help build credibility. John Bogle is a very persuasive guy, just like Madoff was. And so far, Vanguard has always honored requests to transfer money out, but maybe one day they wake up and their $1T is gone.
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Old 12-18-2008, 12:16 PM   #2
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The latest scandal has made me think...how do I know Vanguard really exists? What if it's just a PO Box in a strip mall in Valley Forge? Sure, they send me nice statements every quarter, but it's not that hard to generate nice looking letterhead. They're audited, but so was Madoff. Vanguard has, at times, refused to take my money (closed funds) just like Madoff did to help build credibility. John Bogle is a very persuasive guy, just like Madoff was. And so far, Vanguard has always honored requests to transfer money out, but maybe one day they wake up and their $1T is gone.
Hey at least they were low cost until all your money was gone........
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Old 12-18-2008, 12:22 PM   #3
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Exactly, how do you scam people who are too cheap to pay 2/20 to a hedge fund? Operate a "low-cost" scam! It all makes sense now...
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Old 12-18-2008, 12:23 PM   #4
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i seriously had the same thought on going to sleep last night. then i got a little paranoid and wondered if this early retirement forum wasn't initiated & moderated by the minions of vanguard to lure & entrap the unsuspecting.

then i got really scared and started to think this entire capitalist system was a ponzi scheme. what if banks didn't have money either? what if they just made money out of thin air? what if they then loaned me $100 bucks and counted on me paying them back so that they could loan out another $100 bucks for every $10 bucks i paid back.

then i got so frightened that i almost peed in bed: what would happen if i defaulted on my loan?

this is why ponzi schemes should be regulated. ah, now i'm feeling better about capitalism. (still, maybe it wouldn't hurt to take half and put it into fidelity.)
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Old 12-18-2008, 12:35 PM   #5
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then i got really scared and started to think this entire capitalist system was a ponzi scheme. what if banks didn't have money either? what if they just made money out of thin air? what if they then loaned me $100 bucks and counted on me paying them back so that they could loan out another $100 bucks for every $10 bucks i paid back.
That's not that far from the truth.

The market IS a mass Ponzi scheme. You invest in the hopes that someone will buy your shares later for more money. Of course, they only buy your shares because they hope that someone else will buy them for even more money in the future. And so on.

The only non-Ponzi part of it is dividends. And then you get into paper money, which is based on a belief system too. But what use is gold, really, except that someone else will buy your gold for more in the future.

Great gods! It's all a mass delusion!
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Old 12-18-2008, 12:42 PM   #6
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... i got a little paranoid and wondered if this early retirement forum wasn't initiated & moderated by the minions of vanguard to lure & entrap the unsuspecting.
Disclosure: Vanguard is paying me. They deposited a 5 figure sum in my MMkt account a few days ago. The money is laundered through my Wellesley fund.
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Old 12-18-2008, 12:45 PM   #7
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I had a 6-month gig working for Vanguard a dozen years ago, and I drive by the main offices in Malvern every few weeks. Still there. The naval theme is prevalent there as well in the names of the building, though I can't remember which building I worked in. Might still be a Ponzi scheme, but there's more to it than a P.O. Box.

I was kind of amazed at the time that with all the normal big-company stuff you'd find anywhere that they were able to offer low costs. Though they have the reputation locally of not paying well, but having good benefits.
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Old 12-18-2008, 12:48 PM   #8
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The safest way is to analyze the names. Madoff made off with the money, so you know that's not safe.

Vanguard is safe -- all your money is here:

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Old 12-18-2008, 12:52 PM   #9
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Quite frankly, after the past few months and now the madoff's scandal, Vanguard is one of only a few institutions I still trust with my money. I like the fact that, at Vanguard, the investors are also the shareholders because the temptation is not there for Vanguard to screw the investors in order to reward the shareholders. That makes Vanguard truly unique in my book. Off course it doesn't provide insurance that Vanguard is not a giant Ponzi scheme but, if that's the case, I'll go down with the "ship" (Vanguard's logo). At this point it's almost religion. When the madoff's scandal came out, I was thinking that even if I had $100M, I'd still put it all at VG.
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Old 12-18-2008, 12:55 PM   #10
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At this point it's almost religion.
Vanguard is one of those businesses whose customers tend to be "disciples" who preach the virtues of the business. I guess Apple would be another example.
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Old 12-18-2008, 12:58 PM   #11
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I guess Apple would be another example.
I am becoming one of those too!
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Old 12-18-2008, 01:24 PM   #12
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I guess I've been counting on Morningstar as my "regulator" for most of my mutual funds. Hope they're better than the SEC.
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Old 12-18-2008, 01:26 PM   #13
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I guess I've been counting on Morningstar as my "regulator" for most of my mutual funds. Hope they're better than the SEC.
And the bond rating services, for that matter...
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Old 12-18-2008, 01:29 PM   #14
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I guess I've been counting on Morningstar as my "regulator" for most of my mutual funds. Hope they're better than the SEC.
Good luck with that.........
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Old 12-18-2008, 01:41 PM   #15
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then i got so frightened that i almost peed in bed: what would happen if i defaulted on my loan?
They'd ask Congress for a bailout due to bad loans, but probably after a couple of guys bearing the gift of concrete overshoes shows up at your place.

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Old 12-18-2008, 01:52 PM   #16
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The other potential ponzi scheme I'm thinking about is Berkshire Hathaway. The stock never pays a dividend and the primary business is insurance. The performance isn't as consistent as Madoff, but the result are in theory even more impressive.

Sure Geico and General Re pays the occasional claim, and Buffett is folksy as hell.
Everyone says the stock will tank when Warren dies, but maybe it is less because of his investing prowess and more because when they audit the books, they'll find it is a giant 100+ billion ponzi scheme.

"Just because you are paranoid doesn't mean they aren't out to get you."
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Old 12-18-2008, 02:09 PM   #17
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This whole thing about life is a GREAT GIANT PONZI scheme.

Stocks, bonds, real estate, land, collectibles, gold, precious stones, you name it. You always depend on somebody else buying it from you, so you can do a "food conversion" later as you need it. In that sense, the only things that are TRUE in this life are food, water, clothes, etc... All are consumables that are difficult to hoard, and to preserve.

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. Hey, any of us here also knows the song "Il pleut sur Bruxelles", sung by Dalida? One of my favorite songs with the lyrics I love.

PS. I am posting from Puerto Penasco (Rocky Point), Mexico.
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Old 12-18-2008, 02:12 PM   #18
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What if Vanguard is just a giant ponzi scheme?

I guess we'd all have to sue our FAs.
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Old 12-18-2008, 02:15 PM   #19
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My friend saw Jack Bogle, Warren Buffett and Ben Bernanke getting into a black helicopter. I don't know if the money in the bags inside was to be sprinkled out as a stimulus, or if the three of them were flying off with the loot to their secret lair inside a volcano.
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Old 12-18-2008, 02:16 PM   #20
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That's not that far from the truth.

The market IS a mass Ponzi scheme. You invest in the hopes that someone will buy your shares later for more money. Of course, they only buy your shares because they hope that someone else will buy them for even more money in the future. And so on.

The only non-Ponzi part of it is dividends. And then you get into paper money, which is based on a belief system too. But what use is gold, really, except that someone else will buy your gold for more in the future.

Great gods! It's all a mass delusion!
Yep, without the new entrants the whole thing would crash. We should appreciate all the people having kids, be happy to give them good educations, and try to figure out how to make them think that it's okay for the geezers to consume a lot.
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