Happy Ponzi-versary!

Morning monkeys,

Today marks the 4th anniversary of the Bernie Madoff investment scandal that shocked everyone on Wall St. as well as those at the SEC who wasn't too busy watching porn. Perhaps that's unfair, obviously the SEC does more than watch redtube all day because they investigated Madoff several times. Including an investigation of fraud in 2006 (which concluded in 2007) where they found no evidence despite having already been given the correct answer by Harry Markopolos.

Nevertheless, on the fourth anniversary of the scandal, Yahoo! Finance offers some advice to those who want to avoid ponzi schemes. Frankly, I find their list a bit wanting, so I thought I'd pose the question to all you monkeys out there:

How would you avoid a ponzi scheme?

 

Yeah, here's the thing that pisses me off about these stories... people gave ALL their money to this crook. Now, I'm not saying they should've or could've known he was a crook, but why give ALL your money to one manager? You need to treat money managers like you do individual stocks... Diversify, diversify, diversify. The truth is those people let greed get the best of them. I say this is economic Darwinism.

 
Edmundo Braverman:
mellis, you should read Markopolis's book. They knew they were giving ALL their money to a crook and didn't care.

Are you serious? That boggles the mind. I mean, did they realize he was the type of crook who was going to steal their money outright? That seems unbelievable.

"My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."
 
mikesswimn:
Edmundo Braverman:
mellis, you should read Markopolis's book. They knew they were giving ALL their money to a crook and didn't care.

Are you serious? That boggles the mind. I mean, did they realize he was the type of crook who was going to steal their money outright? That seems unbelievable.

It's just greed, man. As long as he kept ringing the cash register, they didn't give a shit how he was doing it. Keep in mind he provided double digit returns for nearly two decades before it all blew up.

 

I'd open a mutual fund; take a % off the top, regardless of profitability; then take a chunk of whatever profits happen. Then, if or when things turn south, limit the amount of redemptions that can occur.

 
Edmundo Braverman:
ocpitmaster:
I'd open a mutual fund; take a % off the top, regardless of profitability; then take a chunk of whatever profits happen. Then, if or when things turn south, limit the amount of redemptions that can occur.

Hope you're being ironic, because you just described the hedge fund model to the letter.

Then, have a MD who gets a % for doing........................

 
Edmundo Braverman:
ocpitmaster:
I'd open a mutual fund; take a % off the top, regardless of profitability; then take a chunk of whatever profits happen. Then, if or when things turn south, limit the amount of redemptions that can occur.

Hope you're being ironic, because you just described the hedge fund model to the letter.

Then, have a MD who gets a % for doing........................

 

Anyone else here watch American Greed on CNBC? I never realized just how many scammers there were out there until I watched that. It was actually truly horrifying. Regardless, as far as avoiding them goes? You really can't at the end of the day. Just never allocate any one chunk of your money in any one place. Also avoid anything that looks too consistent or good to be true. I mean the only way to be 100% sure is to manage your own money or something of the sort. There really isn't another way.

 
Best Response
Addinator:
Anyone else here watch American Greed on CNBC? I never realized just how many scammers there were out there until I watched that. It was actually truly horrifying. Regardless, as far as avoiding them goes? You really can't at the end of the day. Just never allocate any one chunk of your money in any one place. Also avoid anything that looks too consistent or good to be true. I mean the only way to be 100% sure is to manage your own money or something of the sort. There really isn't another way.

Until I saw that show, I wondered how it was possible for young PWM trainees to get clients by cold calling. Who would possibly entrust their financial well-being to somebody on the phone claiming to represent Merrill Lynch?

But not only will people entrust their money with "random Merrill Lynch guy", they will entrust it with "random guy who sounds vaguely intelligent". And they aren't all Ponzi schemes - a lot of the initial pitches sounded very shady. But people still handed over millions. I honestly have to ask, who are these people? How can you be smart enough to hold a job and accumulate wealth to invest, yet dumb enough to completely mismanage it?

 
West Coast rainmaker:
Addinator:
Anyone else here watch American Greed on CNBC? I never realized just how many scammers there were out there until I watched that. It was actually truly horrifying. Regardless, as far as avoiding them goes? You really can't at the end of the day. Just never allocate any one chunk of your money in any one place. Also avoid anything that looks too consistent or good to be true. I mean the only way to be 100% sure is to manage your own money or something of the sort. There really isn't another way.

Until I saw that show, I wondered how it was possible for young PWM trainees to get clients by cold calling. Who would possibly entrust their financial well-being to somebody on the phone claiming to represent Merrill Lynch?

But not only will people entrust their money with "random Merrill Lynch guy", they will entrust it with "random guy who sounds vaguely intelligent". And they aren't all Ponzi schemes - a lot of the initial pitches sounded very shady. But people still handed over millions. I honestly have to ask, who are these people? How can you be smart enough to hold a job and accumulate wealth to invest, yet dumb enough to completely mismanage it?

Bro, this was the entire business model back in the day, and it never ceased to amaze me. You can't imagine some of the shit I got people to do over the phone. One of the largest clients I had in my career opened an account with me and wired in $100,000 after our first phone conversation. Never met me. Had no idea who I was or anything about me. I was just a voice on the phone.

You don't ever want a guy like me on the other end of the line, man. I'd talk you into some really silly shit.

 

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-Gorilla A. ------------------- “I've forgotten who I had lunch with earlier, and even more important, where.” ― Bret Easton Ellis, American Psycho

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