Madoff wasn’t a psychopath: he was rational. He lived an incredible life, set up his kids for life and downside was jail time for last 20 years of his life. He flipped the “inverse pyramid” most people endure, which is finally having money but being too old to enjoy it. He was very rational because he knew the system was easy to game. He also would have toiled in obscurity, retiring with modest means, like most everyone else if he didn’t take a chance on his ponzi scheme. He played an “option” and the upside was higher than the downside. The worst that could be said of him was that he was greedy. In that way he was no different from his so-called “victims” who greedily looked the other way when investing with him. He simply bet (correctly) that there were people out there that were as greedy as he was. Much of the anger of the so-called victims is actually angst and embarrassment of being seen publicly as greedy and stupid.
Madoff was not the biggest crook of this stock market cycle. He caused a lot less damage than Stan O Neal at Merrill Lynch who dragged his company into collapse, while taking almost $200 million with him on the way out, destroying the livelihoods of tens of thousands of people. Dick Fuld, Jimmy Cayne, and the kind folks at the AIG swaps department make Madoff look like a piker. Madoff only ripped off about $13 billion. The AIG swindle is over $100 billion now and counting.
All this talk about “evil” is ridiculous. Is he any different than the artificially tanned lizard Mozillo of Countrywide fame, who paid off politicians with sweetheart loan deals in order to keep his house of subprime cards afloat? In fact, if they wanted to publish a “victims list” for Mozillo’s crimes they can just publish a list of everyone that paid taxes to the IRS last year because we are all paying for his “evil” deeds. In one way, I admire Madoff – he cleverly protected his family with his stone-faced silence. At least he had some sense of honor. He used the charade of turning himself in to his sons so they could gallop on white horses to the unwitting feds.
Maybe Jim Chanos is right, and we should abolish the SEC, because all it does is give investors a false sense of security. It’s easier to blame the SEC than to do your own investing homework. It’s OK, Daddy “Moral Hazard” Fed will make things better.
Haven’t we all been taught “if it sounds too good to be true, it probably is” by our parents? What about the idea of diversification? What happened to hard work and effort? Are we born entitled to riches without effort in the
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8 comments:
Dasan,
Nice Post. All I can say is that for every schemer or wheeler-dealer born every minute, there are 10 other suckers born in the same time. Greed is innate.
not sure i agree with you at all. These "greedy" people weren't trying to take advantage of anybody. They were looking for a money manager to help them with their savings. Bernie came highly recommended by almost everyone in finance. These people had no direct expertise in this area and putting their money into Madoff's fund was seen as a logical and smart move.
In NO way is it their fault that they put money into Madoff's fund and to suggest that they are is asinine. Madoff committed fraud. He lied directly to their faces and took their money. That's not their fault, it's his. That's why he has 150 years of jailtime. What if your bank swindled you out of your money. Are you at fault for getting good interest rate returns? Of course not.
Way to put things in perspective Dasan.
Louie,
Yes they were looking for someone to manage their money, but ultimately, one is in charge of their own financial destiny. There are people who did invest with Madoff, and there are people who did not invest with Madoff. Why did those people choose Madoff to invest with? Better returns? The word "better" implies that a choice was made where greed was a factor in the decision making process. While I agree that it is not the fault of the investor, I would also not put 100% blame on Madoff for the investors' loss. Nothing is risk free, especially today. People should know that. Markets are not science. Anyway, it is not a question of fault or blame at the end of the day. It is a issue of our cultural evolution as a society who wants more and more and more without doing much. As my grandfather said, you are not supposed to make a dime without sweating your balls off.
If your bank "swindles" you, you have FDIC insurance to cover your losses. If you have more money in the bank than FDIC insurance, then it is your own fault. People often forget what capitalism means, that there are going to be winners and losers. The losers are the people who don't do their homework. These people could have socked away their hard earned money into FDIC protected CD's. With virtually no risk, they could retire to "meager", but very livable means. Instead, everyone wants something for nothing. We have public libraries for a reason. So people can easily and maybe more importantly, freely, educate themselves. But, these people choose that maybe one of their most important decisions of their lives, retirement, should just be handed off blindly to someone else. I have a hard time feeling sorry for lazy people. If he swindled mentally handicapped or outright stole from these people, then I'd have sympathy for the victims.
D
Great post.I think a darker place inhell is reserved for all the feeders, fund o funds and other advisers who built entire practices over decades of nothing but pumping assets Madoffs way. Not eneough is mentioned about the many many outfits that did this.
You're way off base here. You need to check your facts. There is nothing rational about how he operates. He did not set up his kids for life. They're going to lead a miserable existence. The family will be ostracized. Finally, the guy is clearly a sociopath. To be able to lie to your wife, closest friends, sons--everyone that means anything to you--day in an day out over several years and without any sense of grief or remorse, indicates the guy is missing something. You mention toiling in obscurity. Now he will live in infamy, and generations of Madoffs subject to ridicule. I fail to see any validity in your claims.
Your point about everyone having to do their homework is a dangerous one.
At the point that people feel that they cannot trust the system and it is up to them to verify and validate the safety of their investments when they have neither the time nor the ability to do so, you would see a catastrophic withdrawal of investment from the US system. Where it would go, I do not know, but it would certainly be the end of the USA as a dominant financial power.
And like it or not, if you are not a financial power, then you are shortly not an economic power either...
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