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I Knew Bernie Madoff Was Cheating, That's Why I Invested with Him
Posted Dec 12, 2008 12:45pm EST by Henry Blodget in Investing, Newsmakers, BankingFrom ClusterStock.com, Dec. 12, 2008:
Interesting tidbits coming in about Bernie Madoff (read indictment here).
Specifically, we're hearing that the smart money KNEW Bernie had to be cheating, because the returns he was generating were impossibly good. Many Wall Streeters suspected the wrong rigged game, though: They thought it was insider trading, not a Ponzi scheme. And here's the best part: That's why they invested with him.
For years and years I've heard people say that
[Bernie's] investment performance was too good to be true. The returns were too
steady -- like GE earnings under Welch -- and too high given the supposed
strategy.
One Madoff investor, himself a legend, told me that Madoff's
performance "just doesn't make sense. The numbers can't be straight." Another
sophisticated Madoff investor actually went through trade confirms in order to
reverse-engineer the strategy and said, "it doesn't add up."
So why did
these smart and skeptical investors keep investing? They, like many Madoff
investors, assumed Madoff was somehow illegally trading on information from his
market-making business for their benefit. They didn't consider the possibility
that he was clean on that score but running a good old-fashioned Ponzi
scheme.
And another from Whitney Tilson:
One friend who saw this coming said Madoff had his own broker-dealer and a relative as his finance guy; another friend said he was suspicious because of the 1-2%/month returns with never a down month (much less quarter or year), combined with never showing a a down month (much less quarter or year), combined with never showing anyone his portfolio. 99% of the time, if it sounds too good to be true, IT IS!
Got your own Bernie Madoff stories? Please send them in. (hblodget@alleyinsider.com).
See Also: Bernie Madoff: The Indictment
385 Comments
Johnny Ike - Friday December 12, 2008 12:57PM EST
Put him in cage..........and took all his properties, investment,cash on hand and all cash in his bank........No mercy for the wicked..........Shame.....He is just another big crook associate of Mr. Paulson probably.....They have a doctorate degree to Rob the people.....Shame........
spon57 - Friday December 12, 2008 01:00PM EST
On Long island there is another Ponzi scheme that is run by a firm called Agape World . BEWARE!!!!!!
reedersong - Friday December 12, 2008 01:04PM EST
Goldman slashes 2009 commodity price forecasts Friday December 12, 2008, 9:25 am EST Yahoo! Buzz Print Related:Goldman Sachs Group Inc. By Pratima Desai Related Quotes Symbol Price Change GS 68.61 -1.10 {"s" : "gs","k" : "c10,l10,p20,t10","o" : "","j" : ""} LONDON (Reuters) - Goldman Sachs (NYSE:GS - News) slashed its commodity price forecasts on Friday, citing a collapse in global economic growth and demand because of the credit crisis....The U.S. bank which earlier this year predicted an oil price spike to $200 a barrel now expects to see crude average $45 a barrel next year.-----Article............So, If they were completely wrong before...WHY IN THE CRAP SHOULD WE LISTEN TO THEM NOW????
Alan F - Friday December 12, 2008 01:07PM EST
Stole 50 Billion and is only fined 5 Million??? Sounds like a good deal to me. Where do I signup for this gig?
Yahoo! Finance User - Friday December 12, 2008 01:11PM EST
this ponzi scheme is too big to fail!!! bail out
pqbooicu - Friday December 12, 2008 01:12PM EST
ROFLMAO.... I totally agree with meetdave006... we're talking about a bunch of "high-rollers" who may have to give up the house in Palm Beach... Let's bail them out....
mefiong - Friday December 12, 2008 01:13PM EST
What do you know? Another big Ivy school legue scam artist. Ivy league MBAs are killing us on Wall street-- they show up looking and talking smart but in reality these guys are mud heads. If you doubt me, my question to you is where did the big 5 investment banks go?
opcointern - Friday December 12, 2008 01:13PM EST
"Let's bail him out" is the funniest and truest thing I have seen in a long time
cobaltnathan - Friday December 12, 2008 01:15PM EST
Everything in this country is turning into one big Ponzi scheme
Steven B - Friday December 12, 2008 01:17PM EST
His ponzi scheme is no different than the U.S. Government ponzi scheme. The only difference is he has declared it so, and the Government has yet to. The day of reckoning is coming.
Yahoo! Finance User - Friday December 12, 2008 01:20PM EST
At least he stole the money from rich people.. now we will see how their justice system works...
lastoneoutshutthelightz - Friday December 12, 2008 01:20PM EST
Bernie Made-Off with the $$$... Hahahaha-a-a-a!!!
Vic Stone - Friday December 12, 2008 01:22PM EST
Bush is trying to clean up his record of de-regulating Wall Street and letting thieves like Madoff get filthy rich at the expense of the little guy. There's plenty of people like Bernie who are running various types of fraudulent schemes without the SEC batting an eye. Why did they choose to go after him? It's easy. Madoff and his family are bigtime contributors to the Democrats. He put a big target on his back and Bush picked him off with one month left in office.
centvalu - Friday December 12, 2008 01:22PM EST
Buffet has had down years, his auditors don't work out of a 12 x 18 room and he doesn't day trade. This may be the tip of the iceberg in the hedge fund world but it is not a reason to sell BRK.
Yahoo! Finance User - Friday December 12, 2008 01:23PM EST
I never invested in Buffett's company. The figures in the financial statement do not make sense to me and dont add up. Also the entries in a bank or insurance company statement are just made up and act like Quarks floating around from Asset side to Liability side depending on the whim of the accountant and the Income statements can never be trusted.
Whit Chambers - Friday December 12, 2008 01:24PM EST
Well, what exactly does government pension programs do that are not ponzi like.
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reedersong - Friday December 12, 2008 12:52PM EST
Bernard Madoff arrested over alleged $50 billion fraud.........but Buffet has always been on the up and up, right?