Musings On Markets

To Madoff or not to Madoff? 55 billions?) Once we look at the list of prominent individuals who have been snared in this web of deceit, including Mortimer Elie and Zuckerman Wiesel, we have another opportunity to examine the consequences of greed, hubris, and eventual downfall. The facts of the story seem fairly clear.

Madoff made his initial reputation as a broker/dealer, and he built a small business based upon computerization and quick investments for his customers. Along the way Somewhere, he also became an investment advisor, though he did not file to officially become one until 2006. He moved in the best circles of society, and wealthy investors clamored to be his clients.

He made himself even more desirable to these investors by turning away several. His allure was not that he shipped super high results but that he shipped stable and solid profits on in and calendar year out. In effect, he appeared to have found ways to take little or no risk and deliver about 5-8% more than the treasury relationship rate. Week Last, . He provided away his key.

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He have been operating a Ponzi system, i.e, using money elevated from new investors to deliver comes back to old ones. Like all Ponzi plans, it was influenced by new money to arrive. The marketplace collapse of the last few a few months essentially take off that inflow, leaving Madoff open. Rather than get this to a treatise about bad investment advisors and unquestioning investors, I would like to make a general point about investing in general and professional investors in particular. How much cash (returns) did a specific investor to make over a period or periods? Why did the earnings are made by them that they did?

As individuals, we are attracted to the first question and there are services that record these quantities in mind-numbing detail. Morningstar, for instance, has returns on every mutual fund in America, going in time back. Others then build on these numbers: the funds themselves advertise with evidence of superior returns and ranking and reputations are designed on past returns. The second question, however, can be regarded as intellectual and in a few full instances, as academic, and rarely gets replied seriously. If you want to entrust our money to a professional, though, both questions are needed by us solved well.

In other words, I not only need to know how much you (as a specialist money manager) have made as time passes but also why you made this return: was it superior information, your analytical capability or your trading skills? Using the language of corporate strategy, I’d like to learn what your competitive advantage is and how you plan to keep up it. Any trader asking the second question about Madoff would have uncovered warning flag.

The man was not (and never claimed) to be always a sophisticated number cruncher and he obviously didn’t enunciate a forward-thinking investment strategy. The only potential benefit that he might have had came from his access to the trading data of investors (through his broker/seller company) and front side running (trading before) his brokerage clients. That, of course, is unlawful and would eventually be uncovered. In other words, there is no basis for his solid, stable returns. He was either lucky (but that is challenging to accomplish over 30 years) or committing fraud. Week we discovered the answer Last.

My own reason is that the “recovery” from 2001-2 busts was a sham one, created by the easy-money policies of the US Federal Reserve (and other central banking institutions round the world). The piper must be paid, and I think it shall happen over another few years. Today Japan was as much the tech head in 1990 as the US is.

15 calendar years serious stagnation. What Greg is predicting is that the whole Web 2 2.0 industry shall collapse because the advertising dollars and the VC financing will dry out up. My 2ps worth Just, but I don’t believe we will see the same sort of dot-com crash because the amount of investment in daft ideas isn’t there. But I do think we will see a dot-com miss. Google or Microsoft. Only to discover that celebrity doesn’t last and it’s fans proceed, the offers dry up, the advertisers leave and the business worthless becomes. While predictions are for fools, I want to join the fool party.

On at least the Google part of this, there is nearly 0% chance of your situation playing out. How do you figure that profit margins can dwindle anywhere near zero on Google’s paid search ads, half of which arrive on Google Search and related Google properties? Even if click prices level off, that doesn’t imply profit margins go down from 40 to 0. Perhaps, a few factors at best. And finally, a lot of Google’s growth over the past three years has been international. There’s a long way to perform yet in these markets – click prices are screaming bargains due to decrease adoption in many countries.