I've invested with a ponzi scheme run by Michael Milken, Ken Lay, and Jeff Magnum. You probably haven't heard of it, though.

Colin Greenwood plays bass.

I'm sure the government had no idea this was going on.

Shut it all down. The entire market is a fraud.

Zero sum game approaching. Bilk someone or be bilked. Those who bilk are the chosen ones, the bilked were the ones they chose, heh.

I liked Madoff before he sold out and started making Top 40 hits.

There's 40 years of Madoff advice and ideas that need to be reviewed for legitimacy.

Need to get back to basics. What is value, Where is value, and How is this valued.

Does a 10:1 P/E really mean anything if none of that E goes out to shareholders?

We already learned that the ratings agencies can be gamed. Maybe some of the other concepts need to be questioned. Like "What is the value of this company to society?" in making our investment decisions.

Anyone else waiting to see how the gold bubble pops?

PrinceofFark: Zero sum game approaching. Bilk someone or be bilked. Those who bilk are the chosen ones, the bilked were the ones they chose, heh.

I knew it was the jooooooooooos!

wildcardjack: Does a 10:1 P/E really mean anything if none of that E goes out to shareholders?

Yes, because retained earnings have obvious tangible value. If a company has more cash and net assets than market capitalization, why the heck wouldn't somebody who could afford it buy a controlling stake? Worst case, you could just liquidate the whole thing at a profit.

When a company earns money, the shareholders benefit from that money just as surely as if they distributed the whole thing as dividends. Retained earnings are an implicit statement by the company saying "Hey, we can re-invest this better than you can". If you don't buy that line, sell and go buy yourself a dividend stock.

OptionC: If you don't buy that line, sell and go buy yourself a dividend stock.

That has been my investment strategy. I simply don't agree on a moral level with the whole stock price speculation that so many people buy into. This has stopped me from getting a securities license several times. It means I can't sell variable insurance products, but I don't really consider that a limitation since I prefer insurance to have guaranteed results. It's a philosophical question about the underlying societal good that investment is supposed to accomplish. Do you invest money purely for the sake of earning more money for yourself for retirement, or do you invest money to help create something that you as an individual could not build on your own, and share in the profits obtained by the success of the project? And when is an investment simply created to generate greater fees for the financial industry? Because that was what Madoff is accused of.

Every fake transaction that made a fake profit could be offset by a fake transaction that resulted in a loss, and each time a trading fee is charged to the account. Net result, no gain no loss but the firm generates a little extra profit-- which over lots of accounts might pay the wages of half the staff who largely handle legit transactions. In the pre-WWW days this would have been far easier to do because you could simply generate statements once a month and backdate the supporting paperwork rather than show nearly real-time changes on a 15-minute delayed basis like many brokerage firms offer today. The chances of folks contacting the Street-level traders to get trade confirmations would be slim to none. Not every trade is a win, and people could say "Well at least he didn't lose my money." And all of this could have been done at an otherwise legit business that DID make real transactions that earned every account holder money for years. Just not as much money as otherwise.

It's a damned slippery slope, and when you're dealing with other people's money slopes become real slippery, real quick. Which goes back to my dividend investment strategy, because I really don't expect that a company is going to be a wise steward of my money for a long period of time when there's no expectation of directly returning it to me. Corporate governance remains a joke. There are some good corporate people out there, but the question is how long will they remain good and when will they cross the line?

Magorn: jgi: I'm sure the government had no idea this was going on.


To me this is the final piece fo the Madoff puzzle. I remember when this thing first broke, the lack of SEC action against Madoff even after accusations were made against him was explained away as "Well fark, it was Bernie Madoff after all". basically that because Madoff was this hugely respected figure on the Street, nobody would believe he was doing anything wrong. What never made sense to me though, was how someone could go from an incredibly highly regarded Wall Street genius to a conscienceless fraudster so quickly. This explains it though: he was ALWAYS a fraudster and the Street was just gullible for a much longer time than anyone thought.

There were people in the SEC who were suspicious but they were not heard. There's also the fact that there were periods where, given the stocks involved and the profits claimed it was mathematically impossible for him to have produced the returns. There are even investors who, early on, said they knew the returns were too high, but they didn't care because they got theirs.

Of course all those people shut up when the talk of going after fake profits that had been distributed started.

And yet all the talking heads on Fox News and all the Republican candidates scream about how all government regulation is BAD and EVIL and KILLS JOBS.

The basic regulations for a financial market form the ground rules for what you can and can't do. They also require basic reporting and some internal and external auditing requirements to ensure that your reporting is demonstrably accurate.

When you're selling something, the consumer has a right to be able to confirm that you are who you say you are and what you're selling is what you say it is.

The only way to do this is to write the rules and empower someone to enforce them. However the SEC has become so watered down and co-opted by Wall Street that it is barely able to perform any of those functions anymore.