With the flood of tales of heartbreak and financial ruin from King Ponz still coming in, less than 24 hours after Bernie learned what sentence he will be appealing, someone stepped up to the plate and called the Madoff victims “greedy”. In a Squawk Box Europe interview, Hugh Hendry, chief investment officer at Eclectica, fought the urge to call Madoff investors flat out stupid in favor of greedy sheep who didn’t do their homework.
“I’m sympathetic for people losing money but I think this pejorative term of being greedy still applies. There was an implicit greed in not questioning and just accepting unnatural returns.”
No pity parties at the Hendry estate any time soon.
and he is fucking right. I have some sympathy for the financially illiterate pensioners, but none for the pro’s that went with him. fuck them and their loss is all their own.
Eclectica? Weren’t they that band in the 90s with the hit “connection”?
By the way, I hate you and your ass face Gregory.
-Wildcard bitches!
Tru dat
Amen @1.
“and he is fucking right. I have some sympathy for the financially illiterate pensioners, but none for the pro’s that went with him. fuck them and their loss is all their own.”
QFT
Dear Greg,
Just because I read you Liar’s Poker at bedtime does not make you qualified to write for Dealbreaker.
-Mom
BLANUS to the maaaaaax!
Right on 1. And I would add that when you’re an individual investing $5mm+,the excuse for financial illiteracy goes out the window.
spot on.
Where are the client’s prison sentences???
I’ll say they are stupid. They could have been investing in AIG.
@1 Ditto….
anyone have numbers for first year Madoff Clients?
@ 1 & 8 win
These people were not Joe Six Pack factory line worker and Amelia Bedelia 3rd grade teacher. If they didn’t know what they were getting into, and didn’t bother to keep their money at insurable levels, that’s their own fault, who cares.
Yes the financial literate should have been much smarter, but I would wager that most of those people did not put 100% of their saving with BM…but the widows of close friends etc. that heard through the CC circuit that BM was honest and good? Those people have my sympathy. Yes they should have gotten an advisor blah blah – but I would be willing to bet that those people thought BM was their advisor. Maybe I’m getting soft.
Dealbreaker
@13 Get you a case of beer for that one!
15 Unfortunately, their due diligence was far too simple: Madoff = Jewish? CHECK
@15. i tend to think those stories are largely manufactured. he wasn’t running a mutual fund… there were pretty high entry levels, probably above the level of blind, orphan (insert any sad adjective here) widows with a limp. maybe i’m getting hard.
If it were as simple as that, it’s true. But remember, the feeder funds were incentivised by the higher percentage they could take out of the asset management fee while the investors in the feeders probably had little say on directing investment. Surely Huw has sympathy for that?
19 Yes and no. Among the later investors there seem to be a lot of millionaire next door types. Retirees with a million or two, saved over a lifetime, maybe proceeds from selling a small business. Seven figure net worth acquired the hard way.
Oh the feeder funds should get the living crap sued out of them for failure of any DD. The Noels should have to give up the daughters ala Young Guns for the burnt shirt…. @19 I think you are correct that air time goes to the minority of W&O, while the majority were not those types….
20 Huh? Of course they had little to say. For a fee they outsourced all decision making to the feeder. Which would have been fine, had the feeder done their job and added value.
fuck you guys, the criminal is madoff, not the investors…jerks
@24. the question is how much pity should be sent their way. some were clearly sad cases of people who lost everything they worked for (still stupid to put it all in one place). However, some were just assholes that got fucked (ain’t throwing a pity party for them). Greed is not illegal but it’s also not something to celebrate unconditionally.
Actually this greed thing gets thrown around too often. No one was promised outsized returns but rather 8-10% with low volatility. The genious is in having identified that as the sweetspot for a lot of people.
nobody is celebrating it, the guy got sentenced and it was the victims turn to slam the fucker. end of story
Funny, I did not see one jerk comment here until 24. Bernie was a criminal fraud. Some feeders appear criminally negligent at least. Some investors seem willfully reckless. That leaves, as just about everybody above points out, a few W&Os to feel bad for. The whole feeder and fund of funds systems are obnoxious.
@26, thinking that you are somehow entitled to risk free 10% annual returns is not a mindset that is going to generate a lot of sympathy, especially when you cannot have had any idea as to how such returns were supposedly generated. Also, after the guy you hired who stole money from other people on your behalf has been arrested and permanently put out of the stealing-money-on-your-behalf buiness and you’re left holding johnson, demanding that someone (SEC, SIPC, the taxpayers) needs to make you whole the amount of money the guy failed to steal for you is a bit unseemly.
the SEC are loving this attention to Madoff and attention off their negligence.
@26
10% low volatility returns is a pipe dream, and anybody who bothers to learn about their own investments realizes this. It was the combination of return and low volatility that people are calling greedy, not the absolute return.
30 What was the status of the client accounts? Typical full discretion account with a RIA? Which is why the investors are intitled from $500K from SIPC. But does SEC really have jurisdiction? They should have responded better to the famous Markoupolis letter. But beyond that, not sure. Comments?
@29 For those not on the street, 10% returns don’t sound that outrageous. A lot of stock market books you’d find on the shelf at B&N would say that long term returns for the stock market are near 10-12%. Even text books often use rough numbers like 4%rf and 6%rm. I would guess that many of the investors saw BM as a guy who actually achieved the market returns that all other pm’s advertise.
Not to make too many excuses for these people because there were a number of red-flags, but it’s easy to see how retail investors trusted their advisor in good faith. The guy had lots of street cred — he was non-executive chairman of the NASDAQ for christ sakes.
Had lunch week before last with a friend, and we were talking about Madoff.
I allowed as how half the people who invested with him knew it was a rigged game and the other half had to wear headgear when they left the house.
Turns out he lost money with Madoff, too.
Awkward!
33 Thats the basis for a lot of corporate pension fund return assumptions of 8%. 10% from equities, 6% from bonds, mix em together and get 8%.
We’re talking about 8% annual returns without taking compounding into effect, especially since they always had positive returns.
@29, the average return on the Fairfield fund that was a pass-through from Madoff were 12% from 1990-2005 (that’s after netting out the 4% in management fees) with a worst year performance of 6.5%. Show me a book where someone says you get a 12% return investing in equities over time, and show me one where the worst you ever do is make over 6% return when your timeline includes two bear markets. These people either thought he was front-running his clients, were too stupid and reckless to care or suspected he was doing something fishy but hoping to get out before they were the suckers.
@37 This was just taken off the Motley Fool website. I’m not endorsing it in any way, but it was the first thing Google pulled up and I’m sure a lot of average people read this kind of thing. They offered the following advice when planning for retirement:
“Know what to expect and know how the stock market has performed, on average, over the long haul. (Over the past century, the average annual return has been around 10%.)”
“If you put $1,000 per year for 25 years into an investment earning 10% annually, you’ll end up with $108,182.”
These are presented as unlevered historical equity averages. Combine this with the skill of a qualified manager (Wall St. is purportedly full of the best minds in the world) and the results look very good, but not outlandishly so.
@38
“This was just taken off the Motley Fool website” (facepalms violently)
Of course that is the long term average RETURN. The problem was not that his returns were too high, the problem was that those returns had very low VOLATILITY. Small company stocks had those % returns but they also had much more volatility from year to year than Madoff’s funds.
Any green money manager with no AUM could tell you that.
@39, Is a good sharpe evidence of ponziness? Renaissance would be the most obvious case – black box strategy, ultra exclusive investor base, $100bn capacity. If it were a scam, I’m sure there would be a thousand assholes lined up for a 2 minute spot on CNBC to say that they knew it all along.
Many of BM’s investors were novices. If they knew how to run money themselves, they wouldn’t have had to pay some prick with yellow teeth to do it for them.