Tags: Bernie Madoff, Ezra Merkin, Jonathan Berk, Jules Van Binsbergen, Mutual Funds, papers, skill
We’ve talked a bit before about how there’s a booming academic business in papers finding that investment managers do or do not add value versus non-managed alternatives like passive indexing or keeping your money under your pillow and just burning a constant percentage of it every month. Part of why that’s a thing is that the data can be prodded, smooshed, or cherry-picked to say many different things, and so they are. I enjoyed this paper about mutual funds by Stanford GSB profs Jonathan Berk and Jules Van Binsbergen (NBER today here, SSRN in April here) in part for its discussion of data problems, which starts with the fact that they used the industry-standard (in the academic-papers-about-mutual-funds industry) CRSP database and compared it to Morningstar data because “even a casual perusal of the returns on CRSP is enough to reveal that some of the reported returns are suspect.” Suspect like:
We then compared the returns reported on CRSP to what was reported on Morningstar. Somewhat surprisingly, 3.3% of return observations di ffered. Even if we restrict attention to returns that di ffer by more than 10 b.p., 1.3% of the data is inconsistent. An example of this is when a 10% return is accidentally reported as “10.0″ instead of “0.10″.
That is one way to get alpha. Anyway they look at the data using a (strangely) unusual metric of dollar value added, which is roughly alpha (gross excess return over some investable benchmark, in this case a Vanguard index fund) and multiplying it by assets under management, the intuition being that making 1% excess return on a $10bn portfolio is more impressive than doubling your $10 bet at the craps table. And they find that mutual fund managers are better than controlled money burning by the thinnest of margins: Read more »
Tags: Allen Stanford, Bernie Madoff, Ponzi schemes, ruthless predators, utterly remorseless criminals
U.S. prosecutors have urged a judge to send convicted financier Allen Stanford to prison for 230 years, calling him a “ruthless predator” whose $7 billion Ponzi scheme was among the most egregious frauds ever undertaken. Such a sentence, the maximum recommended under federal sentencing guidelines, would be 80 years longer than Bernard Madoff got in 2009 for his Ponzi scheme, and according to prosecutors reflects Stanford’s place as “among the greediest, most selfish, and utterly remorseless criminals.” Stanford’s lawyers are seeking a prison term of 31 to 44 months for their client, which could result in his immediate release because he has already been in custody for three years, according to the government. [Reuters]
Tags: amateurs, Bernie Madoff, disappointments, Fred Wilpon, Irving Picard, The Mets, you win some you lose some
Convicted fraudster Bernie Madoff was “desperately disappointed” that the owners of the Mets chose to settle the fraud lawsuit brought on behalf of victims of Madoff’s Ponzi scheme, CBS News reported Wednesday. “He wrote me last weekend that he was so looking forward to that trial,” said Diane Henriques, author of the book “Wizard of Lies” which detailed Madoff’s fraud. “He was hoping that the Mets’ defense would make the case he was making to me that they had no reason to doubt Madoff.” The trustee for Madoff’s victims, Irving Picard, was set to argue at trial that Mets owner Fred Wilpon, once a friend of Madoff and a longtime investor, was willfully blind and chose to ignore signs that Madoff was producing fraudulent returns. Henriques told CBS that in recent emails from prison Madoff blasted Picard, who was seeking more than $300 million at trial. “He calls Picard a fool, an amateur, says he doesn’t understand the market, says he never understood the market, that he’s just lost on Wall Street,” Henriques said. [NYP]
Tags: Bernie Madoff, Fred Wilpon, logic, Sandy Koufax
Baseball Hall of Fame pitcher Sandy Koufax may testify for the owners of New York Mets at a civil trial accusing them of turning a blind eye to Bernard Madoff’s epic fraud. … According to the Mets owners, Koufax opened a Madoff account at Wilpon’s suggestion, and has been a lifelong friend of Wilpon, with whom he played high school baseball in Brooklyn, New York. “It strains credulity to think that Mr. Wilpon would expose his oldest and closest friend to potential financial ruin” by letting him invest with Madoff, if he knew Madoff was a fraud, the Mets owners said.
Tags: Bernie Madoff, David Kotz, hey, imbeciles, SEC, tranny porn, We can do this the easy way or the hard way
In recent years, the Securities and Exchange Commission has been known more for its fuck-ups than successes. The regulator took a pass on heeding the warning signals by Bernie Madoff himself that he was running a Ponzi scheme, it chose to go after David Einhorn rather than Allied Capital when the hedge fund manager suggested all was not right at the company and right now, as we type, the regulator is presumably fucking up in ways we cannot imagine but will hear about two years hence. Separately the Commission happens to employ a not insignificant number of people who like to look at porn all day, every day, in lieu of working, which perhaps could explain some of the slip-ups, though it’s a very chicken or egg situation.
In past times, none of this (the failures and the 24/7 surfing of www.ladyboyjuice.com, www.anal-sins.com, www.fuck-my-wife.com, among others) proposed a problem. Business as usual. Then Inspector General David Kotz had to come in and start asking people, “Why didn’t you think to follow up when Madoff said the whole thing was a scam?” and “Why, on Wednesday, August 20th did you make approximately 385 attempts to access a website called www.ladyboyx.com from your work computer?” And now, it’s war. Read more »