I didn’t bother much with market related news yesterday, it was a holiday after all, but I managed to catch something interesting on CNBC. They had this one hour special called “Scam of the century”. It was done in style of “investigative journalism” and along the lines of “Age of Wal-Mart”, another special they did couple of years ago. I’m sure everybody can guess what “Scam of the century” was about- Mr. Madoff and his Ponzi scheme. Show covered couple of interesting tidbits. Apparently when Madoff’s sales people were courting hedge funds for business, they willingly disclosed the method he supposedly used to achieve above average returns. In 1998 they made a presentation to some fund in Boston. After the disclosure was made, fund manager called his top trader and asked him to trade the strategy. It comprised of position in S&P futures, which was hedged with options. This strategy was traded in a dummy account for some time and it never produced results anywhere near what Madoff’s claimed. Furthermore, the volume and open interest of those financial instruments at that time, could not have possibly allowed to trade $10 billion which Madoff managed then. Trader who had run the test, informed SEC about possible fraud in number of filings. Not only were they ignored, SEC sought Madoff’s advice on securities fraud detection. Hmm. If they had done a minimal amount of forensic accounting, perhaps they would’ve discovered this Ponzi scheme earlier, but who knows. Seems like the scheme would go on much longer, but market’s fall caused many investors to try to pull money out. Redemption requests increased and Madoff, hard as he tried, was unable to coerce new participants for additional funds and threw in the towel. Had it not been for the current bear market, who knows how many more people would be swindled by him.
Overall “Scam of the century” was not bad, but somewhat less insightful than “Age of Wal-Mart”.
Before I closed the shop on Wednesday, I placed few buy orders in JPY crosses, in case markets responded to economic numbers from Japan.
Focus was on long Yen pairs, breakouts on 1H charts. Out of the 4 crosses, only one moved enough to trigger order, EUR-JPY. I turned the computer on about an hour ago, closed this one trade and that is all I did today. Felt good.
About 40 pips gain, but trade size was marginal, just a little play, not serious trading. Outside of that, very little happened and I think it was wise of me (for once) to stay out. I expect increased movement next week, but more about it over the weekend.
Mike K.
I watched it too. Faber does pretty good job in these special programs, although I find his normal show, the Faber report, too comercial. This, however, was worth watching.
Agreed on “Faber report”. But the specials he does are normally pretty good.
I have not seen the “Scam of the century”, but recall the one about Walmart. I really liked it. CNBC still replays it every now and then. If memory serves, they won some kind of award for it.
What amazes me is that nobody seems to know anything. All the people who worked for him claim they were in the dark. It is total bullshit. In order to send all these hundreds and tousands monthly statements, many people were needed. How is it possible that he did all this on his own? Lies, lies, everywhere.
I also don’t see how Madoff could have done it alone. Way too complicated. He may have been the demented brain behind it, but he needed plenty of help.
What about his sale force? The guys who were pushing his services? They knew what the strategy was and must have noticed it was not workable,not to the extent they presented to prospects. Unless he hired total morons, like the once pushing “Forex made easy”, they should have seen something was fishy.
Funny you brought up Forex made easy. Couple of years ago I went to one of their “seminars”. I described my impressions in earlier blog. One of these days I’ll post a link to it.
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