Bernie Wins His Last One

Many in old age fear the uncertainty it brings, but at 71, Bernie Madoff has that licked – with a 150-year federal sentence for running the biggest known one-man Ponzi scheme in American investment history, he’s certain of medical care, enough to eat, clothing, and shelter for the rest of his life.

Astute as always, Bernie is buying that sentence at far less than face value since the actuarial buzzards have him on the menu in roughly 13 years. Although he founded his firm in 1960, he’s been quoted as saying it went Ponzi in 1991, so the trade is more than 18 years of fabulous wealth, fame, social standing and respect for him and his family against around 13 years of old age in prison. Buy low, sell high.

And yes, there may be others coming under a judge’s gavel, as authorities wonder how those close to him could have not known or suspected the scam. And his wife, Ruth is reportedly feeling “betrayed and confused” while courts strip her assets down to a paltry $2.5 million, but even if that amount is barely more than the value of their boat, it still isn’t bad.

If he were a betting man, Bernie could bet that few of those prosecuting, convicting and supervising him have wives with $2.5 million in assets. But Bernie’s not a betting man, because he didn’t invest funds from his clients in the market – always a sort of casino – he invested them in himself, which was and remains a sure thing.

Of course, Bernie’s being a non-betting type can really be seen as just nothing more than a service-oriented businessman catering to the needs of clients who wanted to out-perform the market, clients who wanted a sure thing.

And so Bernie gave them a sure thing. Years of double-digit returns, no matter what the market at large was doing, only reinforced the notion that while the rubes were picking stocks on the advice of their horoscopes and in-laws, an astute and select few were able to profit from Bernie’s extraordinary wisdom.

And it was a select few. Not just anyone could enter Bernie’s World of Magical Returns. You had to be invited and recommended, kind of like the country clubs where it never occurs to those who play golf badly for $50,000 in membership fees that they could play it just as badly on a public course for $50.

Of course, some of those playing with Bernie were doing it with money from others who never really had the backgrounds to doubt the returns on official-looking computer-printed account statements. Even the Securities Exchange Commission, which was supposed to have the background, ignored years of repeated complaints.

And although losses in the high billions of dollars were shouted about when Madoff was arrested, untangling actual money invested and lost from the snarl of imaginary profits reinvested in imaginary securities for imaginary returns makes any figures uncertain for some time to come.

Just this remains certain. The only one who probably actually made money here since 1991 was Bernie Madoff – and he didn’t do it in the market.

###

Stock Market Reporting Explained

 

Stock market indicators go up and down, economies quiver and governments rise and fall, as journalists tell us what “the market” was feeling and why that made the numbers come out the way they did.

 

Since the New York Stock Exchange alone has 2,000-odd traders, not to mention those in other exchanges, many have been puzzled at how journalists take the emotional pulse of so many, or even a big sample. If an intrepid journalist talks to a different NYSE stock trader every two minutes for the entire trading day, that’s still a shade less than ten percent of those trading.

 

Which doesn’t even take into account all the other good folk who are busy buying and selling shares elsewhere.

 

Yet, one trusted source can report that there are “worries that the market may have moved too high, too quickly over the past two and a half months.” And another journalism leader can tell us that worries about the Brits and “…less positive economic signals from the United States dented investor hopes Thursday that the world’s largest economies will show much vigor in the near term.”

Still another maven says  “optimism about a global economic recovery was tempered,”  and warns that “The tone on Wall Street turned bleak…,”  plus “The gloom was exacerbated” at the news that Standard & Poor’s may cut the United Kingdom’s  rating because of debt levels.

A different oracle says that the Brit’s potentially downgraded “credit ratings stoked fears about the state of the global economy.”

These and other market journalists are clearly very closely in touch with the psyches of stock traders and other market players. They not only know what they’re feeling, but why.

And these traders feel a lot. Most of us over the age of 20 don’t lurch between optimism and gloom in the course of a week as we drive our dented hopes to get our fears stoked. Yet stock traders must be so in touch with their feelings that their feelings have filed class-action harassment suits.

 

But there’s an alternate explanation. Go watch a group of kindergarten kids at play. They talk constantly to each other, as they both direct and act out parts in their make-believe epics.

 

“I’m gonna be the sheriff, and Joey’s gonna be the bad guy,” Billy says, to which Susie adds “and I’m going to be sad that Joey’s bad, because he’s my boyfriend,” while Joey declaims “I’m not gonna be no girl’s boyfriend! Let’s play something else!”

 

Market journalists overhearing that exchange would write “Prospects were mixed today in spite of strong planning statements from two key players as a third of the action vowed to sit things out until the situation changed.”

 

And if the little kids continue their squabble until an adult intervenes and asks what this is all about, the little kids will all say “I dunno.”

 

Market journalists, alas, will not.

###