Saturday, December 20, 2008

Adios, Hermes

Here's a first person account of a rich lady (and well-known author) who lost every cent to Bernard L. Madoff. 

I don't want to comment much, not to influence you before you read. But I'll say this: I never expected the article to leave me feeling so extraordinarily ambivalent. It is, I believe, a masterpiece...however unintentional.

1 comment:

joshi said...

there are so many things to say here, but i'll try and keep it brief.

capitalism relies heavily on trust. in our contractual based society, we trust that people keep to their side of the bargain - and indeed, most do: our courts are filled with a vanishingly small number of cases where somebody reneged on
their part of the deal.

i was a trader at goldman, sachs and i remember being astonished that our phones weren't recorded. we're transacting millions of dollars at a pop over the wires and there's no record?! your word is your bond my rabi said, and thus we carried on, remarkably free of dispute.

which brings us to madoff. his sin was against the way we lead our lives, but there were enough clues around to make us tacitly complicit if we kept believing his lies.

if you manage a risk trader and that trader always puts up positive returns, you must ask if the trader isn't taking enough risk. if your strategy is that good that it leads to no down months - then risk more! the down months should be more than paid for by the extra return in the up months if the strategy is sound - its how well you manage the down months that you provethe efficacy of what you do.

investment professionals are taught to steer between the scylla and charybdis of greed and fear. madoff provided positive returns no matter the state of the market - and that is impossible.

madoff betrayed our trust in broad daylight; alas, we must share the blame.

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