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The man who knew (CBS 60 minutes)

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(Update 04-30-2020) The below CBS 60 minutes link are no longer valid. But I found a CNBC video from Harry on GE (another ponzi scheme, I agree).

(Original 03-12-2009, note the market low on 03-05-2009) Harry Markopolos blew the whistle on Madoff long time ago. But sadly SEC did not listen. Here is the CBS 60 minutes video.

Harry did a mathematical simultation to prove Madoff is a crook. For ordinary investors, I think of the signs I mentioned earlier (too good to be true; 10% annual compound return is very hard to achieve etc.)

Watch CBS Videos Online

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This emperor has no clothes

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Cramer Stewart saga goes on.

Madoff will go to jail, for life. He deserves it. Just thinking how many people (esp. the older people) lives turned upside down because of his ponzi scheme.

How many clothes-less emperors still out there?

Lesson for ordinary investors
Refer to John Bogle, 6 lessons for investors. Get self educated: get a little finance and psychology lessons, so that one knows more than Dow (S&P should be the real benchmark), compound annual return of 10% is not bad at all, fear and greed etc.

I also think there are 3 types of financial advisors in money management business.

1) Crooks like Madoff and Allen Stanely: this is minority.

2) Most people fell into this category, mediocre. I remember one of my colleagues told me last Sept. his broker told him buy GE at around $22, because he thinks that’s a bargain price for a blue chip like GE. Oh well, we all know how it worked. Most brokers are people who passed series 7 or 63 tests, but have not much idea of accounting and finance. They learned about stocks mostly from CNBC or something like that. How can an average investor beat the market by listening to those guys (or ladies)?

3) The heros. Buffett was one (he had a partnership before the Berkshire Hathaway, in a broad terms, his Berkshire is still in money management business). Peter Lynch. Bill Miller (before 2007).

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Tang Wei Zhen: Chinese Madoff

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(Update 06-13-2020) The links below no longer work. This is one nature of the internet: nothing lasts forever. Here is a new article Tang Wei Zhen.

(Original) Tang Wei Zhen 唐炜臻 (company) claimed to be Chinese Buffett (as shown in the following 11’24” video, link here). But apparently he is Chinese mini-Madoff. Chinese story here (hutong9).

Couple points to spot warning signs:

Continue reading Tang Wei Zhen: Chinese Madoff

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All Ponzi’s disciples

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Madoff story continues to occupy the news these days (e.g., this one from NYTimes). Yesterday, Satyam, the No. 4 Indian IT outsourcer, broke the news with giant accounting scandal (BBC news, wiki: Satyam).

But the story does not end here. In my mind, there are many other ponzi schemes in our lives, and sometimes people just ignore it for various reasons (don’t want to face reality; irrational exuberance etc).

Big ones
Dot com technology bubble: new stock holder (trader) bail out previous stock holder (trader);

Housing bubble: new home owner (speculator) bought high from previous home owner (speculator).

Continue reading All Ponzi’s disciples