that there were other Wall Street firms which used the same strategy he claimed to be using (a strategy which, we now learn, is claimed to be a common garden variety strategy on Wall Street), but who could not replicate his results;
that even though his strategy made sense in principle, and was said by some knowledgeable persons to be plausible in principle even after he was caught, Wall Street insiders who were mavens in mathematics and derivatives maintained that -- however plausible in principle -- his results were statistically impossible in practice and this could be (and was) shown by the spreadsheets of the experts.
That many of us small fry victims, I would bet, like me, did not even know Madoff was running money for hedge funds and banks, but instead thought he was only investing for a relatively small number of persons who initially had been confined to some friends, relatives and long time investors -- just as ironically, and in reverse, even Harry Markopolos, if memory serves, did not know he was investing money for small fry, but thought he was investing only for hedge funds, investment banks, and some extraordinarily wealthy individuals. Such lack of knowledge is the result of the secrecy and non-transparency of companies like Madoff's -- of so-called hedge funds (I insist, as I wrote early-on, that for a number of reasons Madoff's was not truly a hedge fund but everyone else calls him that) -- which Congress and the SEC allowed to be secretive, a secrecy and consequent fraudulent disaster for which Congress too bears responsibility because it permitted the secrecy and nontransparency.
So there are a host of reasons -- including some I have not mentioned here but have previously discussed extensively, such as the understandable belief that Madoff was a conservative investment, a relatively low earning and a highly taxed investment when compared to the mutual funds, stocks and hedge funds so prevalent on Wall Street in the 1990s and 2000s -- why the small fry could have no idea that something might be rotten in the state of Denmark, as Shakespeare once said. Speaking for myself, but speaking for lots of other small fry too I'm sure, I can say that had I ever obtained any inkling that there were not enough options in the world to cover the huge trading in securities that Madoff supposedly was doing -- trading of an amount completely unknown to those of us who had no idea he was running money for huge funds and banks rather than just investing for relatively small circles of friends, relatives and long time investors -- then I would have been out of Madoff entirely, or at minimum would have drastically reduced my investment with Madoff, in the proverbial New York minute, after attempting to verify but being unable to verify that he was covering all his trades with options, as he claimed to be doing. For I (and others) understood -- as one can see from early writings here that quoted what I was personally told by Frank DiPascali -- that the options were central to the claimed strategy, and that without the options there was not a conservative strategy, but only non-conservative bets by Madoff on which way the S&P 100 would move.
If one could not verify the use of options to cover trades, the strategy that had attracted us was false, made no sense, and one should have, and I would have, fled or at minimum greatly reduced my investment, would have cut it by three-fourths or more, as soon as it became clear that the options were not being used. (The only reason for keeping any part of one's investment in Madoff, as illustrated below in connection with James Simons, is that Madoff appeared to have a long track record of success whether he was covering all his trades with options or not, and he had been given a clean bill of health by the SEC -- although by the late 1990s one might have wondered whether at least the 1992 encomium from the SEC was out of date because Madoff could conceivably have secretly changed what he was doing somewhat since 1992.)
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