Ok guys, reality check needed

[John Peterson]

Hey Friends,

I saw something on the Drudge Report that was hard to imagine, let alone believe. So Gordon My Friend, I'm sorry to be putting you on the spot, but you're the one person that I know that has worked in the finance industry so I'm addressing this to you more than anyone.

According to the Drudge Report a man by the name of Bernard Madoff, a wall street broker, embezzled more than $50 Billion out of his clients. And get this he told his son's that it was at least $50 Billion. Now this is something I cannot understand or fathom. Guys 1 Billion is 1,000 Million, so $50 Billion is 50,000 Million. Right? OK now follow my train of thought. In 10 years there are 3,650 days. So if this guy that took his investors for $50 Billion plus had spent $12 million each and every day for the entire 10 years there would still be several Billion left. So my question is, How could this possibly be true? How could he possibly be broke as he claims to have told his son's(who turned him in by the way), and where could the money have gone. And finally, Gordon do you think could possibly be accurate? It really seems bizarre to me. And if it is accurate, am I right that there may in fact be many, many other similar cases that have not yet come to light? Or do you think this is a highly unusual and isolated event?

Thanks for taking this seriously, because I am dead serious. If this ends up being true, how could anyone feel safe in investing on Wall Street?

---John Peterson

[Andy62]

John, That is absolutely true and I have been following it since the story broke. Madoff has been around for decades and bilked some of the smartest and most sophisticated investors in the world. He used a Ponzi format which keeps bringing in new investors to pay previous investors higher than normal returns- in his case about 3% per month or 36% per year. Human nature being what it is human greed sucks people in and egos make then keep their losses secret- nobody [particularly the rich and powerful] wants to admit that they have been outsmarted. Many wealthy and highly placed people are not that "street smart" as they have been raised in and live in isolated and protected environments. For that reason their friends and the people in their social circles become their intelligence networks for information and protection. Their strength is their weakness because as soon as someone is able to penetrate their defense network of social contacts these epeople become helpless and are facing the proverbial"fox in the hen house." Madoff in addition to being an excellent con man knew how to work himself through the defense networks of the rich and the powerful. He was reportedly an excellent skiier and went on ski vacations in Europe where he rubbed elbows with the European financiall elite and sucked them into his scheme. Unfortunately in addition to taking down many rich and powerful people he is also takng down many charities with him. Nobody really knows whether he is broke or has some very secret hiding place for his money.

[JoeJustice]

A billion here. A billion there. Pretty soon you're talking about real money.

-Joe

[John Peterson]

Hey Gordon,

Thank You. Now let me ask a few more questions. He supposedly confessed to FBI agents that he was guilty and that there is no way around it. If in fact, this man were to plead guilty, what do you think the implications in terms of sentencing him might be. In fact, I'm curious, for this type of crime what would you guess he might actually receive for a sentence? And finally, Gordon how likely is it that there are other almost identical schemes being played out with other guys like Madoff that have not yet come to public attention? Thanks for your answers Gordon. I really find the scope of this thing to be beyond belief. How do they get this stuff passed the scrutiny of the IRS and other agencies. It's just hard to belive that he could pull it off for so many years. Which brings up one more question. Why do you think he is getting caught now? Why did it take so long? Like I said. I'm fascinated by this.

---John Peterson

P.S. Joe, you've been hanging around with Yogi Berra for too long.

[JoeJustice]

I think we're going to be seeing a lot of this kind of white color crime in the not too distant future! I mean, how does it take $700 Billion to bail out the financial industry?! This guy is just the first.

-Joe

[Andy62]

The Ponzi Scheme is one of the most frequent of scams and is limited only by the imagination of the perpetrator. They are hard to detect and prosecute. I must have run into over 100 hundred of them during my business career. In this case I am sure the defendent will have the best legal team available,but just pulling a figure out of the air a jail term of 20 years might be a good guess. Madoff's operation was essentially a family business with a few outside assoiciates. Most of these guys have a "superman complex" with a need to show their superiority by beating the system The problem with a Ponzi Scheme is that ultimately they collapse under their own weight when new "pigeons" cannot be found. This may be the reason that it is becoming public at this time. Many do not issue audited financial statements to their participants. Madoff may claim to be broke now,but nobody knows who much capital has been syphonned off over the years and is hidden in some numbered account in some obscure underdeveloped country or whatever.



http://en.wikipedia.org/wiki/Charles_Ponzi

[Andy62]

Joe, I agree with you.Progrms set up by governments have flaws in the them which can be exploited. The subprime scandal was started by the government based on well meaning ,but politically and financially naive assumptions.

"Anything the Government touches turns to crap" Ringo Starr

[entrma]

John,

People like this are very smooth and usually smart. As long as they have more money coming in
than going out (robbing Peter to pay Paul) they can stay afloat. In recent year the various
regulatory agencies (SEC/IRS) etc have been underfunded big time and are losing large numbers
of experienced emplyee's to retirement who are not replaced (I am a retired IRS Auditor).

People like this are usually uncovered via some extraordinary economic occurance. In this case
too many investors wanted their money back immediately due to other financial needs. In addition,
at the expense of being considered biased the the person involved was Jewish as were many of
the Charities who invested their money with him.

Eric

[Andy62]

One analyst commenting on the current international financial crisis said,"The great 20 year worldwide ponzi scheme is over."

[JoeJustice]

Oy vey, Eric! I don't see where being Jewish has anything to do with this. I'm sure you could find all kinds of non-Jewish crooks involved in this mess. Unless I'm missing something?

-Joe

[MikeNY]

On Fox business News Saturday Morning they said this guy had Accounts and was examined by the SEC. That makes it all the stranger, he was even fling forms with the SEC. 36% a year is impossible to get, Warren Buffet couldn't even try that. If it sounds too good to be true then it is fake. Yeah the guy hurt the Jewish Community big time, many rich folks just lost a ton of money and well as Hedge Funds, Banks and all his investors. Some of the Banks oversea's leveraged his funds 3 to 1! There is nothing left and nothing to recover, so he owes 50 billion dollars.

[John Peterson]

Well guys I didn't take what Eric said as a slam against Jewish people as much as he was stating that this man had targeted a large number of Jewish people, which makes sense to me in that I think it would be easier for a Jewish investor to believe in and trust a Jewish broker. Now friends please don't give me any flack on this because I have many Jewish friends and even have some Jewish blood myself. So trust me, I am not the least bit anti-Semetic.

---John Peterson

[JoeJustice]

Ahh, the guy took advantage of the Jewish community. The way Eric wrote it just made didn't come out right. No worries.

-Joe

[Andy62]

It is very typical for conmen to ripoff their own ethnic and religious groups first because that is where their greatest influence and connections are.

[HE LIVES IN MY HEART]

The 36% rate of return on investment is overstated. Madoff’s typical returns were in the 10% to 20% range, usually around 12% a year, year in year out. Madoff’s investors were so pleased with his performance that they rarely withdrew large chunks of money from their portfolios, they were more than happy to let it sit and compound year after year. That’s why the Ponzi scheme worked so well - the new money that was coming in was always enough to take care of current redemptions. What that means is that if you were invested with Madoff and needed to take some money out, it wasn’t your money you were getting back, it was a new investor’s money (this is what the SEC complaint alleges). However, with the turn in the economy this quarter (and despite the fact that Madoff’s claims that he was maintaining his ever consistent rate of returns) many of his clients needed cash and requests for $7 billion in redemptions came in during December (per the SEC complaint). That’s where the Ponzi scheme fell apart, there was no way he was able to honor those requests and the house of cards fell apart. It’s ironic that the thing that did Madoff in was not the SEC, but the downturn in the economy. If the economy was still strong he’d still be cruising along! What is most disturbing is that he is in a heavily regulated industry. The SEC appears to have been asleep at the switch. Dealing with the SEC and complying with all their regulations is an arduous task. One begins wonder what purpose government regulation serves when something of this magnitude, which is so blatant can occur. As John said, how can anyone feel safe?

$50 billion may seem like an exaggerated number to many people, but given the circles that Madoff traveled in and the many bright, hardworking entrepreneurs that trusted and invested with him, along with the many charities that they helped to build up and support, $50 billion is not unreasonable

Government in this country keeps getting bigger and more expensive every year, purporting that it is necessary for the public good. It seems that when you real need it, it's useless. A reality check is indeed in order.

[Andy62]

You can't have a more heavily regulated industry than the banks. The company that I retired from was a bank and we always had auditors in. The problem was that the politicians had the auditors and the whole lending industry intimidated into making loans to people who would not have qualitied except for the "social engineering" of the the Politicians. President Elect Obama will soon find out that the President doesn't have that much power. Just as Wall Street went around President Bush when he warned about the excesses in lending in 2003 and funded the politicians through their lobbyists the same thing will happen to Obama.

[JoeJustice]

I think Swoboda was involved in some bad investments. I don't know that he was ever imprisoned for fraud, was he? Or even arrested?

There is a good chance he used his connections to get money for investments. But a lot more that Swoboda students lost everything in the 1929 crash! As a matter of fact, I watched an depression era movie not too long ago called Our Daily Bread and in it the main character had lost everything in oil investments and his wealthy father-in-law was chastising him for trying to get rich quick. I think that oil investing cost a lot of people their living, I think that was the most common investment to destroy people's finances.

All that said, I don't think that diminishes Swoboda's place in Physical Culture. If you look at a lot of those early guys they have some shady things about them. Like Bernarr Macfadden starting his own religion, for example.

-Joe

[gruntbrain]

It has been suggested that Chris Cox, the SEC head, deserves the Plaxico Burress award & a lifetime membership in the Wall of Shame

[Andy62]

I think that Swoboda was a giant. I really didn't learn that much about him until I had experienced life and that is good because I could put his teachings in the perspective of my real life experiences. He never wrote a book as his teachings were individual -he really acted as a personal trainer teaching through mail order. What remains of him are his ideas from a number of scattered sources. Yet ideas really express the essence of a person and if they are relevant they will out last the individuals stay on this earth. Swoboda's main message was that we live in a changing universe,but the creator of that universe has given to us as human beings the potential to adapt to those changes through personal ,conscious, evolution. His teachings embraced not only how to use these gifts to develop our bodies but also how to develop our minds as both are equally important. In other words he showed us how to be participants in life and not just be observers and critics of life and to take the risks that make it possible to turn our desires into reality. Unfortunately, or maybe fortunately, we have seen certain people visit this site recently who represent the observers and the critics of life without the courage or the risk taking ability to take the action to bring their desires into reality. In place of the courage they use critiscism of others who possess the strength that they lack. Swoboda taught that we have great control over our lives and we have the ability to adapt,but there are also random events in the world that affect all of our lives that we as individuals cannot control. The fact that we fail is not as important as the fact that we took the risk to try and succeed and infact the stress caused by the failure can actually speed our evolution. In the process of our development I personally believe that life belongs to the risk taker and that God loves the risk taker. I think Swoboda's philosophy of life is best described by one of his students Theodore Roosevelt who said, "Far better is it to dare mighty things, to win glorious triumphs, even though checkered by failure... than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory nor defeat."

[John Peterson]

Hey Guys,

Swoboda was a giant in the Human Potential movement years ahead of his time. Every one of us here knows this to be the case. The man was a genius and was the inspiration behind Charles Atlas, Napolean Hill, Norman Vincent Peale and many, many others. Gordon and I have no apologies to make for acknowledging Swoboda's brilliance.

Now, as many of you know there was another person that tried attacking us here on Gordon's forum(Using Swoboda) and also on my forum. This man came to our forums to argue and try to engage us in argument for arguments sake as only a certain type of individual will do, and not to add anything even remotely positive to this thread. Obviously, guys like him come here in.order to make it appear as though all we do is argue at our forums. And since this is the case, guys like him will be immediately banned and their comments completely removed. I will not indulge or tolerate any of these malcontents at this or any of our forums. Such people are not and will not be allowed here and you all have my word on that. These kinds of individuals with their stupid and negative rhetoric do not deserve to be heard and will not be given voice here. And believe me friends, there is nothing that gets to a fool more than to know that he will not be given voice or indulged in any way.

----John Peterson