Dec 21, 2008

How smart are your Financial Advisors

It's been a little while since this Madoff thing blew open, and even now it seems a bit unbelievable to me. Over the years, we have all read about Wall Street and how great it is to work there and how much money investment bankers are making etc. I heard anecdotes about 30 year olds making $2M and $3M. All sounded quite good, and impressive. And I thought that these guys must be really smart, and deserve all the success.

Then, came the financial crisis, and the TARP. $350B of tax-payer money doled out, and no real followup. Every time we have these Treasury TARP guys on TV - Paulson, Kashkari, etc. -  they come out looking like dolts, who gave away $350B and don't really know where the money went, or what the tax-payer got for it. Anyone else have a job where they can get away with being such incompetence?

And the arrogance on Wall Street continues. 'We must give bonuses, or people will leave'. Leave for what?? Where will they go? I say if they want to leave, let them. Its not like they did a very good job. Oh yeah, and we all gave crap to the Auto execs who came to DC in their corporate jets, looking for federal help. This included Senators who gave them hell for that. But, how about the execs in the financial industry? They are still flying Air Corporate - AP story via Yahoo Finance.

Now, throw in Madoff and his $50B scam. We hear about these 'funds-of-funds' who have invested in Madoff's scheme and lost big. Well, supposedly these funds were being run by professionals. Yeah right - some professionals. I saw this article on the Fortune website, by Nicholas Varchaver. He makes some pertinent points here. Madoff's investors did not include any large univerisity, or large institutions. He quotes widely from LJH Global Investments guy, who points out that there were tons of red flags about Madoff's operation. He pointed out that these were clear as day in 1997. 1997!! So, given that, how come these so called professional managers of funds fell for the ponzi scheme?

I think that investors who lost money because the funds they invested in, turned around and gave the money to Madoff, should be able to sue their fund managers for gross business misconduct. 

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