Dr. Stephen Greenspan is an expert on why people behave foolishly. That what makes his role as a victim of the Madoff Ponzi scheme so informative and ironic.In a lengthy op-ed in the Wall Street Journal, the emeritus professor of psychology at the University of Connecticut, Greenspan argues that even highly educated people can become victims of a Ponzi scheme. The architects of these frauds tend to be personable people adept on playing on the insecurities of their clients.
Greenspan did not invest with Madoff directly. Like many victims, he gave money to one of the so-called "feeder funds" after listening to a pitch from an acquaintance of his sister and brother-in-law. He argues that Madoff's lies were not obvious or easy to recognize. Heck, the SEC couldn't figure out what Madoff was up to even though it was given a pretty clear road map. Let's hope Congress can get to the bottom of this in hearings later today.
"In my case, I was excited not by the prospect of striking it rich but by the prospect of having found an investment that promised me the opportunity to build and maintain enough wealth to have a secure and happy retirement," he writes in the paper. A friend tried to talk him out of the investment but Greenspan would not listen.
I am not looking to blame the victims of the Madoff scandal. Losing your life's savings must be devastating. But you have to wonder how these people thought they were making money year after year, in good markets and bad markets. Did they think Madoff was a genius or did they just not want to know?
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Reader Comments (Page 1 of 1)
1-06-2009 @ 1:51AM
BHarrison said...
A basic investment principle is "DIVERSIFICATION" of investmentss with no more than 5% - 10% in any one investment to limit one's risks, right.
So, I really cannot have any sympathy for those who violated this basic investing principle. They knew, or should have known, the risks that were involved in violating this basic principle. And the Madoff scandal emphatically proves the point.
Yeah, it is a matter of being in the wrong place at the wrong time; but that is why diversificatin is so important. The "GREED FACTOR" comes into play by having violated this basic principle; and having invested a substantial amount or ALL of their capital into Madoff's funds.
There are NO ABSOLUTE GUARANTEES or "sure things", not even in the Blue chip stocks (do those even exists anymore?) Investing in the stock market has been PROVEN to just be another form of Las Vegas "gambling", where "the House" wins 90% of the time IN THE LONG RUN.
All of this is just another "lesson" to all of those who had become intoxicated with the dazzle and promises of the "phony economic boom times" . . . now it is back to the hard reality of it all. The basic principles of economics hasn't changed . . . the basic principles are still applicable; everyone just got carried away with all of the gamesmanship of the con men . . . the CEOs, the brokers, etc.
This economic debacle is a "lesson" as to why it is critically important that Congress maintains the regulation and oversights to maintain the INTEGRITY of our economy. When, as we hae seen and are experiencing, Congress loses of this reality, then FRAUD becomes rampant throughout our business enterprises.
1-06-2009 @ 7:47PM
Bill Kear said...
To Afortini,
I did not know madoff but I was suspicious.
I don't reveal my clients, or their positions. My grand father built Kear street
but that does not mean I have been working with Soros. I swam in Nashes pond and(glendening) Dalio and Devils den, so what are you implying?. I can
go up against Jim Rogers? afortini, I will give you some trades for 20%.
but I don't like the implications.
I was using reflexive principals since 1985 when I traded crude oil at
Heinhold.
I didn't meet michael Marks until 2001.
I do all my own research and have some quants look it over.
Bill Kear.