Monday, December 15, 2008

Pyramid scheme: Wall Street style

When they caught the owner of this company he didn't even deny it wasn't a Ponzi. He had been promising a guaranteed return of 11% per year which in itself should have raised a nonsense alarm bell because you can't guarantee gains in a stock market.

Appropriately for his name, he has really Mad (e)off with his clients money. The list of his victims reads like the who is who in banking:

  • Santander-one of the few strong European banks, has been buying up falling UK banks on the cheap
  • BNP Paribas
  • HSBC-May yet have to do rights issue if this carries on
  • RBS- now knowns as UK National Bank
  • Unicredit-Italian bank
  • Nomura-now known variously as Lemura or Nohman after buying half of Lehman Brothers
  • Man-One of the largest futures brokers and investment managers in the world
  • Reichmuth & Co-Among other Swiss private banks that gave Madoff $4bn+
  • Any self-respecting new yorker who was filthy rich and wanted hedge fund blagging rights

Its been the kinda of year that would make any self-respecting banker keep schtum about how he earns a living. The key learning for any stock market investor in anything apart from govt paper. Avoid anything you don't understand. If it looks like gold, glitters like gold-its still not gold...

No comments: