I read in the WSJ that the Madoff funds involved a lot of puts and calls. Correct me if I’m wrong, but isn’t that the kind of speculation that cost the public so much in the way of gasoline prices? Anyway, speculation is gambling. People shouldn’t gamble if they can’t afford to lose.
Madoff’s scheme was the classic Ponzi scheme. As long as “new” investors were being added to the bottom of the pyramid, to keep feeding the “top” of the pyramid with high rate returns of 10-16%, things were “fine”.
But, then the economy went south, investment houses, banks and corporations started failing. People got nervous, and rightfully so, and wanted to pull there money out of the market and put it somewhere else, like T-Bills. Madoff’s customers were no different. They tried to pull $7 billion out of his pyramid. That’s when it collapsed! There was no $7 Billion to be pulled out! In fact, there was a whole lot more than $7 Billion that couldn’t be found, maybe as much as $50 Billion! That would be the biggest swindle in history! Where did it all go? To the early “investors” as dividends on their deposits. That’s the point of the negativity on a lot of these FR comments. This lady’s dad was an early “investor”. He got his money back in the 10 years he drew from his account, plus the 5 years she and her siblings have been on it. So for 15 years, they have been living off the other people’s money, though they did not intend to do so, nor did they even realize it. Their “original principle” of $400k is gone. But they fail to realize that what they actually have spent that money and then some all these years................