Fairfield Greenwich Group

The gift that keeps on giving:

“We are shocked and appalled by this news,” said Jeffrey Tucker, founding partner of 

Fairfield Greenwich Group. “We have worked with Madoff for nearly 20 years, investing 

alongside our clients. We had no indication that we and many other firms and private 

investors were the victims of such a highly sophisticated, massive fraudulent scheme.”  

From what I can see, the “highly sophisticated scheme” consisted solely of an inability to explain Madoff’s trading strategy and endless repetition of the mantra, “look at the return history”. When a crook employs a 78-year-old man who spends most of his time in Florida to “audit” $50 billion of assets from a strip mall office in upstate New York, when records are not revealed to anyone and no proof that assets even exist provided to investors, I’m not all that impressed with the guy’s sophistication. I think, instead, that billions of dollars were passed on to him by lazy, stupid people too intent on their own management fees to bother looking at where their clients’ money was going or how it was being safeguarded. It’s enough to tempt me to dust off my license and get back in the game.

How is it that when I hunted wicked people down on Wall Street I mostly dealt with thugs and morons, while friends of mine who worked in the industry were bright, honest people? What I guess I’m asking is, who turned over the monkey house to the inmates? I used to chide myself for being a jealous dolt when I questioned the wealth being generated down there and for thinking that these guys were just moving electrons around on a screen and producing nothing of value. I was obviously too stupid to recognize their genius. But it turns out, the bright, intelligent people I knew weren’t running the show and people like Dickie Fuld were – a man who collected tens of millions of dollars every year for overseeing a business he has admitted he knew nothing about, no idea of the risks his company was subjecting itself to. Same for Merrill Lynch, AIG, and probably (almost) every other investment bank and financial firm on the Street. Were they all run by idiots? If so, how did that come about?

All of my bright, sophisticated readers who know anything about this are welcome to shed light on the matter – it’s beyond me.

Good advice from the Washington Post

Ann Landers for homeowners. 

I particularly like the pithy wisdom at the end.

Q: I’m thinking about putting my house on the market. It’s not a necessity, but we want to trade down to something less expensive as we are getting older. Should we put the house on the market in spring 2009?

A: If you can wait until 2010, you might sell your home faster and for more money than if you put it on in the spring, as the recession is getting deeper.

There is a downside to waiting, though: As prices rise, you may pay a little more for what you’re buying, in addition to receiving more for the house you’re selling. But I’d want to sell the bigger asset at a higher price and buy the smaller asset for a little more money because the differential will be less on the cheaper property.

As my mother, a top real estate agent in Chicago for more than 25 years, often says: You’re never going to sell high and buy low at the same time.

Is hogsh.. biodegradable?

An article written by a flack flogging his book on the subject and presented by MNBC as a legitimate news item claims that there’s money to be made in marketing “green” homes. Like every other story I’ve seen on this subject, the proponents are long on assertions of a growing market and an increasing willingness of home buyers to pay more for eco-friendly houses but short on any supporting data. I just haven’t seen that here and I believe it’s a myth, perpetrated by the National Association of Realtors, in part, to push its new “eco-educated” agent designation program.

“in real estate, the goal is to have something to talk about,” [agent] Bartle says. 

Mr. Bartle has just confessed the real reason for this new buzz.

The real estate market’s just fine in Hattiesburg, Missouri

Or so say its realtors.

That was the point drummed home by various real estate professionals at a meeting of the Hattiesburg American editorial board Wednesday. In attendance were Adam Watkins, president of the Hattiesburg Association of Realtors; Dick Munton, president of Prime Mortgage; developer David Thompson; and area real estate agents Debbie Sinopoli and DeLois Smith.

While national news outlets have been reporting alarming housing trends, they vigorously argued Hattiesburg does not reflect these conditions.

Emphasizing that local economic conditions play the largest role in any market, Watkins stated that Hattiesburg, with its autonomous employment sectors, can weather difficult economic times and continue on a path of moderate, stable growth.

Well that must certainly have been reassuring to local homeowners and would-be buyers. It’s just unfortunate that the article concludes with this little concession:

So far, that message has not sunk in.

“I have been through many periods of time when the confidence is low,” said real estate agent DeLois Smith. ”But I’m not sure I have seen one that is lower than it is now.”

I knew we shouldn’t have invited DeLois to that meeting!

Update: Reader Hiram insists that Hattiesburg is in Mississippi, not Missouri. here’s a picture of the town – look like Mississippi to you?

The end of the world as we know it

Tough times spur nannie firings.

Ah, about that due diligence…

One of the biggest suckers  victims of Bernard Madoff’s Ponzi scheme was this town’s own Fairfield Greenwich Group. They claim to perform extensive due diligence before entrusting clients’ funds but I think those defrauded investors can’t be blamed if they wonder exactly how extensive that investigation was.

Update: Apparently the fund had $8 billion of its $14 billion entrusted to Madoff. Can you spell bankruptcy?

Update II: I’m also hearing that the town of Fairfield, CT had 15% of its pension fund invested with the guy. Can’t confirm that yet but if true, it won’t help our sister city’s mil rate.

University endowments tank, thanks to Yale

Reader Tom K sends along this link to an article discussing how Yale University set the model for endowment investing and how that’s worked out. I notice that the economist who first suggested the investment strategy was James Tobin, a Keynesian who proved his mentor’s point about the long run by dying in 1992.

Here you go

5 Raymond Street, Old Greenwich

This is a very nice house south of the Village, renovated not long ago. The current owners paid $1.625 for it in May, 2004 and listed it again this year for somewhere well above $2.0 million. They’ve taken a couple of price cuts since then and today they dropped it to $1.650. $25,000 more than 2004 prices may still be too high – who knows, these days? – but I call it a realistic price for a good house in a good location.

But they promised such nice returns!

Turns out that Madoff’s investment fund used an auditor from New City, NY. The “firm” was located in a strip mall and the only person seen entering its 13X18 office, occasionally, was a guy in “tight pants and tie-dyed shirts”.

One investment advisor to hedge funds investigated this situation and warned its clients not to entrust Madoff with money. Everyone else with a few billions to lose apparently didn’t want to know, just as long as those great investment returns kept coming in.

According to Bloomberg,

Friehling & Horowitz operates from a storefront office in the Georgetown Office Plaza in New City, sandwiched between a pediatrician’s office and another medical office. An office for the Rockland County Bar Association is also in the building.

A woman who works in a nearby office, who didn’t want to be identified, said Friehling doesn’t come to the office regularly. When he does, he is the only person there.

Another woman in a nearby office, Leslie Cousar, said the man who comes to the auditor’s office does so for 10-to-15 minute periods, and wears tight pants and tie-dyed shirts. Cousar said she never saw anyone else going to the office during the day, but at about 5:30 p.m., another man would show up and use the location.

“He’s in and out of there,” Cousar said.

There is a bright side to this: New City is right across the Hudson from Ossining, home of  Sing Sing. Maybe Bernard Madoff will be able to wave to his pal in the tight pants.

Some folks still don’t get it

There’s a price reduction today – no need to single out this particular homeowner because he’s no different from so many – that still leaves the house $500,000 higher than it was when it failed to sell in 2006 – $2,050,000  vs $1,550,000. I see no evidence that the current market will support 2006 prices, let alone an increase of more than 30%. I base my opinion on the latest sales statistics – where is this seller getting his numbers?

Here’s what I’m talking about

I mentioned a new house on Circle Drive yesterday that’s asking $2.195. It’s a nice enough house but I noticed a number of similar houses going up on both Circle and the adjoining street, Morningside and suggested that there might be a bargaining opportunity here.

24 Morningside, for instance, looks about the same as the Circle Drive house to me, although the two builders would surely disagree. Both are priced at $2.195 and right next door is another house, 20 Morningside, a little bit larger but four years older, asking $2.295. There are other houses nearby that aren’t on the market yet but, judging from their progress, will be within the month. So if I were interested in this area I’d either wait until everyone’s finished and clamoring for my business or stop by now and try to strike a direct deal with a nervous builder. That’s what I’d do, anyway.

How do you not sell Greenwich waterfront?

Well, pricing it too high is a good start.

55 Binney Lane

55 Binney Lane in Old Greenwich has just been withdrawn from the market after testing the waters at $16.8 million and then $14.8 million. It’s an old house but it sits on an acre of direct waterfront with its own dock and beach. Someone would have bought it long ago if they hadn’t been scared off by the price. My guess? Had it been listed at $10.5, it would be long gone. Of course, the heirs may not have wanted to sell it for that price in which case, they can look forward to enjoying that beach next summer.

I could have told them where to look

Oldest Fossilized Brain Found

Speaker of the House, Nancy Pelosi

A Buyer’s Mindset

Although I’m not involved with the deal, I happen to know both the buyer and seller of 2 Old Stone Bridge, reported as under contract yesterday. The seller’s convinced the buyer “stole it” – the buyer’s convinced that the market’s still got a long way to fall but he needed a house, held his nose and went ahead with the deal. I think the buyer will eventually do well with the place (I can report the selling price Monday, when it closes) but regardless, his comments illustrate what’s happening out there which is, unless a buyer really truly needs to buy, now, he won’t, and even then, he insists on paying a price that the seller feels borders on the criminal.

So if you’re a seller, I suggest that you not sell now unless you really truly have to and if you do, prepare to be unhappy with the price you get. Of course, if you, like my buyer/friend, are convinced that the market will continue to plumet, you may want to sell now to avoid the debacle. Your choice.

There goes our scandal (maybe)

According to the Wall Street Journal,

Bernard L. Madoff, a former chairman of the Nasdaq Stock Market and a force in Wall Street trading for nearly 50 years, was arrested by federal agents Thursday, a day after his sons turned him in for running what they said their father called “a giant Ponzi scheme.”

Our claim to fame evaporates if the sons who live in Greenwich weren’t involved. Oh well, we’ll always have Dick Fuld.

Update: According to this second Wall Street Journal article a lot of hedge funds had a lot of money “invested” with Madoff so brace for more losses. The article seems to imply that investors should have known better than to trust the numbers Madoff was spouting but if so, what about Madoff’s officers and employees? If their own trades weren’t generating the kind of returns Madoff reported, did they just assume that some colleague was taking up the slack? Did they ever talk to each other?

(Another) Greenwich scandal?

Wall Street trader Bernard Madoff busted for multibillion-dollar fraud.  

“On Thursday morning, this consummate trader, Bernard L. Madoff, was arrested at his Manhattan home by federal agents who accused him of running a multibillion-dollar fraud scheme — perhaps the largest in Wall Street’s history.”

Berard Madoff apparently lives in Manhattan but Greenwich tax records show a number of Madoffs living in town, including an Andrew and a Mark. The Times reports that Bernard has two sons with those names who ran the company with him. Same family? I don’t know but if it is, I’m sure we’ll hear about it soon.

Update:Sure enough, there are fraudsters afoot and Greenwich’s got them. Our real estate market may have lost some of its lustre recently but we continue to lead in scandals. Leona and her tax problems, Frankle  Frankel and his sorry Russian whores, Andrew Kisslsel’  Kissel’s spectacular murdersuicide, Dickie Fuld’s machinations at Lehman and now this. All due respect to Mr. Fuld, but what a piker – the Madoffs made away with or lost $50 billion – Fuld just didn’t know how to go big. But all in all, it’s enough to restore some hometown pride in this Greenwich native.

Another thought:

From the NYT :

Competing hedge fund managers have wondered privately for years how Mr. Madoff generated such high returns, in bull markets and bear, given the generally low-yielding investment strategies he described to his clients.

“The numbers were too good to be true, for too long,” said Girish Reddy, a managing director at Prisma Partners, an investment firm that invests in hedge funds. “And the supporting infrastructure was weak.” Mr. Reddy said his firm had looked at the Madoff funds but decided against investing in them because their performance was too consistently positive, even in times when the market was incredibly volatile.

So how come no one blew the whistle on these guys? How come the regulators didn’t catch them?

And at Christmas time, too!

Antares boys stiffing non-profit community center on rent.

It sounds like a situation caused by the confusion of Antares being shoved off its Stamford project and the boys’ subsequent loss of interest in resolving debts due from their former involvement, but $13,000 isn’t all that much to straighten out, is it? Perhaps it is – The Stamford Advocate reports, 

Over the past decade, Antares was known for ambitious projects that attracted billions of dollars in capital from investors such as Lehman Brothers and Goldman Sachs. But the company has in the past year suffered widely publicized losses on residential properties in Greenwich.

Legal problems have followed. There is a long list of pending lawsuits against the company, with plaintiffs such as investors and contracting companies.

Community centers wil just have to get in line, I suppose.