Daily Archives: December 12, 2008

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.

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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.

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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.

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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?

snow

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The end of the world as we know it

Tough times spur nannie firings.

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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.

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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.

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