Tomorrow’s WSJ (on line tonight, obviously) has a short article explaining why Madoff’s trading “strategy” couldn’t work. This neither hurts nor helps Bernie because the feds have figured out that he wasn’t trading anything at all, but he said he was, and that makes Walt Noel’s Fairfield Greenwich Group all the more vulnerable to charges that they willingly turned a blind eye to their money maker’s scam.
The other red flag easily available to investors was the shallow volume in the options Mr. Madoff claimed to use as a hedge.
About $3.25 billion of stock could have been protected by the total S&P 100 options outstanding at the end of November, according to the Chicago Board Options Exchange. Mr. Madoff was thought to have had as much as $50 billion under management.
A review of open interest in S&P 100 contracts showed that nobody owns more than 6,000 contracts at any single strike price, according to FactSet.
“All it took was simple math — ‘What’s the open interest of the S&P 100 option, and how many trades does he say he’s making?'” said Joe Kinahan, chief derivatives strategist at brokerage thinkorswim.
Noel’s son in law, Corina’s husband and founding FGG partner Andres Piedrahita told a friend that FGG had two PhDs working Bernie’s numbers to make sure the man was on the up and up. FGG’s pending due diligence defense would look better if those wizards had doctorates in math, instead of Medieval art history – just a suggestion from a former lawyer, so take it for what it’s worth.
Update: Still more bad news for Walt in, yet again, The Wall Street Journal
Suspicions about Mr. Madoff’s trading also go back further than whistle-blowers have alleged. In 1991, a consultant hired to review a corporation’s investments with Mr. Madoff made in the late 1980s grew suspicious about his returns. According to client statements and other information gathered by the consultant and reviewed by The Wall Street Journal, between 1980 and 1990, the consultant found that Mr. Madoff claimed to his client to have earned 22.6% per year, double the average return on the Dow Jones Industrial Average during that time.
The review of trades for that account showed frequent trades in options on stocks, but the consultant found that the number of options purchased for the strategy often outnumbered the amount of options that actually changed hands on public exchanges, according to the documents and a person familiar with the review. Mr. Madoff claimed to have traded more options than had been traded in the entire market on a given day, meaning his strategy would have been impossible to execute. That pattern was apparent on client statements from as recently as 2006, meaning Mr. Madoff had been making the same improbable claims to his investors for at least 17 years.
I can see why my former stock-fraud-hunting colleagues are chomping at the bit on this one.
Seattle’s refusal to use salt leaves roads icebound. Wait until we ban coal and nuclear power plants in the coming years and we’re stuck with wearing propeller beanies in the dark cold. The Chinese will thank us.
New York Social Diary blog has an interesting article, with plenty of pictures, about an overnight stay in “the country”, as New Yorkers insist on calling Greenwich, including a visit to the Delamar Hotel, that new place on the water. It looks nice enough, I suppose, but I miss the Showboat with its karaoke bar, prostitutes, drunks, drunken divorcees and men who claimed to be (divorced – the drunkenness was never feigned). Not my cup of tea, personally, but I came there occasionally to retrieve friends who shouldn’t have been there and found its atmosphere intriguing. I always enjoyed our town father’s antipathy toward the Showboat’s owner, Frank (?) Keating. They hated the man- tried to stop him from painting the road stripe green on Saint Patrick’s Day and passing out green beer, stymied his expansion plans, hit him with code and zoning violation complaints and, all in all, did everything they could over the decades to make him shut up and go away. I’m sure they were relieved when the paddle wheeler shoved off with Keating aboard and the Delamar, with all its respectability, replaced him, but it was a part of Greenwich that I think provided us with one of our few remaining bits of charm.
The Noel’s family foundation wasn’t all that generous, according to its tax returns. But they did give some money to those public schools Monica sent her kids to, Greenwich Country Day ($5,000) and Greenwich Academy ($15,0000). “Charity begins at home,” Monica snapped when reached by telephone, “and home is 175 Round Hill Road – piss off.”
Interesting article in tomorrow’s Times concerning the betrayal and anguish the Jewish community is feeling because of Madoff’s swindle. While I understand, sort of, how it might feel, we goys just accept that we have crooks among our ranks and get on with it. No hair pulling here. I agree with this point:
While the Madoff affair has resonated powerfully among Jews, some say it actually stands for a broader dysfunction in the business world. “The Bernie Madoff story has become a Jewish story,” said Rabbi Jennifer Krause, the author of “The Answer: Making Sense of Life, One Question at a Time,” “but I do see it in the much greater context of a human drama that is playing out in sensationally terrible ways in America right now.”
“The Talmud teaches that a person who only looks out for himself and his own interests will eventually be brought to poverty,” Rabbi Krause added. “Unfortunately, this is the metadrama of what’s happening in our country right now. When you have too many people who are only looking out for themselves and they forget the other piece, which is to look out for others, we’re brought to poverty.”
And then there’s this observation, which sums things up nicely:
“Why, because he happens to be Jewish, he should have a conscience?”
Update from the every cloud dept:
In a letter to its supporters, the ACLU said two foundations that have been “incredibly generous” with the civil rights group were victimized in the alleged swindle and forced to close their doors.
“That means that $850,000 in support we were counting on from these foundations in 2009 simply won’t exist,” ACLU Finance Director Alma Montclair wrote.
“Happily Retired Litigator” has posted a comment casting doubt on this fine club’s having hosted a good round of fisticuffs between Walter Noel and Marc Fisher. Fisher, our litigator points out, is garment money and that sort of NOCD type doesn’t darken RHCC’s RHC’s door. It’s been a while since I sat on the club’s membership committee so I don’t know whether a bar to the sons of Abraham still exists but it doesn’t seem unlikely. Too bad, though, I much prefer our local scandals.
I recall, for instance, returning to town in the early 80’s just in time to watch with glee as a local yacht club dealt with the fallout of a spouse-swapping scandal that involved – who knew such things went on? – “key parties”, where participanting wives went home with the owner of the car keys they drew and, we were told in hushed tones, all sorts of nocturnal activities. When the music stopped many of the husbands and wives settled down with the partner they were with at the end of the game but some, like the cheese, were left to stand alone. All very interesting and left me wodering what the hell had been going on in town while I was away in ribald old Bangor, Maine.
I’m sure such things never happened at RHCC RHC though, which is why I was so pleased to think that, finally, a little excitement had shown up on its greens. There’s still time, of course, and if Walt Noel continues to hang out there while his friends’ losses grow, we may yet have something to report. Stay tuned.
Unless something else breaks before then, of course.
That same blog I linked to below, Guest of a Guest .com has kindly sent me its latest gossip; Vanity Fair, having granted Mama Noel the publicity she sought for herself and her bootiful, if a bit horse-faced daughters, is now demanding that the Noels give them their side of the story or else. Or else what? I suppose they’ll just turn the whole matter over to Dominick Dunne and see what he does with it.
I previously speculated in this space that Greenwich’s Marc Fisher, son of Nine West founder Jerome Fisher and shoe peddler in his own right, might have followed his father’s investment advice and sunk his own money in with bernie Madoff to keep Jerome’s lost $150 million company. Jerome, it was reported, had angry words with a Madoff reporter in Palm Beach a few days after la scandal first erupted so maybe Marc was ticked too?
According to this account in Guest of a Guest .com, it was Marc, not Jerome, who went after a Madoff flunky, and the attack occured at the previously reported Round Hill Country Club. The swindler he went after was none other than our own Walter Noel. Now that’s more like it! Fight! Fight! As a Greenwich story, this one’s getting better and better every day.
Update:The same blog article concludes that it’s been a rough year for the Fisher clan and notes that Marc is an investor with Greenwich builder Mark Mariani. “If they have any unsold properties,” Guest of a Guest speculates, “it could further his financial losses.” I think he means worsen Fisher’s financial losses, but never mind: let’s see, do we know of any unsold Mariani spec houses? Beyond the three discussed before in this blog, on Dairy, Sabine Farm and Grahampton? That trio once comprised $35 million in unsold masonry – their respective asking prices are down now to a collective $29 million but (a) they haven’t sold and still lower prices may be in their future and (b) maybe there are more projects still hiding in the shrubbery. Anyone know?
In NYC, according to the New York Time’s Deal Book. It’s not all that much worse than what Madoff did to his least sophisticated investors, but it’s nasty enough.
Well, maybe not the natives – they’ve been here long enough to take quite a whallop on the prices of their houses and still be ahead of the game, but there’s an angry commentator down below (on the “Chritmas in Mustique” post – go figure – I guess he was reading along and just couldn’t stand it any longer) who blames realtors for letting him buy a house for more than it would be worth in the future and laughing at him for trying to resell it at a price he wants, rather than what the market dictates.
I’m sorry to learn of his difficulties but this has always gone on. For instance, 139 Havemeyer Place in downtown Greenwich was reported sold today for $675,000. Now that’s not a price I’d pay for a 1911 house that has been neglected and chopped into two one-bedroom units but it does represent just 71% of the seller’s original asking price of $949,000. The buyer obviously disagrees with me, or he wouldn’t have bought it, and disagreed with the seller’s idea of its value, too. He offered what he thought it was worth, the seller accepted, end of story. No one was taken advantage of here, it’s just the marketplace at work – get over it.
Another house, this one in Old Greenwich, came back on the market today with a new broker and the same price it failed to sell at before. That price is 69% less than the seller first thought, or dreamed it was worth but I think it’s still too high. If a buyer disagrees and buys it tomorrow, God bless us every one, but don’t come complaining to me.
The Wall Street Journal reported Monday that real estate developers are the latest group of beggars lining up, hands outstretched, on the Capitol steps. They may get money, too, despite the fact that the country managed to survive a 10% delinquency rate on commercial property loans back in the early 90s without a federal bailout. What’s the difference today? We’ve moved, or are rapidly moving toward, a socialist economy. That didn’t work out so well in Europe but maybe it will be different here – we’re so much more special, and smarter, after all.
With the month winding down and new contract activity not likely to appear, let’s look at what we had this December: 6 single family homes went to contract, with asking prices (selling prices are usually lower) ranging from $375,000 to $2,250,000.
December 2007: 23 houses, $649,000 – $7,750,000.
December, 2006: 49 houses, $780,000 – $12,975,000.
See a trend here?
Some disgruntled Madoff investor is suing the SEC for its failure to catch the rat at his game. She has my sympathies, but you can’t sue the king unless he allows you to and that bit of common law was carried across the ocean to our nation. The reader with the redundant user name, “happily-retired litigator” may correct me on this but I believe suing an administrative entity like the SEC for failure to do its duty is a non-starter (although I do remember a case from law school where the estate of a drowned fisherman sued NOAA for failing to maintain a weather buoy and won, maybe – memory dims). In any event, I’d guess the lawyer who filed this suit is looking for publicity, rather than results, and his client would be better off seeking another avenue for redress.