Daily Archives: December 30, 2008

Something for everyone on this blog

Hiram writes, “Beachbum’s one of those obsessive types who relates everything to the Bushes. He probably thinks more about them than about sex”.

Is he right, Beachbum? Just in case …

bush_wideweb__430x326

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Unleash Bernie!

Would someone who knows the presiding judge in the Madoff case please persuade him to free Bernie from house arrest, if only for ajust a quick run up the street? Day after day we see the same damn picture of the man: baseball cap and goofy grin, tawdry jacket, hands stuffed in pockets – had he kept his hands there all along he wouldn’t be in this mess – but come on! We need new meat. The paparazzi are ready to cooperate – will the judge?

I want to fish the Madison

I want to fish the Madison

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Greenwich CT House sales 2008

I’ll play with the numbers tomorrow and see if I can come up with some dollar figures but for today, and assuming tomorrow will see no significant activity, here’s where we are in single family sales, contracts (all contracts signed year stated):

2008: 362

2007: 593 (39%)

2006: 622 (42%)

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It’s ugly, but it gets the job done

Prices in Phoenix plunge as banks dump foreclosed properties. As noted below, a lot of this damage could be avoided here if the banks started working with buyers and sellers to move properties before final foreclosure.

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Oh no, not more of the Fabulous Five!

But how can I resist? Business Sheets, in what’s probably an act of copyright infringement but what they’re calling fair use and commentary, has reproduced the long-lost original Vanity Fair article on the girls. You can read it here,as I’m about to. Hurry, before VF’s lawyers (or maybe the Noel’s) make them take it down).

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SEC – oh yeah, who says we can’t catch crooks?

SEC Chairman Christopher Cox announced today that his forces had snuffed out a $23 million ponzi scheme in Florida that was preying on the Haitian-American community. “Anyone can catch a great, big, $50 billion scandal,” Cox asserted at a press conference today. “It’s much much harder to find the tinsy bitty ones. Besides, we’re all about protecting the little guy – Colombian drug dealers,can look after themselves. they got a problem with Madoff and Noel, I’m sure they’ll handle it.”

With that, Cox terminated the conference. “Now that I’ve done what I’m paid to do,” he announced, “I’m going home. Happy New Year.”

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Ariane Noel: “enough about me, what do you boys do?”

Two readers alerted me that an earlier picture showing Andrew Madoff and his wife was actually one of Andy and his new squeeze, Katherine Hooper. Hey – blame the NY Post, who muffed the identification.

But that reminded me that we’ve really been letting the other Greenwich angle to this story drift away: the Madoff boys! So here’s just a bit on them, courtesy of a fly fishing magazine – apparently, since the boys didn’t waste any effort keeping up with dad’s trading activity they spent most of their time fishing. Nice work, if you can get it.

As an aside, Hooper’s quite the babe and a partner with Andy at the Urban Angler so perhaps the wife’s timing of her divorce – the day dad-in-law was pounced on by the feds – isn’t as suspicious as it first seemed.

Andy and Hoops at the ball. Credit Drake Mag. com

Andy and Hoops at the ball. Credit Drake Mag. com

Miss Hooper catches a fish

Miss Hooper catches a fish

mark Madoff salutes Dad's investors

mark Madoff salutes Dad's investors

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No sale in Greenwich

416 Davis Avenue

416 Davis Avenue

You’re looking at the only activity recorded on the MLS today – a listing that expired. Will this enormous new mansion on a dodgy street with the improbable tag of $7 million come back next year with a dash of realism worked into its price?  Not on your life – the builder will probably raise it, just to teach you a lesson.

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Oh, the humanity!

Unemployed Palm Beachers beg in the streets.

Will paint for food stamps

Will paint for food stamps

 

 

 

 

And what of that poor Brazilian gardener the Noels tried to deny workman’s compensation to? How’s he doing? We believe we may have spotted him, below.

rangel

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More Madoff exposure?

We mentioned yesterday that Mario Gabelli’s got money with Tremont Partners who, in turn, were wiped out by “investing” with Bernie Madoff. A commentator suggested that Mario’s brother ran his own fund with Madoff and this morning another reader wrote (publicly anonymous) to say that John Gabelli is a partner both with his brother and in something called Manhattan Partnership I and Manhattan Partnership II. These latter entities seem to be asset management funds so it’s at least possible that they managed those funds all the way into Madoff’s offshore bank accounts. Did they? I don’t know, but any other tips from readers would be welcome. The ripples spread.

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Bernie, we hardly knew ye, but we had our suspicions

A commentator alerted me to Blogett’s latest (I was busy working on the post below) attempt to unpack Walter Noel’s and FGG’s “strategy” behind investing with Bernie Madoff. Blogett concludes, as I do, that Walter thought Bernie was front running and just assumed that it was someone other than Walter and his five fabulous girls who were getting hosed.

The documents do suggest, however, that FGG:

  • Closed its eyes, shoved its fingers in its ears, and hummed as Madoff made the firm $500 million of fees in the past five years (and more before that).
  • Took all the credit for the trading strategy and based its fees on the premise that FGG, not Madoff, was the brains behind the operation. The firm almost always spoke as though it managed its primary Madoff fund, Fairfield Sentry, itself.  If Madoff ever came up in FGG’s marketing materials, he was described as a “broker.”
  • Knew that the key driver of the fund’s stated returns was NOT the “split-strike conversion strategy” but market timing.  The firm never explained, however, how this superb market timing was supposedly executed.

As investigators dig through the FGG wreckage, therefore, one of the key questions will be how partners like Walter Noel, Jeff Tucker, and Andres Piedrahita explained Sentry’s astonishing market-timing ability to themselves and their clients. 

Andrespiedrahita.jpgIf the best answer is “proprietary models,” FGG may well be found to have been negligent in its failure to conduct adequate due diligence. Consistent market timing is extraordinarily difficult, and Madoff’s claim that he could do it when others couldn’t should have set the same alarm-bells clanging at FGG as it did elsewhere.

We suspect that the more likely answer is “We thought he was front-running.”  Lots of other folks on Wall Street thought Madoff was front-running, including some major Madoff investors, and, for most folks, this seemed to explain his preternatural timing ability.  The trouble for FGG with this explanation is twofold: First, front-running is illegal. Second, the firm doesn’t mention front-running it its fund documents. If FGG did rationalize Madoff’s performance on the suspicion that he was front-running, the firm will likely be exposed to charges of fraud.

FGG itself is almost certainly toast regardless of what investigators find. The legal distinctions will come into play with respect to victims’ ability to go after the personal assets of Noel, Tucker, Piedrahita, et al.

I was confronted a week ago by a red faced, goggle-eyed gentleman who stuck a finger in my face and demanded that I stop saying mean things about his dear, close friends, Walter and Monica. I can’t say I felt remorseful – I thanked him for reading my blog and edged away – but the more we learn about Noel, the less sympathy I feel for him. If that’s possible. My general summation of this sorry spectacle is that it couldn’t have happened to a more-deserving guy.

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Yohoo, anybody home?

One of the Times’ best reporters, Gretchen Morgenson, has a great article in last Sunday’s paper about the difficulties in finding anyone at a lender with the knowledge and authority to rework a mortgage loan. Much of what she writes of: missing documents, no records of who holds title, no idea who even still holds the loan, is also applicable to the  mess one encounters when trying to buy a house when the borrower’s in trouble.

A commentator to this blog suggested that buyers skip the services of agents and just call the work-out department of a local bank where, he promised, the caller would find any number of helpful individuals eager to do a quiet deal to get a bad loan off their books. If only.

My guess is that the commentator still clings to the vision, accurate thirty years ago, of a friendly hometown bank that loaned money to George Bailey’s pal, Ernie the taxi driver, and then held that loan while Ernie drove fares around Bedford Falls and earned enough to pay it all back. Should Ernie get drunk, wreck his taxi and default on his loan then someone who wanted to buy Ernie’s house could call up Uncle Billy who, eye visor on, sat in a back room toting up figures and calculating what price the Savings and Loan could accept while still remaining solvent.

But Mr. Potter runs Bedford Falls now, not George, and Potter grabs Ernie’s loan, bundles it together with those of all the other borrowers in town and ships the whole package off to Wall Street where wizards combine those loans with a million others, pay Moodys to declare them all safe as all get-out, then slice and dice them and sell off the slices to people all around the world. So now, when you want to buy Ernie’s house, who do you call? Mr. Potter doesn’t have the loan and is in no position to discuss the matter (as if he’d even take your call, the bastard!). The Wall Street Wizards have no idea who owns what slice of Ernie’s loan and don’t even know who Ernie is. And they sure as heck aren’t interested in acknowledging a problem because they sold it off and pocketed their profit five years ago. Forget it, Buddy.

So Ernie’s up the creek. He’s got a buyer for his house who is willing to pay enough, if not to make Ernie whole, then at least enough to pay off most of the loan and reduce Ernie’s liability, but there’s no one around to deal with the buyer or accept his money. The house sits, with a forelorn Ernie languishing inside it, drowning his sorrows with Wild Turkey until a sheriff shows up, throws Ernie over the bridge, with no Clarence to save him, and takes possession of the house for some banker in Shanghai. No maintenance is performed, the house deteriorates and, finally, is sold for pennies. No one is better off.

California’s home sales are up these past few months because so many loans have been foreclosed and title has passed to someone with authority to unload the foreclosed houses for pennies on the dollar. It would seem to make sense for lenders in the east to save time and start recouping their losses by working with buyers and sellers now, cooperating in sales that could bring in more money than a foreclosure sale, years before the actual foreclosure. But no one seems to have any reason to do that. As noted, the loans have been sold off to foreigners and other chumps, the banks are failing anyway and their staffs have all been fired. So unless something changes, I think we’ll continue to see desperate sellers cling to their houses and their prices, frustrated buyers walk away, and sales continue to stagnate. A cheery picture, all in all.

Update: More on the difficulties of finding anyone to listen to a deal proposal. “Loan services are overwhelmed”. I still think that an aggressive lender could get organized, get rid of its crap and be years ahead of its competition when the economy recovers. Maybe Dick Fuld could help, if he’s not too busy.

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Duh – the housing market sucks

Or so says the latest Case-Shiller Index report. Prices down 18% in major metropolitan areas. Consumer confidence is down too, surprisingly enough. We’re in for a long year.

UPDATE: This guy’s even more pessimistic than I am. Wow!

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