Tuesday, December 30, 2008

The Lifeguard, B-School Finance, and the Train Wreck

Hi Folks,

Who woulda thought that a glorified lifeguard could bilk people of $50 Billion. Bernie Madoff sure figured it out. I guess the folks that jumped into the trap either never went to B-school, or if they did, were never taught about 'moral hazard'(en.wikipedia.org/wiki/Moral_hazard), or maybe they were just dang greedy!

Or all three.

This and some of the other weird goings on in the financial sector make me glad I didn't spend a lot of time in elective finance classes, dealing with derivatives, interest swaps, and all the other tricks of the trade. To be honest, I wasn't the sharpest arrow in the quiver when it came to basic finance to begin with (though with the aid of good software, I am just fine), so I steered away and took what I figured would be more practical courses, like project management, supply chain management, etc.

As for Bernie, well, it seems he just went to Hofstra (BA Poli-Sci), where he must have figured out how to ride the gravy train. I guess he may be a small-fry scapegoat in the current climate, but I don't feel sorry for him. He and his club-mates have directly or indirectly created the problem we're facing. He's an old man now, and has lived life to the fullest, at the expense of a lot of people, from the wealthy fools who handed him their millions, to the Joe the Plumber investors who couldn't make the market work for them because there was too much foul play.

I kinda do feel sorry for old Bernie's sons and other family members, because blood is thicker than water. They still had milk behind their ears when they jumped on the bandwagon with dear old Dad. Can I think of another cliche to make this paragraph rich?

But seriously, if you were a young adult and had a parent who could offer you the finest education, a nice Manhattan apartment, and a job paying double what your classmates were making (plus a chance to 'get-in' on the magic by investing in the 'Plan'), wouldn't you pull the wool over your own eyes (oops, did it again) and just be the loyal scion?

Personally, I think Bernie turned himself in to save his family members who were in on the deal from getting burned.

Well, I hope they and their cronies all get burned somewhere down below.

I never was able to put aside a lot of money, so I haven't been hit as hard as many, but I think this and the other cases we've been reading about lately should remind us all that any promise of no-risk investment is the riskiest sort of investment there is.

Love and Peace to all!

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