Archive for December 12th, 2008

Madoff’s alleged $50 billion fraud hits other investors.

“Madoff’s investors included captains of industry, corporations — some of which are publicly traded — that used Madoff almost as a high-yielding cash management account, endowments, universities, foundations and, importantly, many high-profile funds of funds,” said Douglas Kass, who heads hedge fund Seabreeze Partners Management.

“It appears that at least $15 billion of wealth, much of which was concentrated in Southern Florida and New York City, has gone to ‘money heaven,’” he said.

A Ponzi scheme is an illegal investment vehicle that pays off old investors with money from new ones, and is dependent on a constant stream of new investment. Because the invested capital is not earning a sufficient return on its own, such schemes eventually collapse under their own weight.
The two most prominent hedge funds that invested with Madoff were the $7.3 billion Fairfield Sentry Ltd, run by Walter Noel’s Fairfield Greenwich Group, and the $2.8 billion Kingate Global Fund Ltd, run by Kingate Management Ltd.
Prior to Madoff’s arrest, investors had wondered how he was able to generate annual returns in the low double digits in a variety of market environments. Many questioned how U.S. regulators were able to ignore numerous red flags with regards to Madoff’s operations.
Investors overseas were reeling from the alleged fraud.

Benedict Hentsch, a Swiss private bank, said it had 56 million Swiss francs ($47 million) of exposure to Madoff’s investment advisory business. UniCredit SpA’s fund management unit, Pioneer Investments, has exposure through its Primeo Select hedge fund, two people familiar with the matter said.

Bramdean Alternatives Ltd said almost 10 percent of its holdings were exposed to Madoff, sending shares in the UK asset manager crashing.

CNBC Television reported that Sterling Equities, which owns the New York Mets baseball team, had accounts managed by Madoff.
Everyone loves a winner even though he later turns out to be a crook.  The system as it is set in place in the USA as well as in other developed countries when so many winners of Madoff’s ilk fold up and wipe out the entire savings of so many cannot do much. They come out with statements that a crisis was waiting to happen. Is that all Capitalism can do? As early as May 2001, Barron’s reported that option strategists for major investment banks said they could not understand how Madoff managed to generate the returns that he did. Yet the climate of self delusion had hit the Regulators, investors and financial pundits that they once again have got it wrong.( quoted from Reuters news-Jon Stempel and  Christian Plumb)

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Is Chance a card up in the sleeve of Life?
One may interpret Life as Oneness of Things, God or any other. Now Chance is quite something else. Let me cite two examples. In the case of Archimedes he discovered a secret of his physical world while he had his bath. The secret was always there,- only that his inspiration cracked it open while he was engaged in a very mundane act of a bath. Isaac Newton similarly hit upon another secret- the law of attraction, while an apple fell to the ground. Chance is not chance if the secret was bound to be broken given the possibility displacement of water occurs every time. Thus Archimedes needed time but discover he did to solve a problem that he was faced with.
By the same token mutation is not chance but a certainty that is bound to happen given the various factors that bear upon a copying process.
Consider the earth some 500 million years ago,-The atmosphere of earth had little or no oxygen at all to begin with. What processes would have gone make it life- friendly would have also led to the building blocks of proteins,- sugars, nucleic acids and amino acids. In such a ‘serendipitous’ sequence of events creation of a crucial compound called DNA on one hand and mutation on other hand were likely to happen. Life originated with DNA. For all these to happen it may have taken some 100 million years. Uniqueness of dioxyribonucleic acid lies in the fact that it can replicate itself; It also acts as a blueprint for manufacture of amino acids. DNA has only four basic molecules arranged in a particular sequence which specifies how the twenty or so amino acids should be arranged in a particular protein, how much is to be made and when. During the DNA copying process, a fault may occur due to varying reasons but what results out of an imperfect copy of DNA are proteins of different sequence-mutation it is called- giving rise to evolution. Chance is worked into evolution. Mutation is as a result of Ultraviolet rays, gamma radiations and sometimes certain chemicals also could often have interrupted the DNA copying process: all these occurring at the level of genes or a set of genes do not stretch the credulity considering the millions of years it has taken for life-forms to evolve. The main point is that while life-forms got altered DNA itself has remained unaltered.
Chance is the froth, a kind of smokescreen that working of several certainties impinge upon our consciousness. Oneness of Things works on certainty since Truth is the restframe against which it can lay down its absolutism. If the Holy Spirit writes, God created heaven and earth in the beginning it is based on certainty. Certainty of Truth. Godhead cannot deny itself and be absolute. Whereas our rational mind wrestles with truth of nature. Hence we support Evolution from a mode that I aver is uncertain mode. In such a mode chance seems as good as a rational mind, imperfect at that, can support.

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