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He ran the largest
dollar value Ponzi scheme in history -- at least
any known at this time -- other than Social Security.
His Ponzi scheme went on for decades longer than
most other known schemes -- aside from Social Security,
of course. |
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OK, he was bad.
Bernard Madoff lied, misrepresented, and cheated his clients
over several decades. That is bad. His clients, many
of whom begged him
to invest money for them, collectively lost
billions of dollars. |
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Madoff was not nice,
he was uncaring, and he performed as a sociopath
with
clients' money. Many clients entrusted him with their only retirement
money. Other clients entrusted him with charitable
contributions earmarked for important humanitarian
purposes. That money mostly is lost. |
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It is not yet known
what exactly Madoff did with the money. If we believe that
Madoff did actually trade at least a portion entrusted to him, he was in the markets
often as a
buyer. That is, Madoff used some of the the money entrusted to him to purchase
securities in open, free markets. He bought
from other investors. Some of those investors had
finished making their
profits and decided to sell. Some others of those investors
had had enough of their losing positions and decided
to sell. Both of these investor groups wanted to
sell. They voluntarily came to the markets. |
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Madoff was waiting in
those markets. He purchased
assets when other investors wanted to sell. It
is possible that roughly one-half of those who sold
to Madoff's fund sold at a profit for themselves. Those who sold at
a loss, successfully cut their losses when they
freely chose to sell in
the market by chance to Madoff's fund. |
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Madoff was obviously
a bad trader and a bad investor. We know this to be
true because over decades he lost billions of
dollars from his fund. |
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But those Madoff buy
orders were the other side of positions being
voluntarily offered for sale by other investors. On
balance Madoff bought losing positions. That means
that those who sold to him were better traders and
investors. Many successfully took profits or cut
their losses thanks to Madoff having taken the other
side of their trades. |
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Some of those who
sold to Madoff --
investors who made profits and cut losses -- were funds
that invested for their clients'
trading and retirement accounts. Others who sold to
Madoff were individuals taking profits or cutting
losses. |
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Perhaps someone
reading this essay earned money because Madoff
purchased a position from his account. |