Forbes' Martin Sosnoff: Angry at the Madoff and Merkin Circle of Evil

Forbes: Upstaging Madoff by Martin Sosnoff starts as an analysis of investor motives and then blasts us with an uncharacteristically blunt burst of investor anger.

The Sosnoff sub-head sounds sober enough, "With Treasury yields on the floor and stocks viewed as too shaky, investors naturally become suckers for Bernie's returns." The essay veers into speculation about the motives of Madoff and then into an actively angry attack on both Madoff and Merkin. Not that there is anything wrong with that, given the litany of their of sins.
The battle for investment survival never ends. I'm sure the quest for the Holy Grail of uncorrelated alpha spawned Bernie Madoff. Uncorrelated alpha, for those of us who can't afford financial consultants, means your rate of return adjusted for volatility doesn't follow the trajectory of a bear market, short or long term...[skipping ahead]

...Perhaps when Bernie traded for clients he felt it was too painful to report disappointing numbers. Rather, leverage and make back your losses. "Tomorrow is another day," said Scarlett. This is the modus operandi of rogue traders who fall behind in the battle for investment survival.

I'm pissed at Bernie. Not only had he competed unfairly with us legit money managers, but we've even lost a few clients to his steady rate of return's siren call.

He gives Jewish Wall Street a bad name, but I can live with that. Bernie knowingly destroyed scores of endowment funds whose future largesse is seriously impaired. That's unforgivable.

I include J. Ezra Merkin in this circle of evil. Merkin parked billions under his management with Bernie without disclosing this to clients. I'd like to know if Merkin got fees from Madoff for this gambit. And by the way, J. Ezra, why are you reaching out to an auditing firm in the Cayman Islands?...

The country needs all of 2009 to get its act together, a perfect setting for the next Bernie or J. Ezra Merkin to surface from the sewers under Broad and Wall. The refrain is dangerous: 10% compounded over seven years is a double. Dream of 15% returns? It doubles in less than five years. Pleasant dreams!

Bernie, who marketed himself as the ultimate white swan, molted into the blackest swan of all, bar none. Actually, this Bernie was a black sh-t bird. Let's hang Bernie up by his heels and encourage his marks to swat him with a baseball bat.

1 comment:

Anonymous said...

With his Juris Doctor degree, Mr. Merkin earned his stripes. See the revirew of Graham and Dodd's classic 75th anniversary edition. Contrarian Value Investing. http://www.contrarianvalueinvesting.com/

In hindsight, of course, Mr. Merkin's unique approach to value investing might be considered truly contrarian.

Mr. Merkin was a contributor to that volume. Was he paid? He was generally paid for his contributions, a real baal tzedakah.

He will be remembered as a brilliant armchair baseball analyst, and as long as the company survives, as GM, the Great Merkin.