The most important conclusion of 2008

It's not only a question of lessons to be learned from what happened in the World Economy and on the Stock Markets in 2008, but also a matter of conclusions to be drawn.
The most important conclusion just unexpectedly popped up last week when the Madoff story broke and this week when the effects of the Madoff maelstream begin to appear.

When 'very trusted people' (VTP) suddenly prove untrustworthy, people can begin to lose confidence in: authorities, a method or system, themselves or their fellow citizens.
This year we watched the failings and mistakes of: bankers, brokers, politicians, business leaders, bureaucrats, scientists, advisors, authorities and a lot more.
Even the Securities and Exchange Commission (SEC) failed to control and audit Madoff, although there were allegations of his financial wrongdoing since 1999. (See link beneath)
The latest results will ripple through and eventually calm will be restored, but it's worth thinking about the long term effects of loss of confidence and trust.
As a whole however, Investors and the Investment Community simply shrugg off the Madoff effect on the market, it is no more than a piece of rather shocking bad news. Next year the results will show or not. For the moment it only adds to the recession. And it all depends in how far the hedge funds will be hit.
Even the battered Fortis investors (in the Netherlands) do not seem to have sleepless nights after the news Fortis was hit by a possible 1 Billion Euro loss through the Madoff scam.
Anyway, the world has really changed in 2008! This is our preliminary conclusion by the way, an open door with unknown consequences and opportunities.

President-elect Obama says: 'Regulators have been asleep at the switch'.
This seems to be a common international problem we noticed.

See this link: Obama names 3 more for his financial team, says regulators have been 'asleep at the switch'

SEC chairman says agency failed to probe Madoff
December 17th, 2008

WASHINGTON (AP) — In a stunning rebuke, the Securities and Exchange Commission chairman blames his career regulators for a decade-long failure to investigate Wall Street money manager Bernard L. Madoff, now accused of running one of the largest Ponzi schemes ever.
On Tuesday night, SEC Chairman Christopher Cox ordered an internal investigation of what went wrong and offered a scathing critique of the conduct of his staff attorneys. He said they never bothered to seek a formal commission-approved investigation that would have forced Madoff to surrender vital information under subpoena. Instead, the staff relied on information voluntarily produced by Madoff and his firm.
Credible and specific allegations regarding Madoff’s financial wrongdoing going back to at least 1999 were repeatedly brought to the attention of SEC staff, said Cox.

The effect of the 'Madoff Mess' on the Markets

On Friday December 12 the news broke that the ex-Nasdaq Chairman Bernard Madoff was arrested and charged with operating a multibillion-dollar Ponzi scheme from his investment advisory business.
The total amount of the fraud is yet unclear but can easily reach 50.- Billion U.S. Dollar which makes it a record amount ever for a Ponzi Scheme.
Bernard Madoff was heavily involved with the $1.5 Trillion hedge fund industry and had wealthy clients from all over the world.
It took a while before the news spread around but already rumors are circulating about funds that will be wiped out in the next future.
With the world stock markets in a shaky condition and the recession deepening we can expect in the days, weeks and months ahead, investors running for the exit and even some 'classic panic scenes' emerging.

This latest affair, 'The Madoff Mess' is beginning to raise seroius questions about the mental health of - generally- very trusted people like; finanicial authorities, stock brokers, bankers, advisors and so on.
Bernard Madoff, an Ex-Nasdaq chairman with obviously the status of a Very Trusted Person (VTP), simply turned out to be a fraud.
At the same time it raises questions about the mental health of the people trusting their money to him.
Good stuff for a book anyway: "The Financial World runned by a Bunch of Egocentric Lolly Loonies"

(Dec 14) Reports are circulating about Swiss Banks being hit for 4 Billion U.S. Dollar by the Madoff Fraud. A fair amount of wealthy and distinghuised instutions from the American East Coast are among the victims as well. The list of victims is growing, not only among the wealthy and powerful.

December 26. What drove Bernie Madoff? (Article on CNN Money)
An intense competitive streak may have fueled the flames of one of Wall Street's greatest frauds.
But inside was the drive of an intensely competitive person.
"There's a need to prove to the world that I am somebody powerful -- I am so intelligent," said psychologist Alden Cass, president of Competitive Streak Consulting, who has counseled and studied Wall Street personalities.


(Reuters) Madoff's alleged $50 billion fraud hits other investors

(CNN Money/Fortune)'Financial psychopaths' wreak havoc
The damage done in cases of Bernard Madoff and Marc Dreier doesn't end with investors.

Wall Street's Latest Downfall: Madoff Charged with Fraud (Time.com)
Bernard Madoff, the former Nasdaq chairman who was charged on Thursday with massive fraud, was long considered to be quirky. Employees at the offices of his eponymously named brokerage firm in midtown Manhattan's Lipstick Building had to follow strict rules for what they kept on their desk. Family photos were allowed but only if they were displayed in a simple black frame.