The Seduction of Smooth Returns

w0ot · 02-02-2009, 10:42 PM

Interesting article i came across..

The recent case of Bernie Madoff, former chairman of NASDAQ, accused of running the biggest Ponzi scheme in history, has no doubt, sent tremors throughout the financial markets. The sheer enormity of the scam, to the tune of USD$50 billion, is mind-boggling.

How did wealthy, sophisticated, individuals, professionals in their own right, and occupying prominent positions in the highest echelons of society succumb to such duplicity?
The single, overriding factor that made Madoff's investment vehicles attractive was the metronomic uniformity in their performance. One of his funds, Fairfield Sentry Ltd., reported annual returns of between 8 percent and 18 percent every single year. Now we know it was all a facade. The US government says Madoff was paying off early investors with the funds incoming from later investors.

Read more at The Seduction of Smooth Returns

desigac · 02-10-2009, 03:53 AM

It is nice post from you and I just want to know about real meaning of seduction of smooth returns.

Indian Groups

w0ot · 02-12-2009, 07:55 PM

Hi. from my point of view, the “seduction of smooth returns” encapsulates the phenomenon that equity investors are typically enamored with annual returns that are always positive, over a prolonged period, like 5-10 years. Such returns are more representative of a fixed-income investment, that carries with it, lower risk, but with a commensurate lower, predictable return. In Madoff’s case, his investors, were duped or “seduced” into putting money with him, based on his purported “smooth returns”, that we now know were fabricated.
The moral of the story is: Know exactly what you are investing in, and do your homework before committing to any stock investment.

Do share your views too.

02-02-2009, 10:42 PM	#1 (permalink)
w0ot Noogle Join Date: Feb 2009 Posts: 1 Thanks: 0 Thanked 0 Times in 0 Posts	The Seduction of Smooth Returns Interesting article i came across.. The recent case of Bernie Madoff, former chairman of NASDAQ, accused of running the biggest Ponzi scheme in history, has no doubt, sent tremors throughout the financial markets. The sheer enormity of the scam, to the tune of USD$50 billion, is mind-boggling. How did wealthy, sophisticated, individuals, professionals in their own right, and occupying prominent positions in the highest echelons of society succumb to such duplicity? The single, overriding factor that made Madoff's investment vehicles attractive was the metronomic uniformity in their performance. One of his funds, Fairfield Sentry Ltd., reported annual returns of between 8 percent and 18 percent every single year. Now we know it was all a facade. The US government says Madoff was paying off early investors with the funds incoming from later investors. Read more at The Seduction of Smooth Returns

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02-10-2009, 03:53 AM	#2 (permalink)
desigac Elite Googler Join Date: Jul 2007 Posts: 1,300 Thanks: 12 Thanked 31 Times in 30 Posts	It is nice post from you and I just want to know about real meaning of seduction of smooth returns. Indian Groups

02-12-2009, 07:55 PM	#3 (permalink)
w0ot Noogle Join Date: Feb 2009 Posts: 1 Thanks: 0 Thanked 0 Times in 0 Posts	Hi. from my point of view, the “seduction of smooth returns” encapsulates the phenomenon that equity investors are typically enamored with *annual returns* that are always positive, over a prolonged period, like 5-10 years. Such returns are more representative of a fixed-income investment, that carries with it, lower risk, but with a commensurate lower, predictable return. In Madoff’s case, his investors, were duped or “seduced” into putting money with him, based on his purported “smooth returns”, that we now know were fabricated. The moral of the story is: Know exactly what you are investing in, and do your homework before committing to any stock investment. Do share your views too.

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