@JustThatGuy3:

Check out Dave Swensen's "Unconventional Success" - a very worthwhile read.

@ADismalScience:

OK, here's the thing. Some investors can beat the market. How does the typical individual investor CHOOSE those investors, though? Basically, how does an individual investor, with typical individual investor information, choose which retail-offered mutual fund to purchase?

There's a big difference in saying "some investors can beat the market," and saying that a typical retail investor should _try_ to beat the market. The evidence is overwhelming that the typical individual investor is highly likely to underperfom the market by trying to beat it.

@JustThatGuy3:

Wrong. I couldn't disagree more.

Index funds are promulgated by EMH disciples in the advisory business, who lost their clients a lot of money in the recent downturn. EMH is a lie, you -can- beat the market, and some investors are vastly better than others. Actively managed products are badly beating indexes, including hedge funds. This is because low-liquidity, thinly-traded markets like those typical of a secular bear market require uncommon analytical skills and limiting your exposure to the good names.

If you think the rising tide lifting all boats is the future of the markets in a credit-constrained environment, well, you probably own index products.

@ADismalScience:

People should be buying index funds - not because they're certain to do much better than the market, but because they're certain not to do a lot _worse_.

Usually what happens is that they have a "bad crop" year, and try to cover it up by paying out of the principal. This puts them in a hole, and they have to make more agressive investments to dig their way out. If these don't pay off, they're deeper than when they started. Eventually, the whole thing collapses.

He got people to give him apple seeds to start his farm. he tells them that for every 10 seeds they give him, he'll add one to their account at the end of the month.

He then uses the seeds to plant apple trees, grow apples, and use the seeds to pay everyone back.

One year, he has a bad year and lots of his apple trees die. He doesn't have new seeds to cover his "one a month" promise. Instead, he takes some of the original seeds and uses them to cover his debts.

The problem is that now he has less seeds than he says, so he can't grow as many trees. Unless he gets a record crop, he has to keep pulling out more and more seeds to pay people back. It's a vicious cycle, and in the end he just doesn't have any seeds to pay anyone with.

Just heard it on the news this morning, PLEASE change this Lifehacker. lol I'm not trying to defend the guy, but just trying to correct a major error.

Time to clean house on Wall Street.

fuck dude, I'd trade it in for a Cheese Nip, and all the horrible anti-asian sentiment that includes.

(I'm asian, btw)

@bohemian:

BlackRock was viewed as a potential asset manager of troubled mortgage assets in the course of the TARP bailout. They've got no solvency issues - your information sounds badly misinterpreted from source. Larry Fink is a genius, and largely diversified out of subprime in 2005. He gave a good interview about how "liquefying our balance sheets is our generational project." Couldn't agree more.

You should be so lucky to have BLK assets available to you in your 401(k)!

My plan? Get a good permaculture farm going on the most sustainable, energy-efficient property I can put together, and plan to have most of my family there before the decade is out. Wish me luck!

A-EFFING-MEN; I'm so glad to hear someone else say it! How much money would we have for health care (or whatever) if every white-collar asshole convicted of lying to the tune of X Million had to hand that X Million (at least) over? And what the HELL is the supposed reason they get to keep it?

@ADismalScience:

Small correction: Q4 should be "Q2" in the first paragraph.

Ben, not to shit all over your prophecy of doom, but Q1 redemption notices to most quarterly-redeeming and annually-redeeming Hedge Funds were due months ago. Q4 is already almost done. Lots of funds have already engaged gates, holdbacks, lockups, and all manner of liquidity management strategies to prevent their capital bases from leaving nothing but the leverage. This is beyond the defensive, cash-based strategies that most Equity Long/Short products were pushed into over the past year. It's a little late to presage a redemption crisis or a flight to cash; where have you been? Do you think the Dow went down 3000 points in a few months and the VIX hit 80 because scared individual investors sold their penny stocks?

This Madoff guy was unbelievable, sure, but a prophecy of widespread corruption in the private wealth management industry seems based on nothing more than personal prejudice. If there were hot-air derivatives on the other side of most of your ruminations I'd buy them. Which is to say nothing of the damage an irrational media-driven redemption spree would have on the valuations of the remaining stocks with investors. Then again, you are running a tabloid!

But by all means, instruct people to go buy worthless index products. That's worked great for the last 10 years, and it's worked great historically in secular bear markets. Kids these days don't even remember the Nifty Fifty. I'm going to start calling working until you die the "Magazine Retirement."

On the contrary. Congress is still going strong...and is far more powerful now than it was three months ago.

Don't worry, I here this criminal may spend as much as 5 years behind bars and he will learn his lesson when he has to pay a $17,000,000 fine!

All of a sudden $15 Billion for the auto bailout seems like a deal!

@tinmanx:

Exactly - it's not like he has $50BN sitting around - if he did, it wouldn't be a Ponzi scheme. The vast majority of the $ have been already paid out to investors who thought they were getting the returns promised to them. He gave up because too many investors wanted to pull their money out, which made it impossible for him to continue.

As for the poor boomers - p on 'em. I was born in the last year of the boom and they actively blocked me my whole life. Over the years, I saw that they were following a lemming mentality that was not sustainable, so even after I finally got a break, I didn't join in on the financial shenanigans.

So here I am with no debts other than my mortgage and 100% liquid in assets and haven't lost a penny. I know how to live on my income, and live well on it. I counted on NEVER being able to retire, and have structured my life to accommodate this as much as possible. Now that the playing field is leveling and they are playing MY game, I finally have the advantage I was denied in my youth. I will capitalize on it.

Ponzi schemes, on the other hand, investors believe their funds are actually invested in something and receive statements from time to time indicating that their funds are indeed there. The statements are fraudulent, and only when the investors ask for their money back is the scheme detected.

Not quite the same thing.

Oh I think you'd be surprised; I'm sure drug dealers that deal in the $50 Billion dollar arena probably contribute more than you think.

But timing an exit on something like this is strictly luck, unless you have a way of knowing something.

Now combine that with the big three all dying at the same time. They take all of their vendors and employees with them. The two situations combined could collapse a big percentage of jobs and leave just about everyone with no retirement money left.

We have been told for the last 25 years that your 401k and IRA are your retirement. They wanted to turn social security into a hybrid 401k. Now it might be a situation were almost everyone has lost all or most of their retirement. At the same time boomers are getting ready to retire.

@snoop-blog: I know people who've killed over twenty bucks before.

Umm, you tell some schmuck he lost everything. You've just committed a violent crime in my eyes. You've threatened them just as much as a punk robbing a robbing a liquor store threatens the clerk. Except you're usually doing it on a scale that defies comparison to the punk with the gun. You don't think they're comparable? How many of these people will commit suicide, fall into drug patterns, have to seek psychiatric treatment, suffer divorces, et al. from this idiot's actions.

White collar crime is still crime and we're foolish to act like there is less effect or a "lesser" violence to it. ALL crime is violent. ALL crime is an imposition of oneself above another by the perpetrator. ALL prisons should be 23 hour a day lock down, maximum scurity prisons. No mollycoddling. No differences. The only compassion in the justice system SHOULD be the jury.

The current situation is as ridiculous as the one between men and women "offenders" that get caught popping some teenager. Woman does it? Slap on the wrist (especially if she's got looks) Guy does it? He's a farking pedophile burn him, BURN HIM! They're the same crime, but treatment is unequal.

@rolla: Yeah because nobody has ever been killed over a fuck ton of money before.

Really, a good island runs you about $2-10M US. 250 foot yachts will run you about $200M! A luxurious mansion in the hollywood hills will run you $3-10M. So, they're priced quite low. But then you have to worry about compsognathi running around terrorizing your daughter.

Is this missing $50 billion the made up "gains" from the fund? Or was it paid out to some fat cats who took all their money out?

Either way, it's $50 BILLION! I don't think I can even spend that much in my entire life even if I wanted to!

What's this you say? People doing unethical things to make a quick buck? You've got to be kidding!

@TechnoDestructo: Let's use a white rope to make a white collar.

A few billion here, a few billion there...soon, you're talking about real money.

They're saying the NASDIQhead ran a Ponzi scheme? The whole of Wall Street is a Ponzi scheme, dependent upon continuous growth. It has to end sometime.

But i understand what your point...the penalties must be more severe.

My standards for success are quite low.

Pimco is pretty shady too. It seems like the fed is purposely doing things that won't end well.

This revelation that someone with that kind of reputation was doing this and how un-regulated things are now is extremely scary. Who knows how many more of these scams are out there.

When do you decide "wow, this is a ton of money!" and disappear?

Because for me, it would have been 49 billion dollars earlier. That's "buy your own island" money.