New York’s test for legal insanity: "a person is not responsible for criminal conduct if at the time of such conduct as a result of mental disease or defect he lacks substantial capacity either to appreciate the criminality of his conduct or to conform his conduct to the requirements of the law." The mental disease or defect requires a mental diagnosis. Madoff’s years of secrecy about his actions seems inconsistent with an insanity defense.
Better, perhaps, can Madoff receive a fair trial anywhere in the English speaking world?
If you thought Bernard Madoff’s $50 billion investment scheme was audacious, get ready for his alibi. Lawyers for the accused scammer are exploring an insanity defense, we hear.
“Bernie’s family and his attorneys may argue that, somewhere along the line, he had a mental break,” says a Madoff acquaintance. “They may even say he has a multiple personality disorder.”
Madoff’s grip on reality does show signs of slipping. The 70-year-old financier, now a prisoner of his East Side penthouse, wore a weird smile when he was photographed shortly after his Dec. 12 arrest…
“He seems really out of it,” says a source, who believes Madoff’s family fears he’ll follow the example of Rene-Thierry Magon de la Villehuchet, the Madoff client who slit his wrists last week. “He has a very low affect. Bernie barely speaks…
He could argue that Madoff committed the fraud during manic, euphoric periods and that he never found the equilibrium to correct his crime. Or that he was so delusional that he convinced himself the investment returns were real. You might also plead that he was incapacitated by some character disorder, like a malignant narcissism stemming from an early-life trauma.
“Insanity defenses rarely work,” Ablow notes. “But if you can influence just one juror, he may stand a chance.”
No doubt people will call him crazy like a fox and recall mobster Vincent (Chin) Gigante, who tried to escape jail by mumbling and stumbling around the streets in his bathrobe.
Top criminal attorney Edward Hayes doesn’t think it will fly: “Madoff admitted to his sons that he knew it was a Ponzi scheme…"
“We hope to do to this industry what Wal-Mart did to theirs, Starbucks did to theirs, Costco did to theirs and Lowe’s-Home Depot did to their industry. And I think if we’ve done our job, five years from now you’re not going to call us a bank.”
As a supervisor at a Washington Mutual mortgage processing center, John D. Parsons was accustomed to seeing baby sitters claiming salaries worthy of college presidents, and schoolteachers with incomes rivaling stockbrokers’. He rarely questioned them. A real estate frenzy was under way and WaMu, as his bank was known, was all about saying yes.
Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.
Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved.
“I’d lie if I said every piece of documentation was properly signed and dated,” said Mr. Parsons, speaking through wire-reinforced glass at a California prison near here, where he is serving 16 months for theft after his fourth arrest — all involving drugs.
While Mr. Parsons, whose incarceration is not related to his work for WaMu, oversaw a team screening mortgage applications, he was snorting methamphetamine daily, he said.
“In our world, it was tolerated,” said Sherri Zaback, who worked for Mr. Parsons and recalls seeing drug paraphernalia on his desk. “Everybody said, ‘He gets the job done.’ ”
At WaMu, getting the job done meant lending money to nearly anyone who asked for it — the force behind the bank’s meteoric rise and its precipitous collapse this year in the biggest bank failure in American history.
Are we now in danger of losing Milton Friedman’s legacy to the mindless adoption of a socialistic imperative?
"When Friedman’s Platonic ideas of free-market virtues are put into practice, they have too often generated a systemic orgy of competitive greed — whose remedies, ironically, entail countermeasures of nationalization,” Marshall Sahlins.
What do our readers think — has the devastating unraveling of our financial system during this past year changed any of your beliefs? - Ilene
John Cochrane was steaming as word of U.S. Treasury Secretary Henry Paulson’s plan to buy $700 billion in troubled mortgage assets rippled across the University of Chicago in September. Cochrane had been teaching at the bastion of free-market economics for 14 years and this struck at everything that he — and the school — stood for.
“We all wandered the hallway thinking, How could this possibly make sense?” says Cochrane, 51, recalling his incredulity at Paulson’s attempt to prop up the mortgage industry and the banks that had precipitated the housing market’s boom and bust.
During a lunch held on a balcony with a view of Rockefeller Memorial Chapel, Cochrane, son-in-law of Chicago efficient-market theorist Eugene Fama, and some colleagues made their stand.
They wrote a petition attacking Paulson’s proposal, sent it to economists nationwide and collected 230 signatures. Republican Senator Richard Shelby of Alabama waved the document as he scorned the rescue. When Congress rejected it on Sept. 29, Cochrane fired off congratulatory e-mails.
The victory was short-lived. Lawmakers approved the plan four days later, swayed by what Cochrane calls a pinata of pork-barrel amendments.
“We should have a recession,” Cochrane said in November, speaking to students and investors in a conference room that looks out on Lake Michigan. “People who spend their lives pounding nails in Nevada need something else to do.”
At the University of Chicago, once ascendant free-market acolytes are finding themselves in an unusual role: They’re battling a wave of government intervention more…
Economic pain that has been hitting the financial economy and the brick and mortar retailers is hitting Silicon Valley as well. Many chip companies are short of cash and layoffs are increasing. Let’s kick off the review with Hynix Gets 800 Billion Won Aid Package From Creditors.
Hynix Semiconductor Inc., the world’s second-largest maker of computer memory chips, gained 800 billion won ($590 million) of financial support from creditors to stay in business as falling prices threaten a record loss at the company.
Controlling shareholders will provide 500 billion won in fresh loans and extend the maturity of Hynix’s debt until the end of 2009, main creditor Korea Exchange Bank said today. Ichon, Korea-based Hynix will also sell 300 billion won of new stock on the market that creditors will buy if unsold, Korea Exchange said.
Hynix’s creditors have pumped in fresh funds in hopes of recouping the remainder of their $4.6 billion bailout of the chipmaker this decade by selling their stake when the industry recovers.
"With additional funding and a recovery in the second half of next year, the possibility of a liquidity crisis at Hynix is pretty low compared to smaller rivals," Kim Young Chan, an analyst at HMC Investment Securities Co., wrote in a report yesterday. Kim, who has a "buy" rating on Hynix, projects the chipmaker will return to profit in the third quarter of 2009.
The company held about $1 billion in cash as of Sept. 30, Daiwa Institute of Research Ltd. estimated this month. Still, Hynix had net debt of $5.5 billion at the end of September, the most among the eight biggest computer-memory makers, Daiwa said.
Prices of the benchmark dynamic random access memory chip have fallen 59 percent this year to below the cost of production. The DRAM glut will probably persist throughout next year, UBS AG and JPMorgan Chase & Co. predict.
Anyone predicting a recovery in the second half of the year is not thinking too clearly. Extending more loans is throwing good money after…
That second to last page in the first section of the Wall Street Journal continues to offer up commentary that you just don’t see elsewhere in the mainstream media.
Over the last month or so, as it has become increasingly clear that our monetary system may be at the root of many of our current problems, there were at least three calls for a new monetary order, all of which involved gold in some way. See the following references from back in November:
(Hmm… maybe I should be more demanding when crafting the titles to these posts – it seems to have had the desired effect.)
Today, Peter Schiff weighs in with some quite sensible arguments regarding the recent mania in economic stimulus programs around the world, figuring that maybe the free market would be better off deciding who wins and loses rather than governments.
As recession fears cause the nation to embrace greater state control of the economy and unimaginable federal deficits, one searches in vain for debate worthy of the moment. Where there should be an historic clash of ideas, there is only blind resignation and an amorphous queasiness that we are simply sweeping the slouching beast under the rug.
With faith in the free markets now taking a back seat to fear and expediency, nearly the entire political spectrum agrees that the federal government must spend whatever amount is necessary to stabilize the housing market, bail out financial firms, liquefy the credit markets, create jobs and make the recession as shallow and brief as possible. The few who maintain free-market views have been largely marginalized.
It is rather remarkable that the only discussion you…
In today’s commentary at Bloomberg, Michael Sesit consults with the "Bond King" on what many call the biggest and baddest bubble of them all – U.S. debt.
To Bill Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., the answer is yes. “Treasuries have some bubble characteristics, certainly the Treasury bill does,” Gross said earlier this month. “A Treasury bill at zero percent is overvalued. Who could argue with that in terms of the return relative to the risk? There is no return.”…
The bursting of a bubble in the U.S. government bond market would be a perilous event.
First, it would cause large losses for millions of investors, especially U.S. retirees who regard Treasury securities as the ultimate safe investment.
Second, it might threaten Treasuries’ status as the global “risk-free asset” and would damage the international stature of the U.S. Foreigners, who own about half of all Treasuries, might stop funding the country’s growing trade and budget deficits without an increase in U.S. interest rates.
Finally, a busted Treasury-market bubble could undermine the dollar’s global reserve-currency status, which in turn would spell higher U.S. interest rates, undercutting economic growth.
As difficult as these conditions are, however, the Obama administration also inherits an economy with great potential for the medium and long terms. Investments in an array of areas — including energy, education, infrastructure and health care — offer the potential of extraordinarily high social returns…
In this crisis, doing too little poses a greater threat than doing too much. Any sound economic strategy in the current context must be directed at both creating the jobs … and doing the work that our economy requires. … Our president-elect … is crafting a broad proposal, the American Recovery and Reinvestment Plan, to support the jobs and incomes essential for recovery while also making a down payment on our nation’s long-term financial health.
A key pillar of the Obama plan is job creation. In the face of deteriorating economic forecasts, Obama has revised his goal upward, to 3 million. …. The Obama plan represents not new public works but, rather, investments that will work for the American public. Investments to build the classrooms, laboratories and libraries our children need to meet 21st-century educational challenges. Investments to help reduce U.S. dependence on foreign oil by spurring renewable energy initiatives… Investments to put millions of Americans back to work rebuilding our roads, bridges and public transit systems. Investments to modernize our health-care system, which is … key to driving down costs across the board. …
We must focus not on ideology but on drawing the best ideas from all quarters. That is why, for example, in key sectors such as energy, Obama is pushing for both public investments and the removal of barriers to private investment. It is also why his plan relies on both government spending and tax cuts to raise incomes and promote recovery. …
There will be no earmarks. Investments will be chosen … based on what yields the highest rate of return for the economy and monitored closely not just by officials but also by the public…
There’s much discussion occurring regarding the triangle formation occurring in the major US Equity Indexes. Let’s focus for a moment on the DIA (Dow Jones ETF) and see this triangle in action.
DIA Daily chart:
The structure is still the same – price is in a confirmed downtrend with price making lower lows and lower highs, and the orientation of the key daily moving averages is in the most bearish position possible (20 beneath the 50 which is beneath the 200).
There are two interesting divergences playing out and perhaps resolving: First is the positive momentum divergence that set-in on the November price lows which preceded the current ‘rally,’ while the second divergence is the non-confirmation from volume into the recent rally – albeit we are experiencing “holiday volume” which throws off volume analytics for the time being.
The 50 day EMA continues to supply price resistance, while price meanders through its flat 20 day EMA. Moving averages have less significance generally when they are ‘flat,’ or the market is in a consolidation phase (as is evidenced by the current price contraction which resembles a triangle formation).
It would be significant if price could break above the $90 level or beneath support at the $80 level.
Let’s pull the perspective back and add in a key possible Elliott Wave count.
DIA Weekly Chart (with selected Elliott Waves):
I’ve simplified this chart because I want you to focus closely on the triangle pattern that has formed on the chart – it’s much more evident in the weekly chart than the daily.
Whatever you want to call this move, it is clear that it is a consolidation pattern that can also be known as a “corrective” or ‘counter-trend’ structure.
Going back to the price structure, price remains in a persistent downtrend which is confirmed by the structure of the key weekly moving averages (again, now in the ‘most bearish orientation’ possible).
This Elliott Wave count assumes that we are still in the larger scale Wave 3 down which has been horrendously destructive to investors, and that fractal Wave 5 is perhaps yet
The signs were there. Period. And the SEC decided to lazily ignore the problem and is continuing to claim jurisdictional road blocks. It argued that Mr. Madoff didn’t register as an investment advisor, but that is not true. He was registered in 2006 and the SEC was required to examinie his operation then, and every five years thereafter.
In light of its recent performance, to make excuses at this point this is nothing less than insulting to investors.
Our financial regulatory system has failed. Therefore, steps must be taken to correct the problem now. If the United States wishes to remain the financial capital of the world, we must take a leadership role immediately.
Many factors such as securitization, leverage, asset bubbles, conflicts and outright fraud contributed to the economy’s downfall. But in general, I believe that it is self-regulation and inadequate oversight that provided the essential glue for the confluence of issues that have led to the economy’s collapse. One needs to not look any further than the fact that Bernie Madoff himself presided over the NASDAQ, which at the time served as one of the key financial regulators overseeing him and those of his ilk. Moreover, he was able to perpetrate his alleged schemes knowing the SEC was asleep at the wheel.
Nearly at every turn there are examples of Wall Street’s influence over regulation:
For example, in 2002 Wall Street successfully lobbied the SEC to adopt directives that would be “equivalent” to proposed European Union (E.U.) regulation that would have put the big five U.S. investment banks under the umbrella of E.U. regulatory authority. In response, the SEC, perhaps unwittingly, created as
As far back as 2001 questions were being raised about Madoff’s funds and alleged performance but apparently not by the SEC. The questions made it to Barrons. Here’s the article. H/T to Michael Covel.
BARRONS, Monday, May 7, 2001
Don’t Ask, Don’t Tell, Bernie Madoff is so secretive, he even asks investors to keep mum
By ERIN E. ARVEDLUND
Bernie Madoff might as well hang that sign on his secretive hedge-fund empire. Even adoring investors can’t explain his enviably steady gains.
Two years ago, at a hedge-fund conference in New York, attendees were asked to name some of their favorite and most-respected hedge-fund managers. Neither George Soros nor Julian Robertson merited a single mention. But one manager received lavish praise: Bernard Madoff.
Folks on Wall Street know Bernie Madoff well. His brokerage firm, Madoff Securities, helped kick-start the Nasdaq Stock Market in the early 1970s and is now one of the top three market makers in Nasdaq stocks. Madoff Securities is also the third-largest firm matching buyers and sellers of New York Stock Exchange-listed securities. Charles Schwab, Fidelity Investments and a slew of discount brokerages all send trades through Madoff.
Some folks on Wall Street think there’s more to how Madoff (above) generates his enviable stream of investment returns than meets the eye. Madoff calls these claims “ridiculous.” But what few on the Street know is that Bernie Madoff also manages $6 billion-to-$7 billion for wealthy individuals. That’s enough to rank Madoff’s operation among the world’s three largest hedge funds, according to a May 2001 report in MAR Hedge, a trade publication.
What’s more, these private accounts, have produced compound average annual returns of 15% for more than a decade. Remarkably, some of the larger, billion-dollar Madoff-run funds have never had a down year.
When Barron’s asked Madoff Friday how he accomplishes this, he said, “It’s a proprietary strategy. I can’t go into it in great detail.”
Nor were the firms that market Madoff’s funds forthcoming when contacted earlier. “It’s a private fund. And so our inclination has been not to discuss its returns,” says Jeffrey Tucker, partner and co-founder of Fairfield Greenwich, a New York City-based hedge-fund marketer. “Why Barron’s would have any interest in this fund I don’t know.” One of Fairfield Greenwich’s…
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
A little while ago I shared 6 ways to improve decision making. In response I received a number of comments, the most insightful of which I'd like to share with you today. My main point in the previous article was that information, together with a strong filtering process, form the basis for making sound decisions.
I love these emails. You write essentially about what it all comes down to which i...
Note from dshort: I've updated this series to include the data in yesterday's Federal Reserve release of the 2014 Z.1 Financial Accounts for Q2. Based on data extrapolations through the current close, the Q Ratio is 70% above its arithmetic mean and 83% above its geometric mean. The current valuation level is surpassed only by the turn-of-the-century Tech Bubble.
The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Fortunately, the government does the work of accumulating the data for the calculation. The numbers are supplied in the Federal Reserve ...
The present global financial ‘crisis’ began in 2007-8. It is not nearly over. And that simple fact is a problem. Not because of the life-choking misery it inflicts on the lives of millions who had no part in its creation, but because the chances of another crisis beginning before this one ends, is increasing. What ‘tools’ - those famous tools the central bankers are always telling us they have – will our dear leaders use to tackle a new crisis when all those tools are already being used to little or no positive effect on this one?
Administradora de Fondos de Pensiones Provida S.A. (PVD) shares will not be trading on the NY Stock Exchange after today. Tomorrow, shares will be harder to sell. Strangely, I wasn't able to find information on the internet, but Paul just sent me a copy of the email he received from Interactive Brokers.
We're selling PVD out of the Virtual Portfolio today at $87.18.
From: Interactive Brokers dated July 18, 2014
Holders of AFP Provida S.A. American Depository Receipts (ADR) are advised that the Company has elected to terminate the Deposit Agreement effective 2014-09-18.
Although the stock market displayed weakness last week as I suggested it would, bulls aren’t going down easily. In fact, they’re going down swinging, absorbing most of the blows delivered by hesitant bears. Despite holding up admirably when weakness was both expected and warranted, and although I still see higher highs ahead, I am still not convinced that we have seen the ultimate lows for this pullback. A number of signs point to more weakness ahead.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-r...
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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
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The CBOE Vix Index is in positive territory on Friday morning as shares in the S&P 500 Index move slightly lower. Currently the VIX is up roughly 2.75% on the session at 13.16 as of 11:35 am ET. Earlier in the session big prints in October expiry call options caught our attention as one large options market participants appears to have purchased roughly 106,000 of the Oct 22.0 strike calls for a premium of around $0.45 each. The VIX has not topped 22.0 since the end of 2012, but it would not take such a dramatic move in the spot index in order to lift premium on the contracts. The far out-of-the-money calls would likely increase in value in the event that S&P500 Index stocks slip in the near term. The VIX traded up to a 52-week high of 21.48 back in February. Next week’s release of the FOMC meeting minutes f...
Despite the various opinions on Bitcoin, there is no question as to its ultimate value: its ability to bypass government restrictions, including economic embargoes and capital controls, to transmit quasi-anonymous money to anyone anywhere.
Opinions differ as to what constitutes "money."
The English word "money" derives from the Latin word "moneta," which means to "mint." Historically, "money" was minted in the form of precious metals, most notably gold and silver. Minted metal was considered "money" because it possessed luster, was scarce, and had perceive...
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
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