The Owner's Name is on the Door.

"In an era of faceless organizations owned by other equally faceless organizations, Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner's name is on the door. Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark.”

All of the above is straight off the Bernard L. Madoff Investment Securities website. Of course you have to get behind the message on the front page from The Honourable Louis L. Stanton, Federal Judge.

Take a look at that statement above again and try to see how far the mendacity really goes. One has to wonder how this man has managed to break the old rule about fooling all the people all the time for so very long. It also begs the question as to how many other nightmares there are still to come out blinking into the sunshine. Well I have a large selection of old, and incredibly bad taste, sunspecs at the ready for them.

Not everybody was fooled though. Jim Vos, investigating on behalf of potential clients, found that the auditors, an accounting firm Friehling and Horowitz, occupied a single room (13' x 18') in Rockland County, upstate New York. Now this is an accounting operation that doesn’t even have a website!

Reports abound of the number of people who have been caught on this one, including none other than the City of London ‘wonderwoman’ herself. Yes I speak of that near deity, Nicola Horlick. Some of her comments had me reaching for the Vintage stuff I can tell you.

First up from Nicola herself, this little gem. ”It is astonishing that this apparent fraud seems to have been continuing for so long, possibly for decades.” This fooling of people in general would include you then would it Nicola? She then, amazingly, went on to claim that Madoff’s advisers said the firm had been subjected to a full-scale investigation by the US Securities and Exchange Commission twice in the past two years. Well I don’t know about you dear reader, but if I was told something I had millions in was under that kind of scrutiny, I would have exited some time back. Naturally she went on to explain her investment outfit, ‘Bramdean’ was about to redeem some money from the Madoff fund when the scandal broke. Some money? What about all of it? Then with nonchalance that confounds belief, she went on to say “I never met Madoff — he didn’t meet any investors. All contact was through these feeder funds that supplied him with the capital. The strategy we were supposedly buying into was very conservative.” So let me get this straight Nicola, you buy into something paying way over the normal rates of return, furthermore, you don’t even get to meet the sage behind this, yet you believe the statement you are buying into something very conservative. Phew, now I know where I have been going wrong all my life. Then as if that wasn’t enough, she went on to say “There was extensive due diligence being conducted on the funds by our advisers, who are part of Man Group.” This would be the same Man Group who’s shares have enjoyed a dizzying ride from £6.39 to as low as £1.69 per, in these last 12 months would it? One can safely assume this is the same Man Group with near on £240 million of its own funds deposited with Madoff. One wonders if they had the wherewithal to find out if Madoff’s Accountants were the small time operation mentioned previously. Glad to know all the experts have such a grip on matters.

A quick visit to Bramdean’s website does actually tell one everything required.

Some nuggets of wisdom include; ‘We invest on a global basis across the whole alternative assets class.’ Glad to read it, for a moment there I thought you were just handing the moolah onto others to do your work for you.

Then there is the statement ‘Diversification across a broad spread of investments is an appropriate approach to spreading the risk within an investment portfolio’. Well I never. Glad you told me that because I would never have worked that one out for myself.

Then another says ‘Well-balanced portfolios increasingly include an allocation to alternative investments’ I think less said the better, don’t you?

Finally, and chillingly, there is this statement. ‘Our door is open, please get in touch if you would like to introduce us to your funds’ I can see it now like some awful dream after too many glasses of the Vintage stuff... I lead my funds in on the collar and lead; they sit there patiently, tail wagging, while I introduce Nicola and her crew to them. “Funds, meet Nicola, Nicola, meet Funds”….”Funds! Stop that immediately you dirty beast!”

Pip pip

So what next?

OK, so the banking crisis hit. Lehman’s collapsed and banks need bailing out to stop them going to the wall. Then they needed more. Now it seems some major non banking companies are going for handouts. This last point is a fascinating study in social economics. What happens if thousands of corner shops start keeling over due to poor management and not seeing this whole situation coming? Will they be able to ask for handouts because of their own incompetence? Hardly, but then they don’t really bring votes do they. Now on this last point far be it for me to infer that certain industries are being chosen now because of the impact their collapse would have on a voting public, I digress. So all the above still does not seem to be stopping the rot, so central banks slash rates again. This time the Bank of England has reduced rates to a point unheard of in living memory. But what’s this? The retail bankers are pointing out that this makes little difference as the cost of lending to each other remains steadfastly higher. Now at this point, one should kick off one’s shoes, put the aching feet up and reach for the Port, as this could prove to be more spectator sport. Sure enough it does.

Slowly but inexorably the battle lines are being drawn. Yes the Governments have bailed out the Banks around the world. But the realisation is dawning on them that this action has not created a pet for them to show off whenever they feel the need to buy some votes, no indeed. The banks, on the other hand, are learning fast that there is a hefty price to be paid for allowing these new masters in disguise into their portals, watch this space.

But what of these leaders of countries? What exactly are they doing? Well old Gordy Broon is strutting his stuff, telling anyone within earshot that his way is the only way, less said there I think, don’t you? George Dubya doesn’t really care any more, he’s had enough and now looks forward to moving to his new home, in an ultra-chic North Dallas enclave of Preston Hollow next year. Sarkosy, on the other hand, still dives about with all the energy of a whippersnapper overdosing on Red Bull. His latest idea is to throw more money at the problem. I am just so disappointed in these Politicians aren’t you? Can’t they think of something else? Sorry, scrub that question, of course not, they are Politicians and as such have the imaginations of retarded toadstools.

So anyway, it seems ‘Sarko’ recently announced a $33 billion economic stimulus plan, including cash payments to the poor, a bigger rebate on new-car purchases and a speedup in high-cost public works projects. This is after, of course, he has had another jibe or two at the cause of all this, the dreaded Americans.

The extra government spending in France, one of the 15 euro countries, implied a willingness to assume further public debt, already estimated at more than 3 percent of the French economy, and contradicted Sarko's campaign pledges to cut official spending and produce a leaner government. But officials emphasized that the measures were designed to be temporary and that much of the money could be considered investment that would bring growth. Don’t say a word dear reader, just take a deep breath; we can all see where this is going to end up, why don’t they? Simple, I refer you to 2 paragraphs above.

"We do not have a choice," Sarko said in a speech at Douai, in northern France. "Doing nothing would cost us a lot more…” That would be a bit like your normal way of doing things then would it?
Critics, however, accused Sarko of doing too little, too late. "These are baby measures, not in proportion to the problem," said Ségolène Royal. Sarko delivered his speech next to a Renault plant, never one to miss a trick is he. "Our response to the crisis is investment," he said. Meanwhile The Finance Ministry's National Institute for Statistics and Economic Studies reported in early December that unemployment rose by a tenth of a percentage point in the third quarter and now affects 7.3 percent of the workforce in mainland France. The numbers confirmed anecdotal reports of job losses across the country since the slowdown began

One of these fine days our self important, self congratulatory, puffed up, pompous politicians will wake up and smell the coffee. Meanwhile we just keep on keeping on.

"How much?"

“Our job is to set a tone at the top to incent (sic) people to do the right thing, and to set up safety nets to catch people who make mistakes or do the wrong thing, and correct those as quickly as possible. And it is working. It is working”.

The above is a quote made by Chuck Prince, then CEO of Citigroup from the New York Times back in 2006. Recently The New York Post ran a headline exclaiming: 'Bounce These Bozo Bankers', how things change. Bearing the brunt of the anger now swirling around like some poisonous whirlpool is Robert Rubin, a man who has worked at a senior level at Citi for almost a decade, taking some $107m in compensation in the process. It was Rubin, some claim, who pushed the firm's traders into taking more risk and who is largely responsible for Citi's current parlous position (asset write downs now around $65bn). Former CEO Chuck Prince (now you really have to agree with me, that is one serious name!) is also being blamed, with The New York Times quoting one insider who said: 'He didn't know a CDO from a grocery list', and Saudi Prince Alwaleed bin Talal, Citi's largest individual stockholder, confirming that he was 'sorry for appointing' him.

Well that’s ok then. I will sleep more soundly knowing that the Prince is ‘sorry’.

However, word reaches me that Rubin, who has taken some $115 million in compensation from Citigroup since 1999, is telling anyone who will listen and, let’s be honest, those numbers are reducing daily that he could have gone elsewhere for more moolah. Is it me, or am I the only one who is beginning to wonder of things haven’t got just a tad out of hand? Here we have a guy who has been a major part of the biggest banking debacle in history not showing an ounce of remorse, in fact, quite the opposite. Rubin acknowledged that he was involved in a board decision to ramp up risk post 2003, but insisted that this misfired as executives executed the plan properly. This logic lost me completely I’m afraid. How bad could things be? Maybe if the executives had not executed the plan properly things might be better, who knows, certainly not Rubin! He also appears to justify his compensation by suggesting that he could have got more elsewhere: His actual words were, “I bet there's not a single year where I couldn't have gone somewhere else and made more”. Some Citi investors may be wishing he had gone for all the good he appears to have done.

On a lighter note, I heard an interesting story recently regarding the Somali pirates. Fresh from extracting over £100m from the Saudis for that massive oil tanker, the pirates are said to have considered hijacking Citigroup. They all got together and plans were being drafted, when one of the cleverer gang members pointed out a fundamental flaw in their thinking – like who would pay for the company's release? The US Government? Hardly. More likely they would be happy to see the back of it! 'OK', one gang member countered, 'Why don't we at least open an account and stick our booty there?' 'Are you crazy?' responded the gang leader. 'That's far too risky. I'd rather keep the cash under my mattress. It'll be safer there'. In the end, the group decided to use the tanker money to buy Citi (not that difficult considering where the share price has been), apply for further funds from the TARP (the US Troubled Asset Relief Program), and then push off back to Somalia with it. That's apparently far more profitable than hijacking for a living, as any banker will tell you.

Talking of hijacking, the UK Government continues on its merry way with the idea that there is no reason at all why the young should not have their futures hijacked. Now when I was dealing in finance (at a very low level you understand, knocking out small loans from a secondary finance house), the customers used to call these loans ‘the glad and sorry’, in other words, glad they had the product, sorry they had to pay back the loan they took to buy said product. Now, along with everything else in the looking glass world of politics, we have the UK Government’s own peculiar inverted version of ‘the glad and sorry’. Their version is “sorry we got you into such a mess everyone, glad we won’t be around when the bill really hits.”

Go figure.