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Tacoma News Tribune – Tucked among the hedge funds and the famous names on Bernard Madoff’s client roster is an unlikely group of about 800 people – strangers to one another, yet all listed at the same anonymous Denver address.
Now, they are discovering a painful common bond, shared with at least two previous groups of stung investors. For at least the third time in as many years, the company behind Denver PO Box 173859 has turned up as a go-between in a collapsed Ponzi scheme.
The address belongs to Fiserv Inc., which served as middleman for Madoff and scores of regular Joe-and-Jill investors: dentists and doctors, insurance salesmen and builders who trusted Madoff to manage specialized individual retirement accounts.
Their losses with Madoff, together with earlier cases, raise questions about Fiserv and the risks inherent in what are known as self-directed IRAs. These financial products are an increasingly popular way of letting people invest in real estate or small businesses and other less-traditional investments.
Tacoma News Tribune – Year after year, the hedge fund industry dazzled Wall Street by delivering “absolute returns” – outsized profits whether markets rose or fell. Using sophisticated trading models, the pools of managed capital made wealthy people wealthier with eye-popping returns that carried seemingly moderate risk.
Not these days. Blind-sided by a colossal market collapse and the widening Bernard Madoff scandal, hedge funds suffered their worst showing on record last year. And they’re bracing for more pain in 2009. The industry’s fall proves that even the quantitative brilliance and market wizardry of elite hedge funds are no magic bullet for investors during brutal times.
“Hedge fund managers have always said, ‘Look, we know how to make money even in difficult times,’ and that turns out to be a fallacy,” said Timothy Brog, portfolio manager of New York-based hedge fund Locksmith Capital Management.
Tacoma News Tribune – It was a year of disillusionment, betrayal and excruciating pain for investors.
Wall Street got investing so wrong that the financial system needed an emergency $700 billion transfusion of taxpayer money to avoid collapse, and investors lost trillions of dollars of their life’s savings.
For the regular person with a 401(k), it didn’t help much if they obeyed the lessons of sound investing. Although investors are told that diverse mutual fund choices will help them get through a stock market downturn, the practice didn’t save them from a miserable 2008.
As the stock market plunged more than 50 percent from its October 2007 high, everything but U.S. Treasury bonds suffered drastic losses – real estate, commodities, U.S. stocks, international stocks and even hedge funds, municipal bonds and corporate bonds. As investors panicked and headed for the exits, strong and weak investments were sold. Virtually nothing was immune.
“All 10 sectors within the Standard & Poor’s 500 fell, from a 22 percent slump for consumer staples to a 74 percent thrashing for the financials,” said Standard & Poor’s chief investment strategist Sam Stovall.
Times of Malta – The situation in the international financial markets, although still displaying signs of uncertainty, seems to be settling down. Governments in the major economies, US, UK, Germany, France and Italy, no longer seem to be chasing fairies (or bad witches!), but appear to have got ahead of the situation.
The money markets (which were a major issue) are getting unblocked and as such even interbank lending rates are going down. However, this does not mean that the world has solved all its economic problems. We have simply gone back to the situation of a few months ago, when there was already fear of an international economic slowdown resulting from the increases in the price of oil and the consequent rise in inflation.
The recapitalisation of financial institutions by different governments, the partial or full re-nationalisation of such institutions and the continued provision of liquidity by governments to the financial system have restored a level of confidence that at last allows the system to function, even if not at an optimum, at least to an acceptable level.
