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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (33037)12/14/2008 3:06:01 AM
From: Madharry2 Recommendations  Read Replies (1) of 78774
 
I read the article in the ny times and several points struck me;

1. Complacency - they produced decent consistent results for decades. after awhile customers accepted the black box approach and didnt care that the financial were audited by some unknown firm. See lehman bear stearn, aig, maybe gm too.

2. What happened to diversification? how does a charitable organization have all their funds in one place?

3. The hired gun approach. is the hired gun responsible?
Many of the investors who were burned had no idea they were investing with Madoff they entrusted their money to a manager who in turn invested in a madoff fund.

This is similar in my view to those foolish cfo-s who took their companys short term cash and put it to work in auction rate securities at a rate marginally better than t bills and are now stuck with it for multiple years. I expect we will see lots of lawsuits and a withdrawals from funds of funds after this fiasco.

The lessons that are here for the taking are: its foolish to believe that because some name has invested in a ________________ thats it ok because they have vetted it.

investors have to do their own due diligence. If we dont understand the way they make or lose money and the risks that are being taken, the investment should not be big no matter how well the company or shares have performed in the past.

I guess for me that means listening to the conference calls and reading the sec reports more carefully than I have been.
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