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alstry (35.69)

Madoff was GOLD

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December 15, 2008 – Comments (8)

For those in the inner circle....Madoff was better than gold.  During times of easy money, it is easy to conceal problems when you can leverage to hide issues.  Now we are deleveraging.  Sales evaporating.  Earnings crashing.  Fraud surfacing.  My guess is that what we have seen so far is just the tip of the iceberg.

Forensic accounting is a hobby of mine.....this was easy to spot last year.  You will see it trickle over to public companies in the not too distant future.  Now you know why I complain so much about the integrity of financial statements.

Madoff was exposed because his clients were asking for money to compensate for their other accounts going down......they were still happy with Madoff.  It is just that Madoff didn't have enough to give everyone back their money.  Now managers are liquidating everywhere....we shall see how much money is really left to pay investors.

You think the stock market is any different?

8 Comments – Post Your Own

#1) On December 15, 2008 at 2:29 PM, alstry (35.69) wrote:

What do you think the investors who had money in the funds that had money with Madoff are doing today????

Liquidation can beget liquidation creating even more liquidation.

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#2) On December 15, 2008 at 3:10 PM, icesword2 (49.79) wrote:

Why hasn't the market sunk lower than 2% yet today?  Who wouldn't expect a crash after the news we've had this weekend?

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#3) On December 15, 2008 at 3:10 PM, 4everlost (30.37) wrote:

alstry

I really enjoy your approach where you report and I decide.  Forensic accounting is what you do after a company is dead.  How did it help you spot trouble in this fund?

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#4) On December 15, 2008 at 3:43 PM, alstry (35.69) wrote:

4ever, 

I actually wasn't referring to the Madoff situation specifically.  Although I must admit today's blog could reasonably lead one to that conclusion.

As you know, in the past, my blogs are replete with complaints about the integrity of financial statements and analyst recommendations on seemingly insane assumptions.

The "this" I was referring to in my blog is the ever increasing adverse feedback loop we are experiencing as a result of a systematic breakdown of fair and accurate reporting across many levels.  My blogs are public and open for anyone to review.  I always encourage oposing opinions and clarifications.

Thanks for the input.  I have little doubt this will get much much worse.  I have little doubt you will agree with me as well.

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#5) On December 15, 2008 at 4:02 PM, socialconscious wrote:

I notice any investigation of any entity any time is being called forensic if you break it down slowly. Therefore diagnostic medicine could be considered forensic if you took your time.

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#6) On December 15, 2008 at 4:08 PM, socialconscious wrote:

Seriously deleveraging is melting the Iceberg to borrow your analogy Alstry and there is much dirt. I have to agree that there are going to be alot of nasty suprises from trsuted names that will scare the market. I do believe most of the bad news is baked in but the suprises coupled will ALT-A will unfortunately provide a roller coaster ride for 2009.

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#7) On December 15, 2008 at 4:09 PM, socialconscious wrote:

The only gold may be shorts and maybe gold.IMHO my nickle.

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#8) On December 15, 2008 at 4:58 PM, jegr5347 (< 20) wrote:

As a former auditor, I can tell you that there is very little one can do when you have a financial statement auditor in fraud collusion with the issuer of the financial statements. Facts and circumstances sorroundng the audit firm of the Madoff company are still surfacing but I can tell you the audit procedures to test the balance sheet of a money management company are very simple.

Apparently this CPA had no misgivings about selling his name and license to Madoff for what appears to be a handsome fee. It is highly unusual to find an external CPA that would risk jail time for this type of scam. As a trial lawyer, Alstry would tell you gross negligence is very hard to prove unless you have someone as wreckless as this auditor. These types of fraud are not common.

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