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Geetesh Bhardwaj: His Firm AIG Invests with CTAs

Trend following critic Geetesh Bhardwaj has provided interesting hypocrisy here (and for my new edition of “Trend Following”), but the email that came in below from a trend following CTA is a topper. As you read it keep in mind that Geetesh worked at AIG and has written a paper ripping trend following (while he worked at AIG):

Great stuff with Geetesh…Very entertaining reading. Here’s a bit of irony for you – we manage a significant amount of money for AIG and have done so for several years!

Not really a surprise.


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Pardo Capital

Bob Pardo writes very good books on trading systems. He also trades as a trend follower. His annual compounded rate of return:

2003: +27.65%
2004: +4.84%
2005: -14.65%
2006: -15.13%
2007: +63.71%
2008: +114.62%

To those Madoff defenders on here who keep saying that no one could have known that 1% a month every month was a sign of trouble, take a look at Pardo. You don’t win every month and you don’t win every year. More from Pardo:

+19.08%; 11-2008
+114.62; YTD 2008
+937.41; Since Inception 06-1999
+27.92%; ARR Since Inception 06-1999

The Madoff Investor JEHT Foundation, created by Jeanne Levy-Church, Shocked to Lose their Endowment

From the New York Times today:

When Jeanne Levy-Church created the JEHT Foundation in 2002 to promote justice, equality, human dignity and tolerance, she tapped into investments run by Bernard L. Madoff. Those investments were initially made more than three decades ago by her father, Norman Levy, who entrusted his real estate fortune to Mr. Madoff. Financed solely by regular contributions from Ms. Levy-Church, the foundation gave away more than $75 million over the next few years. But on Monday, the young foundation announced that it would cease operations by the end of January – a victim of the same investments that made it a star in liberal philanthropic circles. “The returns had been steady and strong for all these years,” said Robert Crane, the foundation’s chief executive. “It was shocking.”

 

jeanne levy church lost a lot of money to Bernard Madoff
Jeanne Levy Church got caught out in one of the largest frauds ever seen through having her investments looked after by the Bernard Madoff scheme. He ran a Ponzi scheme that made use of his high level position to backdate trades and to manipulate client account statements.

What was shocking? That the good thing that made no sense, the good thing that produced such easy money for so long, was finally exposed as a con? Think I am too harsh? Well, it is clear that some very wealthy people are currently all over the media with “I don’t know what happened” cries. It rings hollow.

Madoff Clients: Case Studies for Colleges Classes for Decades

From the AP today:

When local officials in Fairfield, Conn., heard of Madoff’s arrest “it set off every bell,” said Paul Hiller, the town’s chief fiscal officer. The town’s employees board and police and fire board — which cover 971 workers — had $41.9 million invested with Madoff, said Paul Hiller, Fairfield’s chief fiscal officer. Town officials immediately notified their investment fund to liquidate. “At that point, it was too late,” he said. “We obviously didn’t ask enough questions,” Hiller said.

Continuing:

New Jersey Sen. Frank Lautenberg, one of the wealthiest members of the Senate, entrusted his family’s charitable foundation to Madoff. Lautenberg’s attorney, Michael Griffinger, said they weren’t yet sure the extent of the foundation’s losses, but that the bulk of its investments had been handled by Madoff.

The bulk? Go figure. Easy come, easy go. Here is the full list of “innocents”…I mean suckers. Don’t like my harshness? Well, this is a gross episode that goes far beyond one man.


How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

Trend Following Podcast Guests
Frequently Asked Questions
Performance
Research
Markets to Trade
Crisis Times
Trading Technology
About Us

Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Ramifications of Bernard Madoff Blowout

Consider a wire excerpt:

Now, the collateral damage is likely to add to the chaos that has already been ravaging hedge funds. Spooked by losses and forced to raise cash quickly as the financial crisis ballooned, investors have sought to pull out their money from hedge funds, causing serious pain, and even some forced closures. A growing list of large, well-known firms have sought to block redemption requests in an effort to stem a mass exodus of investors who now desperately want to get into cash. In a letter sent Friday, the Citadel Investment Group said it was halting redemptions at its two largest hedge funds through March 31. Confidence will only weaken further with the Madoff firm scandal, intensifying pain for the industry. “If you couple this with the deleveraging already, this means one thing: more redemptions,” said Campbell R. Harvey, a professor at the Fuqua School of Business at Duke University.

So is this a bullish sign for U.S. stocks? Heavy sarcasm.

Bernard L. Madoff: Introducing the Hedge Fund with the Most Gullible Clients on the Planet

This one is a doozy:

The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses. Madoff told senior employees of his firm on Wednesday that “it’s all just one big lie” and that it was “basically, a giant Ponzi scheme,” with estimated investor losses of about $50 billion, according to the U.S. Attorney’s criminal complaint against him. A Ponzi scheme is a swindle where early investors are paid off with money from later investors. The $50 billion allegedly lost to investors would make Madoff’s fund one of the biggest frauds in history. When Enron filed for bankruptcy in 2001, one of the largest at the time, it had $63.4 billion in assets. U.S. prosecutors charged Madoff, 70, with a single count of securities fraud. They said he faces up to 20 years in prison and a fine of up to $5 million. “Madoff stated that the business was insolvent, and that it had been for years,” Lev Dassin, acting United States Attorney for the Southern District of New York, said in a statement. The Securities and Exchange Commission filed separate civil charges against Madoff. Authorities said that, according to a document filed by Madoff with the U.S. Securities and Exchange Commission on January 7, 2008, Madoff’s investment advisory business served between 11 and 25 clients and had a total of about $17.1 billion in assets under management. Those clients may have included other funds that in turn had many investors. The SEC said it appeared that virtually all of the assets of his hedge fund business were missing. An investor in the hedge fund said it generated consistent returns, which was part of the attraction. Since 2004, annual returns averaged around 8 percent and ranged from 7.3 percent to 9 percent, but last decade returns were typically in the low-double digits, the investor said. The fund told investors it followed a “split strike conversion” strategy, which entailed owning stock and buying and selling options to limit downside risk, said the investor, who requested anonymity. Jon Najarian, an acquaintance of Madoff who has traded options for decades, said … “Many of us questioned how that strategy could generate those kinds of returns so consistently.” Najarian, co-founder of optionmonster.com, once tried to buy what was then the Cincinnati Stock Exchange when Madoff was a major seatholder on the exchange. Najarian met with Madoff, who rejected his bid. “He always seemed to be a straight shooter. I was shocked by this news,” Najarian said. “Bernard Madoff is a longstanding leader in the financial services industry,” his lawyer Dan Horwitz told reporters outside a downtown Manhattan courtroom where he was charged. “We will fight to get through this unfortunate set of events.” A shaken Madoff stared at the ground as reporters peppered him with questions. He was released after posting a $10 million bond secured by his Manhattan apartment. “Our complaint alleges a stunning fraud — both in terms of scope and duration,” said Scott Friestad, the SEC’s deputy enforcer. “We are moving quickly and decisively to stop the scheme and protect the remaining assets for investors.” Madoff had long kept the financial statements for his hedge fund business under “lock and key,” according to prosecutors, and was “cryptic” about the firm. The hedge fund business was located on a separate floor from the market making business.

Wow. Who are the suckers who lost the money here? Wonder if State pension funds got losses in there.

Geetesh Bhardwaj Is the Tool for the Attack; Mutual Funds Go After Trend Following

Follow along with this chain of events:

1. I made this post in November about Geetesh Bhardwaj at AIG who was criticizing trend followers.

2. Within a few weeks of my original post I noted on a new post that Geetesh Bhardwaj was now at Vanguard. Trend followers make fortunes in October 2008 and a mutual fund that has just been devastated is leveling criticism. I thought it was odd to say the least.

Now? The author Geetesh Bhardwaj has clearly noticed that I have been posting about him and his work. He posted here today:

If my affiliation is the only criticism that you have of the results, I am vindicated. So stop taking about who I work for and start justifying the industry wide Sharpe Ratio of 0.09 to your invstors [sic]. You have been stealing investor money for too long, 2-20 for trend following really?????

Let me get this straight:

1. Bhardwaj worked at AIG until a few weeks ago.
2. Bhardwaj now works at an index mutual fund – Vanguard.
3. Bhardwaj, who clearly wants to show off his intellectual prowess, thinks the Sharpe ratio is a fair measure of trend following traders. It is not. Read (PDF).

Bhardwaj is a pawn of the mutual fund industry. The mutual fund industry spends millions through lobbying in Washington and propaganda (i.e “academic research”) to keep trend following traders from advertising their performance. Why do this? The mutual fund industry has a stranglehold on the average investor that they don’t want to lose. They keep the average guy stuck in ‘long only’ dead-end strategies to spin off their massive fees. Bhardwaj is no prophet. His attack is transparent and ignorant. When the immediate retort back is, “Sharpe Ratio”, you know the dice were loaded.