Perhaps Wall St. Really Is Just One Big Ponzi Scheme

from the finding-that-last-sucker dept

While we've always been pretty skeptical of the way Wall St. worked, at least it seemed like there was some semblance of reality on which it was based -- even if much of that foundation was a rickety house of cards. Yet, with the revelations coming out about Bernard Madoff's potentially $50 billion fraud, it makes you start to wonder if anything on Wall Street is real. Madoff admitted yesterday that his entire firm was "one big lie" and "basically, a giant Ponzi scheme." It appears that rather than paying investors back based on profits they earned, he was pulling money out of the principal from other investors -- and now there's basically nothing left. Not surprisingly, the firm's website touted Madoff's "high ethical standards." What's even more astounding is that no one happened to notice this was happening until he 'fessed up. At a time when one of the biggest things missing in the market is confidence, this is not going to help. Yes, there is some reality backing at least some of Wall Street, but people are going to have an increasingly difficult time figuring out what is real, and that's not going to encourage much investment. Conceptually, what Wall St. does is provide a very useful service for putting money to use where it's best needed as investment capital. In reality, it looks like there was an awful lot of fraud baked into the system. That's not good for anyone, and the fallout from this is not going to be pretty.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    icon
    TX CHL Instructor (profile), Dec 11th, 2008 @ 6:16pm

    This can't be good.

    This can't be good. Money is going to go to mattresses, much like it did in the 1930's.

    What a crazy world. Wasn't it bad enough that we just elected a Chicago politician with an almost completely blank resume to be POTUS?

    Yup, things are going to change.
    --
    www.chl-tx.com Without the 2nd amendment, the rest of the document is just wishful thinking. And we are almost there anyway.

     

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  2.  
    identicon
    Anonymous Coward, Dec 11th, 2008 @ 6:23pm

    You have to salute the moxie of committing fraud in the billions. If you steal, don't steal the ride, steal the train. The problem is getting away with it.

     

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  3.  
    identicon
    Anonymous Coward, Dec 11th, 2008 @ 6:28pm

    Can someone please tell me what the price of a stock is based upon? Profit? Dividend? What? Seems these days share price is based on company performance (profit) irregardless that a $50 stock might only pay $1 in dividend. So tell me again how profit helps me? Why would I buy a stock that has a 2% return? Oh, on the hopes the price goes up? But why would the next guy pay $55 for the stock when that would reduce his return to 1.8%?

    Stocks are legalized gambling. Their value is based on nothing more than the hope that the next sucker will pay you more than you payed the last sucker.

    If stock prices were based on something real like dividend, we could not have these large swings in the market. As stocks go down, return goes up assuming dividend remains the same.

     

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  4.  
    identicon
    i guess the bs is just starting, Dec 11th, 2008 @ 6:35pm

    Re: This can't be good.

    "Wasn't it bad enough that we just elected a Chicago politician with an almost completely blank resume to be POTUS?"

    relevance ?
    The two are related in your head, but is there anything real to support it ? Just what are you attempting to say ?

     

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  5.  
    identicon
    Your Gawd and Master, Dec 11th, 2008 @ 6:35pm

    Re: This can't be good.

    What a crazy world where some half-wit can start out talking about Wall Street and then switch immediately to his retarded POLITICAL agenda. Nice work there. Why didn't you throw in a "white power" statement while you were at it, Adolf.

     

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  6.  
    identicon
    grammarian, Dec 11th, 2008 @ 6:40pm

    You have principle where you should have principal.

    Apparently the scammer had the opposite problem.

     

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  7.  
    identicon
    Anonymous Coward, Dec 11th, 2008 @ 6:50pm

    Re:

    Stock prices are based on speculation, that's it and that's all. Why would you want to invest in something that is it's real value? That would be about the same as keeping your money in your wallet.

     

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  8.  
    identicon
    MikeR, Dec 11th, 2008 @ 6:52pm

    Ponzi Scheme?

    The only real difference I see is Wall Street is (mostly) legal.

     

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  9.  
    identicon
    Quantity Surveyor Man, Dec 11th, 2008 @ 7:10pm

    Its always a good idea

    It is great thinking putting gambling addicts in control of the economy, no?

    Now lets put drug addicts in charge of hospitals.

     

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  10.  
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    Mike (profile), Dec 11th, 2008 @ 7:11pm

    Re:

    You have principle where you should have principal.

    Oops. Fixed. Thanks.

    Apparently the scammer had the opposite problem.

    Ha! Indeed.

     

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  11.  
    identicon
    You are stupid, Dec 11th, 2008 @ 7:35pm

    Re:

    The value of everything is based on what someone will pay for it.

    If a company is profiting, but not paying dividends, it is growing, and hopefully increasing profits further. At some point, a 'sucker' will like the looks of that stream of income and pay a lot of money for the stock, or it will stop growing and start paying dividends.


    Stock prices are based, in part, on expected dividends, not current dividends.


    "As stocks go down, return goes up assuming dividend remains the same" That is making a HUGE assumption. Stocks go down for many reasons, but one of them is that investors don't think they'll be able to pay dividends at the same level.

    In the future, try regardless instead of irregardless. While irregardless is in the dictionary, it is only used by morons.

     

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  12.  
    identicon
    Come on, Dec 11th, 2008 @ 7:40pm

    Re: Ponzi Scheme?

    Here is the difference: Ponzi schemes pay old investors with funds from new investors. Companies(for the most part) pay all investors with the money from the company earns from doing business. Not a small difference.

    The market is real. It is based on real value, created by real companies. The values of these companies(like everything else in the world) change. That does not make them any less real.

     

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  13.  
    identicon
    No, Dec 11th, 2008 @ 7:42pm

    Re: Its always a good idea

    The world would be a better place if all the gambling addicts put their money in the stock market.

     

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  14.  
    identicon
    Anonymous Coward, Dec 11th, 2008 @ 8:42pm

    That Last Sucker

    "from the finding-that-last-sucker dept"

    The last sucker being the taxpayer to bail these guys out.

     

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  15.  
    identicon
    Mike B, Dec 11th, 2008 @ 8:52pm

    re: come on

    Did you not read this part?

    " It appears that rather than paying investors back based on profits they earned, he was pulling money out of the principal from other investors "

    That's exactly a Ponzi scheme. Which is what this was.

     

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  16.  
    identicon
    movie buff, Dec 11th, 2008 @ 8:54pm

    Fraud

    Merry Christmas from Wall Street... Madoff will never be able to repay society for the staggering amount he stole

     

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  17.  
    identicon
    Anonymous Coward, Dec 11th, 2008 @ 10:05pm

    Government sponsored Ponzi scheme

    Isn't this how the U.S. works Social Security?

     

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  18.  
    identicon
    Raymond Stride, Dec 11th, 2008 @ 10:36pm

    Ponzi Scheme

    If you think the stock market is crazy,take a look at these crooks and the software to predict the future. What is amazing is they say that "big word" over and over. INTEGRITY.
    www.TRADERTECH.COM

    22 Categories: $25,200

     

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  19.  
    identicon
    Twinrova, Dec 12th, 2008 @ 3:56am

    One step closer...

    "That's not good for anyone, and the fallout from this is not going to be pretty."
    We can all only hope this statement is true.

    Yes, I know, many of you think I'm completely nuts to expect a depression, but it's time for one.

    Only then will people sit back and redefine what "business" is all about.

    Here's a damn hint for you: IT'S NOT JUST ABOUT PROFITS!

     

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  20.  
    identicon
    Anonymous Coward, Dec 12th, 2008 @ 4:25am

    Re: Re:

    Wow, I can't use a word that is in the dictionary now? I guess you know better than Webster? Oh if only I were so smart. I must beg forgiveness from you, the mental giant.

     

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  21.  
    identicon
    Anonymous Coward, Dec 12th, 2008 @ 6:25am

    Let me be clear , after what Nardelli did to Home Depot i would not buy a Chrysler if they gave it to me at half
    price.

     

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  22.  
    identicon
    Anonymous Coward, Dec 12th, 2008 @ 6:28am

    I would sell all stock right now before we realize that
    wall street is just a big ponzi , who before their fall are
    trying to suck the government into it along with the next
    generation who is gona have to pay for it.

     

    reply to this | link to this | view in thread ]

  23.  
    identicon
    Anonymous Coward, Dec 12th, 2008 @ 6:28am

    I would sell all stock right now before we realize that
    wall street is just a big ponzi , who before their fall are
    trying to suck the government into it along with the next
    generation who is gona have to pay for it.

     

    reply to this | link to this | view in thread ]

  24.  
    identicon
    Anonymous Coward, Dec 12th, 2008 @ 7:40am

    Re: This can't be good.

    You obviously hit a nerve with a few bleeding hearts.

     

    reply to this | link to this | view in thread ]

  25.  
    identicon
    Anonymous Coward, Dec 12th, 2008 @ 8:44am

    Re: This can't be good.

    Without the 2nd amendment, the rest of the document is just wishful thinking. And we are almost there anyway.

    That is quite possibly the stupidest statement I have ever read. Except maybe for the rest of your asinine comment.

    What a crazy world. Isn't it bad enough we let people like you out on the streets?

    And before you reach some other stupid conclusion, I am a gun owner, a conservative and a Christian. You're just an id10t.

     

    reply to this | link to this | view in thread ]

  26.  
    identicon
    Tom, Dec 13th, 2008 @ 6:43am

    Editorial of Editorial

    Hey Mikey

    This is not news, or commentary, or editorial. It is a summary of something you heard on the wire. How about sticking your neck out a little and forming a new thought.

     

    reply to this | link to this | view in thread ]

  27.  
    identicon
    Mike, Dec 14th, 2008 @ 10:52am

    Perhaps? No, _*definitely*_

    From the mythology of "economies always expand" that's taught in every business school, to the "sucker's deal" told to every individual investor to "buy and hold" [when every Wall Street firm is doing exactly the opposite with multiple trades per second/minute/hour/day], to the fact that the internationalization of capital markets [such that $$$ can flow *instantly* to other jurisdictions where regulations are less stringent], the whole mess is one big disneyland where emotionally-arrested "men" and "women" get to play with other people's money at no consequence to themselves [and life-altering consequences to the rest of us].

     

    reply to this | link to this | view in thread ]

  28.  
    identicon
    smart guy, Feb 8th, 2009 @ 6:27am

    the stock market is an instrument for the wealthy
    to rob the unfortunate. Things will always be the same,
    as long as the masses are kept ignorant, the financial
    kings will make them do whatever they wish, let it be
    stock market, or some other scam...

     

    reply to this | link to this | view in thread ]

  29.  
    identicon
    silver trading dude, Jan 3rd, 2011 @ 1:36pm

    Silver Trading

    Seriously! Those are some great insights. I think that wall street is so messed up. It's such a crap shoot if you are going to make money or lose it. There is really no sure formula to this anymore. It's been totally abused.

     

    reply to this | link to this | view in thread ]


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