Creative Finance and Bernie

This is a bit far afield for this blog, but I suppose B.M. was engaged in “creative finance” as well as “creative accounting.” I spent a couple decades in finance before joining academia so I knew the Madoff name and am well versed in option’s strategies.

Anyone who believes in efficient markets and rational investors should skim through a Barrons article from 2001.


As a former futures and options analyst I ran hundreds — or maybe thousands — of simulations of returns from split-strike conversions, so I can attest that anyone who took time to test Bernie’s alleged strategies would not be able to re-create returns resembling his claimed results.


Barrons is widely read in the investment community. The existence of this 2001 article calls into question (1) efficient markets and (2) rational investors.


It also makes one wonder what European Banks consider “due diligence” to be. I suspect that some of the banks and funds-of-funds people who invested their clients money with Madoff believed that Bernie was front-running – which would make them greedy, unethical and devoid of character, as well as stupid. I suspect there will be lawsuits galore and a rethinking of what “fiduciary responsibility” and “due diligence” mean.

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