Yahoo headlines today have the lede.
A former British soldier killed himself after losing his life savings in an alleged $50 billion fraud run by Wall Street financier Bernard Madoff, the dead man's son said.
As the Cream sang back in the '60s, "If you lose all your money, pray God don't lose your mind."
I know I will receive some bad vibes about the following diary, as many people are living paycheck to paycheck, have a minimal or negative net worth. But, there is a punchline to all this.
This man, according to the article, was no mega-millionaire. He had about $2m in investments with European hedge funds that had, in turn, invested all their money with Madoff. I suppose it was the lure of easy money for the funds - i.e. they could collect investment money and not waste their time and money investigating and diversifying their positions.
About 18 months ago, I had about $1m in my brokerage account. How did I do it? The same way the vast majority of Americans who have achieved a million $ net worth have. I maxed out my 401K for 20 years, had a strong income, bought a house that was 1.5X my annual salary, spent an hour a day (at least) for a few years learning about the markets, was frugal, drove a minivan, took cheap vacations.
Of course, like virtually all the investors in my position, I had a vast drop in my net worth, but due to my total cynicism about the reality of the markets, I moved into cash, bonds and gold early in the crash. So I have not been hit as hard as people with all their money sunk into big cap funds. Now the fear is that our banks or brokerages will fail, wiping out a lifetime of work. Or that our money will be inflated away due to the vast debt of our country. So now, rather than investing, I am forced to diversify my cash by financial institutions. In addition, I have taken to increasing my spending in some areas, for example, doing very expensive foundation work on my house, in case we see really accelerated inflation, and my money evaporates. I am also investigating starting some small side businesses, of which I will need to start 4 to find the right one, meaning 12 hour work days to get it all rolling.
Maybe I am stupid, life is short, and I'm no spring chicken, but being raised by parents who were grew up in a crushingly poor environment during the Great Depression, I just can't handle having the wolves at the door. So I can understand this man's suicide, and it drives me forward into constant achieving. I am motivated by fear. I went from semi-retired a year ago, figuring I could hunker down and make it the rest of my life, to working as hard as when I was a young man.
But here's the irony. If Madoff ran his fund selling swaps and naked puts on phony assets, he would still be a "Master of the Universe." His losses would be "tragic," but understandable (how could he have known running a kiting racket would end in bankruptcy)? He could have gotten TARP money, and Congress would have debated the danger of potential "brain drain" if his salary was limited to 1/2 million bucks. But instead, he was too lazy or arrogant or smart to bother running anything but an out-and-out fraud, rather than the big public corporations, which only ran out-and-out frauds.
But now, his investors are killing themselves, rather than the folks who owned Citi or are vested in pension funds, who are only slowly bleeding to death.
BTW, I AM NOT A REPUBLICAN, I am a proud LIBERAL.
I have added a poll, I have seen similar, but I will throw it in for my own edification.
Good luck to you all.