The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
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2008 Redux ?

2008 was a lousy year in the stock market, and it ended in a major scandal when Bernie Madoff was arrested in December. 2022 was also a lousy year in the stock market, and it also ended in a major scandal when Sam Bankman-Fried (SBF) was arrested in December. Of course, there are differences.

Madoff orchestrated history’s largest Ponzi scheme, while SBF of FTX fame allegedly had a simple fraudulent scheme of moving money out of clients names and into his name — commingling client funds with those of companies that he owned/controlled, which smells like simple theft to me! In a Ponzi scheme, the crook must always take in new funds to make up for the funds he distributed to clients as dividends. Because of that, all Ponzi schemes are doomed to fail eventually. SBF was not doing that and might have enjoyed ill-gotten riches for many years.

In March of 2009, the stock market reversed itself and reached new record highs. Unfortunately, some investors got too scared to stay in the market. They bailed-out of the market and missed the subsequent record highs. Were you one of them? What can we learn from history!