Madoffs victims may deserve to lose their money, but not necessarily respect

I haven't posted for a while, mainly because nobody anywhere in the world has done anything stupid in the past month.  I guess people get smarter around the holidays.   Go figure.

The BBC has an article blasting rich people, mainly to the effect of "how much money does one person need?".  It's a good question, and I think one that deserves to be asked, but I take particular issue with their treatment of the Maddoff scandal.  Specifically, his clients:

But most of them had got their money the same way, by promising vast returns on money from other people who were trying to make money out of nothing.

Well, he didn't promise them vast returns.  What he promised was steady returns.  He promised (and claimed to have delivered in the past) 8-12% annual returns, each and every year.  That is pretty impressive, but it's the same returns your financial advisor will tell you the S&P 500 returns each year.  They're lying, but over a 30 year average it's true.  

So, with options, shouldn't you be able to establish a strategy which averages the stock market returns?  Well, maybe over a few years (LEAPS, long term equity options, last 3 years), but certainly not over 30 without establishing private contracts.  But hey, he's a hedge fund, maybe that's what he did.  It's not, it's not even what he claimed to do.  I've been looking around and I still can't find information on his alleged strategy, just that it was so complicated that nobody seemed to understand it.  

This is a sure sign that you shouldn't invest, but then, the people who invest in biotech of software startups don't necessarily know any chemistry or programming themselves.  The late investors just saw past results, and took it for granted that he couldn't just be making them up. Can't argue with results, right?  

Investors need to be aware of the risk of fraud, so I'm not saying they should be bailed out.  Or even deserve sympathy.  But that doesn't make them idiots.  Maddoff didn't promise vast returns, just steady ones.  In retrospect this seems just as outlandish, but the total returns after a few decades wouldn't be much different than the stock market.  So if his scheme is money for nothing, so is $15 trillion in assets of our economy.  

Error rating: 3.  I know it's fashionable to take joy in the pain of the rich, but really, they weren't being too greedy. Just too trusting.

-Enginerd

Cheap oil is a right

The Ayn Rand institute is very angry, and of course everyone was following 9/11. Nevertheless, some people react more strongly than others:

Fifty years ago, Truman and Eisenhower surrendered the West's property rights in oil, although that oil rightfully belonged to those in the West whose science, technology, and capital made its discovery and use possible. The first country to nationalize Western oil, in 1951, was Iran. The rest, observing our frightened silence, hurried to grab their piece of the newly available loot.

Natural resources are a bit tricky in my mind. Obviously, whoever invests in the infrastructure to harvest the resource deserves some compensation. But who really has the right to Irans oil? The industrial revolution sprung from the west, which made oil a valuable commodity, but does that give the descendants of those inventors the moral right to travel 'round the world taking whatever they need?

This author says yes. I have to say I'm a bit surprised, I would've thought the line of reasoning would be a bit different from the Ayn Rand institute, something more like "whoever has the ability to take it has the right", but I guess I haven't studied their philosophy enough.

A more logical approach would hold that the people of a country deserve the profits derived from their natural resources. The US creates inventions that the world runs on? The profits derived from selling those products is the compensation. Say we can't do that without oil? Well, then it would be in the best interest of OPEC (et. al.) to provide cheap oil. But of course, the market sets the price, and oddly enough people only bemoan the free market when the results turn out against them. People pay a fortune for pharmaceuticals from the US that cost pennies to produce? Well, you've got to let the market set the price, or else we'll have shortages. Oil is expensive? We deserve oil because we provide the world with so much else.

Error Scale: 3. More arrogant and hypocritical, but moral arguments are always debatable

-Enginerd