Bernard Madoff and the continuing curse of affinity fraud

Last week’s ABC mini-series chronicled Bernard Madoff’s $50 billion Ponzi scheme, which so devastated wealthy individuals and major institutions within the American Jewish community. I’m still taken aback by Madoff’s icy lack of communal conscience or apparent self-limitation. He wiped out Elie Wiesel’s life savings, and stole $15 million from Wiesel’s foundation. Madoff stole from Sandy Koufax. Madoff even defrauded Hadassah. Nobody does that. That’s like mugging your grandmother.

I wrote about the case yesterday at the Atlantic website. Not everything could fit in that piece. Here’s some additional observations.

There’s much to be said about his crimes–not least about the incompetence of the regulatory apparatus that failed to stop him despite repeated warnings and what researchers Greg Gregoriou and Francois Lhabitant quite properly called “a riot of red flags” over many years.

The biggest red flag was the simple knowledge that almost no investment reliably outperforms a simple index fund or can promise anything approaching the stock market’s overall returns without the market’s accompanying downside risks. Anyone who promises otherwise is likely deluding himself or trying to delude you….

Continue Reading…

What Clinton should say about those paid speeches…

At last night’s debate, Hillary Clinton took more fire about her lucrative speech gigs. I wonder if Clinton should own it in a different way:

It’s part of the comedy of my life that people are willing to pay $300,000 to hear me deliver a speech over lunch or whatever. Is this a bit ridiculous? Yeah, of course it is. It’s part of the comedy of my life as one of the most over-exposed famous people in the world. Of course the same is true of my husband and of some others who’ve been center-stage in American politics. I and Bill are incredibly blessed to have more than we need for our own wants and needs. Like President Obama, I’ve written best-selling books that made a lot of money. If Goldman Sachs or anyone else believes they can buy me with something like that, they are in for a rude surprise. We contribute much of our speaking fees to our foundation and to other good causes. Welcome to the craziness of life in America 2016.

It is what it is. She might as well hang a lantern on it. It is part of the mad comedy of contemporary American political life.

RIP basketball great Kenny Sailors

This 1946 picture looks like it’s from a mysteriously unaired episode of Quantum Leap, in which the hero goes back in time as the only baller who could actually shoot the jumper. That was pretty much Kenny Sailors’ career.

He  recently died, at age 95. William McDonald wrote a fine obituary in January 30’s New York Times. Obituaries provide another reminder that the Times remains the world’s greatest newspaper.

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Screenshot of New York Times. Eric Schaal/Life Magazine, via University of Wyoming

This is why we recommend that you stick to index funds

In our index card book, Helaine Olen and I recommend that ordinary investors stick to low-fee index funds–and thus avoid actively-managed mutual funds. Here’s more evidence. In this comparison, only 4.1% of actively-managed funds beat a simple Vanguard index fund over a ten-year period through October 31, 2015. It’s not complicated. It’s just too bad millions of ordinary investors are paying billions of dollars in fees to under-performing investment products.

PS: If professional money managers can’t beat a simple market index, you probably can’t either. So avoid picking individual stocks or other speculative efforts like that. Use your brainpower on your day job, and to be good to people close to you.

Glenn Loury speaking on race at Stanford CASBS

How does racial inequality manifest itself in today’s America? What does this mean for the future of American democracy?

On Tuesday, January 26, Stanford’s Center for Advanced Study in the Behavioral Sciences hosted its second symposium of the academic year – “Racial Inequality in 21st Century America: Where do we go from Here?”  Distinguished economist–and new RBC member–Glenn Loury is spending the year at CASBS. He gave an extended presentation on such matters, with a particular focus on disparities in incarceration.

“Another hostage dies”

Although Chicago’s police drama has grabbed the headlines, Illinois’ disgraceful budget standoff continues. And more local service providers are shrinking or closing their doors. Lutheran Social Services recently announced the closure of key programs.

This Friday, an article appeared in Capitolfax.com, an authoritative media source on state budget politics, under the cheery headline: “Another hostage dies:”

Haymarket Center is closing its social setting detoxification program. This was Haymarket’s first program, the start of our mission 40 years ago.

In FY 2015, this program had 1,047 admissions of 903 unique individuals.

As a social setting detoxification program, it is not eligible for a Medicaid certification, and relied on State funding. With the end of our federal portion of our DASA contract growing near, the 22% cut in our contract, and other programs such as Recovery Homes also relying on State funding, we believe we had no choice but to close this program.

We will be announcing further reductions within the next few days.

Haymarket is one of Chicago’s oldest and largest drug and alcohol treatment providers. It is a pillar of the system. When even agencies like these are closing major services, you get a sense of the havoc wreaked by the lack of a state budget.

Providers and social service agencies across Illinois are desperately trying to fit services under the ambit of Medicaid–the only faucet still properly flowing to support basic services. It’s not clear that we’ll ever have a budget for this year–or who will be paid and when if the Messiah comes and a budget is actually signed into law.

This astonishing governance failure is becoming the new normal. It’s less dramatic than lead poisoning in Flint. The human costs are high enough. And there’s no end in sight, no sign of a reasonable political compromise.

Dropping the knowledge on single payer

Me talking Single Payer issues on C-Span, basically riffing from my VOX article here. That piece got a bit more attention than I expected, in part given the different approaches to health policy presented by Hillary Clinton and Bernie Sanders.


Why no. I didn’t spend thirty minutes walking through personal finance issues with the technician who helped me in the studio. Why would you even ask. I certainly didn’t print out various prescriptive financial materials and tips in their office, and thus miss my beach walk in Naples, Fla.

Film recommendation: Linda’s fiduciary cake

Regulatory standards regarding information and advice provided by financial professionals are incredibly important. These issues are also incredibly complicated and boring. ”

Fiduciary vs. Suitability standard….” The phrase induces narcolepsy just hearing it, unless you happen to be really into this issue or you have a financial stake in the accompanying government regulations. That’s a real challenge in addressing key personal and policy concerns.

I financed this short video, which debuted at Huffington Post, to help address this challenge. (See the site I created at fiduciarystandard.info for more information. I’ve drawn from there in this post.) Continue Reading…

MLK Day


Glenn Loury and I two years ago discussing what might have happened had Dr. King survived. I don’t believe there would be an MLK holiday. He would have remained too a polarizing figure, as he surely would have gone on to do more difficult, controversial, and worthy things.

MLK Day always makes me remember fondly the old Jewish radicals, not least my parents and grandparents, who supported the Civil Rights Movement in the 1940s and 1950s. They were way before their time.

I also remember 1968, the worst year in postwar American history. I was five, watching my parents staring in horror at our black-and-white kitchen TV. There was Coretta Scott King in mourning black. There were the sobbing mourners and the terrifying images of rioting and burning. The wheels were coming off. I didn’t know what to make of it. No one did.