Having gotten through 2008 with portfolios battered and confidence shattered, I guess we all pretty much know how Queen Elizabeth felt when she described 1992 as an “annus horribilis” for her and the other royals. For most of us, however, there is no consolation of Buckingham Palace or the crown jewels.
Indeed, many people at year-end are feeling more like Humpty Dumpty than anything else. All the king’s horses and all the king’s men couldn’t put their nest eggs together again.
For a population pummeled by bank failures, incredibly shrinking credit availability, widespread and growing layoffs, to name just a few of the financial missiles raining down on the country, the Bernie Madoff debacle was just one more “you’ve got to be kidding” event. An alleged $50 billion Ponzi scheme that lasted decades? You’ve got to be kidding.
Unfortunately, it seems that Madoff wasn’t kidding and by his own admission some $50 billion in funds invested by wealthy individuals and charities and hedge funds went down the drain. Maybe this is where Humpty really belongs.
It intrigues me how heart-wrenching the stories seemed to be in reports about the wealthy people who had lost millions by investing with Madoff, often on the basis of a personal connection or network of acquaintances. These were much more heart-wrenching than any stories, if they happened to appear at all, about poor or middle class folks who lost their all even though it was only a small percentage of the millions that rich folks lost with Madoff.
Is it really so much more devastating for a millionaire to lose a bundle than for a working class joe (not the plumber, please) to lose everything?
In any case, one of the things that is so astounding about the Madoff affair is that a lot of these rich folks put everything with him and, as a consequence, did lose it all. Hadn’t they or their advisors heard of diversification? What kind of mentality, no matter how trusting, puts all their eggs in one basket? This isn’t investing, it’s elementary school stuff.