Markopolos, Dan diBartolomeo, and Koppel vs. Madoff

Another way to predict — lie about your success rate.
Mathematical analysis in 1999 showed Madoff’s returns were impossible and repeated warnings went unheeded. Competitor Markopolos complained to the SEC’s Boston office in May 1999, saying it was impossible for the kind of profit Madoff was reporting to have been gained legally. Markopolos reached his conclusion with the help of mathematicians like Dan diBartolomeo, whose analysis of the Madoff’s methods in 1999 helped fuel Markopolos’ suspicions.

“As the market goes up and down, this strategy should have done a little better or a little worse, just like everybody else,” he said. “Instead, it appeared to be indifferent as to whether the market went up or down. They made money all the time.”

In 2005, he submitted a report to the SEC saying it was “highly likely” that “Madoff Securities is the world’s largest Ponzi scheme.” The report highlights 29 “red flags” about Madoff’s business, among them the returns of a third-party hedge fund managed by Madoff’s firm which had negative returns in just seven on the 174 months Markopolos analyzed. His warnings were heard too late, and he’s becoming a symbol of a botched oversight of fraudulent dealings by governmental authorities.

Rich Koppel, founder and managing director of technology provider said Fund-of-hedge fund managers (FOHFs) that lost big in the alleged Madoff $50 billion securities fraud could have avoided the debacle if they had deployed technology to gather information and monitor the trading strategies and results from hedge funds they were invested in.

“Lack of technology is a factor, or failure to use technology effectively is a factor,” said Rich Koppel, founder and managing director of technology provider youDevise Limited in an interview yesterday. Koppel maintains that using technology would have enabled FOHFs to avoid the huge losses that resulted from investments in Madoff funds.

Another parallel to make of this form of prediction with global warming, nobody listens to whistle-blowers, until its too late. Numerous well-credentialed physicists have shown using mathematics that sensitivity of climate to CO2 doubling can be no greater than 1C, and that the high rates of warming shown by the IPCC projections are only possible with unrealistic models. Even though the empirical data confirm low sensitivity, it falls on deaf ears.

For an example of this strategy, see the Met Office getting it wrong but claiming the opposite!

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0 thoughts on “Markopolos, Dan diBartolomeo, and Koppel vs. Madoff

  1. jae: Good one! See this for more. The ‘left’ seem to do condemnation much better than the right, eg. Makes Lord Monkton of Brenchley look tame.

    Life-long liberal Democrat Dr. Martin Hertzberg, a retired Navy meteorologist with a PhD in physical chemistry, also declared his dissent of warming fears in 2008. “As a scientist and life-long liberal Democrat, I find the constant regurgitation of the anecdotal, fear mongering clap-trap about human-caused global warming to be a disservice to science,” Hertzberg wrote. “The global warming alarmists don’t even bother with data! All they have are half-baked computer models that are totally out of touch with reality and have already been proven to be false,” Hertzberg added.

  2. jae: Good one! See this for more. The ‘left’ seem to do condemnation much better than the right, eg. Makes Lord Monkton of Brenchley look tame.

    Life-long liberal Democrat Dr. Martin Hertzberg, a retired Navy meteorologist with a PhD in physical chemistry, also declared his dissent of warming fears in 2008. “As a scientist and life-long liberal Democrat, I find the constant regurgitation of the anecdotal, fear mongering clap-trap about human-caused global warming to be a disservice to science,” Hertzberg wrote. “The global warming alarmists don’t even bother with data! All they have are half-baked computer models that are totally out of touch with reality and have already been proven to be false,” Hertzberg added.

  3. Democrats claim we need more regulation.

    If the regulators don’t do their jobs for many and various reasons, what good will more regulation do??

  4. Democrats claim we need more regulation.

    If the regulators don’t do their jobs for many and various reasons, what good will more regulation do??

  5. That is very interesting. Climate system responding faster than anticipated – not! I don’t mind people bringing attention to relevant links. It serves a useful purpose.

  6. That is very interesting. Climate system responding faster than anticipated – not! I don’t mind people bringing attention to relevant links. It serves a useful purpose.

  7. There is always Sherrington’s postulate, “There is a limit to the rate at which people or coorporations can increase true wealth annually over decadal periods.” There are a couple of exceptions, like Bill Gates, but most of the time the fast movers are creating illusory wealth, not real wealth, or are bending the rules. Show me a company claiming to grow at more than 30% p.a. every year (not allocating gains from one bull year over the following several) and I’ll show you a company needing investigation.

    Lamentably, the inverse, relating to the loss of wealth, is not true.

  8. There is always Sherrington’s postulate, “There is a limit to the rate at which people or coorporations can increase true wealth annually over decadal periods.” There are a couple of exceptions, like Bill Gates, but most of the time the fast movers are creating illusory wealth, not real wealth, or are bending the rules. Show me a company claiming to grow at more than 30% p.a. every year (not allocating gains from one bull year over the following several) and I’ll show you a company needing investigation.

    Lamentably, the inverse, relating to the loss of wealth, is not true.

  9. The ultimate profit limit is the perfect, (zero phase lag) low pass filter; compared with the actual quoted. — for better than this; model the psychology of the moving averages and line drawings (something like adjusting for yearly cycles.

    For the economy; people’s unsaleable rights versus the rule of money. — “Let them eat cake” was the suggestion before Divine rights of Kings was lost.

  10. The ultimate profit limit is the perfect, (zero phase lag) low pass filter; compared with the actual quoted. — for better than this; model the psychology of the moving averages and line drawings (something like adjusting for yearly cycles.

    For the economy; people’s unsaleable rights versus the rule of money. — “Let them eat cake” was the suggestion before Divine rights of Kings was lost.

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