Who wasn't dealing with Bernie Madoff?
Posted
Dec 16 2008, 06:13 AM
by
Bernhard Warner and Matthew Yeomans
Rating:
This post comes from partner site The Big Money.
Perhaps the question we all should be asking about the alleged $50 billion Bernard Madoff fraud is: Who hasn't been duped? Reporters from Tokyo to West Palm Beach are still piecing together just how vast the damage will be, who is at risk, and for how much.
The globe-spanning list of Madoff victims keeps growing, the BBC reports this morning. It includes Japan's Nomura; at least four British banks, including possibly HSBC; Spain's biggest banks, Banco Santender and BBVA; plus a group of French banks and Swiss funds. That's just the overseas scalps that we know about. Among the high-profile names in the United States are two from the entertainment industry—Steven Spielberg and Jeffrey Katzenberg are victims of the Madoff fraud, the latter having "suffered millions in Madoff-connected losses," the Wall Street Journal writes. Charities and nonprofit organizations are also highly exposed to Madoff, with several announcing they'll have to either shut down or cut staff imminently, the New York Times reports.
It's not just the staggering list of names and financial institutions hit by the fraud, it seems the entire hedge-funds sector is taking another beating over this scandal. In another WSJ article, the newspaper reports hedge funds' assets under management had already fallen from $826 billion at the end of June to $685 billion by the end of October. "The fact that so many leading industry names were duped by Mr. Madoff, including Man Group's RMF and Banco Santader's Optimal, will be another major blow to trust, with consequences felt across the hedge-fund industry," the WSJ predicts. "That's because funds of funds, or FOFs, are responsible for nearly half of all investment in hedge funds."
Turning to the investigation now, the Washington Post reports that it's still not clear "how much money was lost or how many people were involved." What is still hard to fathom is that the Securities and Exchange Commission was in the dark to the largest securities fraud in history until Madoff himself confessed, the newspaper writes.
For today at least there will be a giant, Fed-sized distraction to get people's minds off the Madoff scandal. In an effort to stimulate the economy, it's widely expected the Fed will announce yet another rate cut today—it would be the 10th cut in just over a year. Any cut, the Washington Post points out, will be in historic territory. "The Fed is expected to drop it to half a percent, or even lower, at the end of its policymaking meeting today. That would be the lowest U.S. rate on record," the newspaper writes. On Monday, stocks nudged down as investors sat on the sideline waiting for something hopeful from the Fed. They are also waiting out news from Goldman Sachs and Morgan Stanley. Both Wall Street firms are due to report later in the week. It's a busy news week and yet investors might just sit things out. "We think the market is shaping up for a quieter end of the year," David Chalupnik, head of equity trading at FAF Advisors, told the WSJ. "You have a lot of forced selling by hedge funds that's out of the way now, which takes a lot of pressure off. They seem to have raised the cash they'll need for year-end redemptions."
Mac fans, you may want to look away now. It appears the recession has finally caught up with Apple. The WSJ reports that Mac sales showed their first sign of weakness in November. During the same month, industrywide PC sales were up slightly, the newspaper writes, citing research firm NPD Group Inc. "NPD analyst Steve Baker blamed a 35% drop in sales of desktop Macs, noting growth in Apple's laptops still outpaced rivals." Apple was one of the biggest losers on the Nasdaq on Monday after Goldman Sachs cut its price and profit targets. "[S]hipments of MacBooks, iPod Nanos and iPhones were 'slightly' lower than anticipated in the quarter ending this month," Bloomberg reports Baker as saying. On the PC side of the business, things don't look that much better. The NYT has a sit-down with Michael Dell in today's newspaper and learns very little about Dell's ongoing restructuring plan other than that the founder doesn't care for questions about the ongoing restructuring plan.
There's some relief for smokers today, and headaches for Big Tobacco. The U.S. Supreme Court on Monday ruled that cigarette makers could be sued for fraud for their allegedly deceptive marketing of highly popular "light" cigarettes. According to the Los Angeles Times, the Supreme Court ruling clears "the way for a new era of tobacco litigation." The Washington Post calculates the ruling could expose the tobacco companies to "billions of dollars in liability in court cases nationwide."
And, finally, we go to Germany for a new kind of government stimulus package, one that could be unveiled there early in 2009. Call it a guarantee for job security in exchange for a taxpayer bailout. "Under the plan," the Financial Times writes, "large companies would renounce mass redundancies for a period yet to be defined, in return for a rise in government subsidies for employees placed by companies temporarily on shorter working time or lower wages." How serious is the plan? Both the government and industry are working on a cut in mandatory health insurance contributions, a sacred cow in Germany, to make sure the numbers work out.
This post was written by Bernhard Warner and Matthew Yeomans of The Big Money.
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