The Goldwatcher

Charles Ponzi

The New Mattress Stuffers:

An article in Friday’s Wall Street Journal comments that with the financial crisis sweeping across the nation ’one of the first micro-trend groups to emerge is the New Mattress Stuffers — people who have lost their trust in the financial world, and are preparing for the next meltdown.’ By Monday the stuffers with gold under the mattress looked smarter than many other investors. With the disclosure of Mr. Matoff’s $50 billion Ponzi Scheme another gaping breach in trust was revealed. And, with it, another good reason for investors to own gold as insurance against vulnerable financial assets.

Suckers, Geniuses and Comatose Regulators:

Suckers taken in by the 1920’s fraudster Charles Ponzi were greedy retail investors chasing unrealistically high returns.  But the investors taken in by Bernard Madoff  were greedy banks and institutions with managers,  disdainful of  basic due diligence.  chasing unealistically high retirns.  Making investments yielding over 10% at a time when blue chip  returns were negligible they must have been alert to high risk exposure.  How come  they committed  millions, tens of millions and in some cases billions to investments without abundant due diligence?

The answer appears to be that our genius million £/$ salary stars  were deficient in their performance. An article in today’s International Herald Tribune todayreveals investors failed  to ensure their  investments were safe. And they must have been blind. Madoff never accounted for investmnents with acceptable transparency.

What about the suckers? You,  me and everyone else supporting banks and other institutions.  And, of course, our comatose regulators asleep at the wheel again.

After the financial debacle experienced over the last few years what scope is there left for trust in a financial system still without adequate regulation?   This Bloomberg video includes commentary on the regulatory failure.

Why gold is so strong:

The case for mattress stuffing never looked better -  particualrly as the $ surge could be coming to an end.  Trust in financial institutions and regulators  is being breached without respite making the case for owning gold more and more compelling. It’s not surprising that,  priced in British pounds,  gold is now at or near an all time high.

#  Note added 16th December :

Descriptions of Madoff’s operation read like a cheat sheet out of Investment Fund Due Diligence for Dummies

# Note added 22nd December 2008: Barrons 2001 warning on Madoff