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by Rob Horning

15 Dec 2008

The sums involved in the fraud perpetrated by Bernie Madoff are so staggering, they’re almost blasé. Madoff apparently ran a Ponzi scheme that racked up losses of $50 billion—an incomprehensible amount of money outside the realm of government bailouts. This is not cash printed by way of state seigniorage; this is private money that at one time was possibly earned by someone. Confronted with that amount, my mind shuts down and absorbs it as though it was a figure named by Dr. Evil in mad scheme of world domination.

Madoff allegedly provided the illusion of steady returns for years mainly by managing to recruit new investors and distributing their funds to previous clients. When the market turned down, redemptions came in and the jig was up, the news was out, etc. What everyone wants to know now is why nobody noticed what he was doing before. As the NYT story notes, “Competing hedge fund managers have wondered privately for years how Mr. Madoff generated such high returns, in bull markets and bear, given the generally low-yielding investment strategies he described to his clients.” His returns were too improbably regular, according to an analyst cited in the article. And in 2001, analysts were smelling something fishy about Madoff’s funds and his “split-strike strategy”. Naked Shorts links to this report that now makes for very interesting reading—Madoff defends his investment approach against skeptics, who wondered “why no one has been able to duplicate similar returns using the strategy” and “why Madoff Securities is willing to earn commissions off the trades but not set up a separate asset management division to offer hedge funds directly to investors and keep all the incentive fees for itself”—that is, why they outsourced the recruitment of new investors to other fund managers when they could have brought them in directly and earned more money. Of course, the answer is clear now—those intermediaries were the advance guard for Madoff’s pyramid scheme. The punch line is the report’s last sentence:

Madoff, who believes that he deserves “some credibility as a trader for 40 years,” says: “The strategy is the strategy and the returns are the returns.” He suggests that those who believe there is something more to it and are seeking an answer beyond that are wasting their time.

But if some investing pros had been skeptical of Madoff for at least seven years, how did he keep his pyramid scheme afloat. Sadly, one can ask the same question about our entire subprime-loan-driven economy through the housing-bubble years. That makes the “cynical” take that Paul Kedrosky cites in this post especially piquant.

While many dopey investors in Madoff’s funds thought he was actually running a “split strike option” strategy (and most of those people had no idea what that meant), most of the smart investors didn’t. They just thought he was using the trading order flow from his securities firm to run a lucrative insider-trading operation, and they were happy to get a piece of it.

Kedrosky adds, “Imagine how pissed those wise-guy investors were when they found out that Madoff wasn’t running the fraud that they thought he was. Instead, he was running a different fraud.”

But it is possible to be even more cynical and figure that investors knew it was scam, but figured that as long as they got in and out early, relative to the rest of the herd. That trading strategy, if you believe Marx, is called capitalism.

Capital, which has such good reasons for denying the sufferings of the legions of workers that surround it, is in practice moved as much and as little by the sight of the coming degradation and final depopulation of the human race, as by the probable fall of the earth into the sun. In every stockjobbing swindle every one knows that some time or other the crash must come, but every one hopes that it may fall on the head of his neighbour, after he himself has caught the shower of gold and placed it in safety. Après moi le déluge! is the watchword of every capitalist and of every capitalist nation. Hence capital is reckless of the health or length of life of the labourer, unless under compulsion from society. To the outcry as to the physical and mental degradation, the premature death, the torture of over-work, it answers: Ought these to trouble us since they increase our profits? But looking at things as a whole, all this does not, indeed, depend on the good or ill will of the individual capitalist. Free competition brings out the inherent laws of capitalist production, in the shape of external coercive laws having power over every individual capitalist.

At some point, capitalism compels us, by its own integral logic, to adopt unsustainable approaches that can’t be generalized to include everyone—we all can’t be at the top of the pyramid. Instead we become committed to a desperate effort to keep the machine moving, to bringing in more and more into the system so it won’t collapse under its own weight, and the pile of grievances it generates through its merciless functioning. The more merciless the system becomes, the more merciless, we, its agents, have to become to perpetuate it. Subprime loans were made with no real faith that they will be repaid, but with some hope that new, even more desperate and exploitative techniques would be contrived to bring in a new influx of profit and prevent their insolvency from mattering. What has happened now is that for the time being, we have lost faith in the schemes, and we can’t persuade ourselves to naively believe anymore, or alternatively, we have lost the will or ability to recruit new naifs.

by Lara Killian

15 Dec 2008

Over several thousand years the human brain has been changed by the act of reading.


Our brains continue to evolve, and a number of scientific studies as well as popular nonfiction works are exploring this fascinating issue. Recently I read an accessible introduction to the subject by Maryanne Wolf, Director of the Center for Reading and Language Research at Tufts University. Her book, Proust and the Squid (2007), describes how the evolution of learning to read has helped to change the way humans think as a species.

The way we view and use textual information today has changed dramatically from the ancient clay tablets where Wolf begins her discussion. In her book she examines major shifts in literacy and the tools which make it possible to disseminate information, including electronic formats. What does it mean to be literate in today’s increasingly digital society? For me personally, reading online tends to be a more superficial process than sitting down for quality time with a novel.

It turns out that our brains actually do process text differently depending on the format, and just as Nicholas Carr pointed out in his provocative Atlantic magazine article, “Is Google Making us Stupid?”, of July/August 2008, some people are now finding that as they read more online, focusing on longer narratives becomes tougher.

The experience of reading varies dramatically between mediums. Is the way we process the information we read also changing, depending on the media in which we view text? As the next generation grows up immersed in digital text and spend little or no time reading traditional narratives, will the ability to follow traditional plot structure and character development become a skill of the past?

by Sarah Zupko

15 Dec 2008

These nearly microscopic cards hold 1GB of music, liner art, photos, videos and whatever other little extras artists may want to include with their albums. The players are very inexpensive at only $19.99 ($34.99 for the artist editions like the nifty Abba one I have) and make quite affordable gifts. They also don’t require a computer to either buy the music or play it. None of this would matter if you could only use these mini music cards on the player itself. The music needs to be transferable, and it is. The card contains unrestricted MP3s with very good sound quality that you can put on your phone if it has a slot or easily transfer to a computer with a USB adapter that comes with the player. I had those Abba tracks from the card blasting from my stereo speakers mere moments after popping the card in my computer. So, you can make playlists with the music you purchase this way and unlike music bought from iTunes or eMusic, you get host of extras with releases even beyond what appears on most CDs.


by Karen Zarker

15 Dec 2008

Rough Guide books are always gorgeous, comprehensive, and engaging reading, but this one, Wow! The natural world truly is your oyster, here. Each adventure, wherever it lay on/above/below/floating on/diving into this planet, clearly indicates the level of fitness required (Physical), how scary/dangerous an experience will be (Psych), how surefooted one must be to get there (Skill), and even how awe-inspiring the trek is guaranteed to be (Wow!). There’s delightful trivia about the regions (animals, history, lore, even recipes from local fare), and a chart to easily determine the best time of year to experience the place that catches your fancy. Surely at least one trip recommended here in literary fashion (yes, these write-ups are quality travel writing, too), is something one must do before one dies. First step in inspiring your hard-working, nose-to-the-grindstone friend to ‘live a little’: give him this book. He’ll be requesting his vacation time from his boss by week’s end.


by Karen Zarker

15 Dec 2008

The buzz on Barack Obama is that he’s a great speaker. Well, you haven’t listened to Winston Churchill lately, have you? You can compare these two notables while pondering the significance of their historical era, as well as other politicians, activists, newscasters, sportscasters, celebrities and more from this 5-CD set (so that’s 500 greatest, total) from the reputable Shout! Factory, whose catalogs includes Grammy®-nominated box sets. I’m listening to a radio announcement that the Russians are in Berlin, right now (100 Greatest News Stories), and it feels right now. These audible excerpts, the highlights of stories from modern history, are chilling, inspiring, funny and tragic. They’re historical earworms that wriggle right into your head and settle in your heart. This is stuff you never forget. Your history buff, your pop culture collector, the teacher in your family, the audio sampler (who will appreciate the alphabetical, rather than chronological organization) will want this, too.


//Mixed media

Hozier + Death Cab for Cutie + Rock Radio 104.5's Birthday Show (Photo Gallery)

// Notes from the Road

"Radio 104.5's birthday show featured great bands and might have been the unofficial start of summer festival season in the Northeast.

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