Yesterday, another wild fraud was reported by JP Morgan who said that a $175 million cash acquisition they made last year was fraud. Ho Hum.
My friend Ted Seides was a long time hedge fund allocator who has a great post out titled 'You Won't Detect The Next Fraud'. I found this most interesting from famed investor Michael Price...
Michael went on to explain a principle about frauds. When you conduct analysis on an investment, you spend 99% of your time assessing the merits of the opportunity and 1% thinking about whether what you see is real. The fraudster spends 100% of their time staying two steps ahead of you. Fraud is a risk you bear in every investment and sometimes you can’t avoid it. As he put it, “fraud is fraud.”
I thought about this when my wife and I watched Madoff: The Monster of Wall Street on Netflix last week. Bernie Madoff did not make any trades. He literally spent 100% of his time taking actions to stay a few steps ahead of everyone who got too close to the truth. Madoff exemplified Michael’s principle.
I am having Ted on the podcast soon to talk about this very subject.
Anyways, have a great Friday.
PS - Ellen and I watched the Netflix Bernie Madoff documentary a few weeks ago and enjoyed it. Solid history lesson of the events.