Hedge Fund Head Dead in Apparent Suicide
Mr. de la Villehuchet, 65 - the director of a hedge fund that had $1.4 billion invested with Bernie Madoff - was found dead in his Manhattan office reports DealBook.
Mr. de la Villehuchet, 65, was pronounced dead Tuesday morning, and a New York City Police spokesman, Paul Browne, told DealBook that he had apparently committed suicide. He was found with wounds to his arms, with one leg propped up on the desk and a trash can nearby to catch blood. (Read more about Mr. de la Villehuchet here.)
He had been trying to recover the money that Access International raised in Europe and invested through Mr. Madoff?s business, according to La Tribune, which first reported the news, citing an unnamed source.
The name of the hedge fund was Access International Advisors LLC - they had called the news of Madoff's arrest a "shocking development" when the news broke earlier this month. NBC has a brief news report on the apparent suicide in the clip below from Hulu.
What's a Ponzi Scheme?
The news about Bernard Madoff's $50 billion ponzi scheme has some wondering what exactly is a ponzi scheme. A Ponzi scheme is a type of pyramid scheme that promises a huge return in a very short. The Ponzi scheme relies on giving big payouts to early investors to lure in new investors and using new investor money to pay off the early investors. If a Ponzi scheme is working the early investors will often reinvest their money in the corrupt scheme. The term originated with Charles Ponzi who bilked investors out of millions in the 1910s and early 1920s. At his peak Ponzi was bringing in $250,000 a day. Here's an explanation from the SEC.
Ponzi schemes are a type of illegal pyramid scheme named for Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s. Ponzi thought he could take advantage of differences between U.S. and foreign currencies used to buy and sell international mail coupons. Ponzi told investors that he could provide a 40% return in just 90 days compared with 5% for bank savings accounts. Ponzi was deluged with funds from investors, taking in $1 million during one three-hour period?and this was 1921! Though a few early investors were paid off to make the scheme look legitimate, an investigation found that Ponzi had only purchased about $30 worth of the international mail coupons.
Matt Friedman for the Associated Press also explains what a ponzi scheme in the video below.
World Bank's Hans Timmer Talks Global Pain
Hans Timmer from the World Bank provides some good information about what the World Bank sees on the economic horizon in this clip from the AP. He sees a pretty grim picture for the developing world in 2009 as well as the recession for the developed world. Hans Timmer says there are two big risks. One is that the future is even dimmer than they are forecasting. The second is that the recovery will be delayed so that the recession will be longer than anything since the second World War. He also says the World Bank expects world energy prices to drop another 30% to 40% next year. Hans Timmer says the U.S. recession will continue well into 2009 but that a rebound in 2010 in possible. Reuters and the New York Times have written articles about Hans Timmer's latest thoughts. The thing every analyst keeps saying is that they are not sure how long this recession will last and exactly how deep it will get.
Worst Recession Since World War II? An article in Bloomberg says the U.S. may be headed for its worst recession since World War II. The article quotes a chief economist at Moody's who says "almost all businesses are in survival mode."
Employers cut payrolls last month at the fastest pace in 34 years as the unemployment rate rose to 6.7 percent, the highest level since 1993. The 533,000 drop brought cumulative job losses this year to 1.91 million, the Labor Department said yesterday in Washington.
"Almost all businesses are in survival mode, and they're slashing payrolls and investments just to conserve cash," Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania, said in a Bloomberg Television interview yesterday. "We're in store for some big job losses."
The economy lost over 500,000 jobs in November and there seem to be new layoff announcements from big companies almost daily. The latest layoffs come from AT&T, which is slashing 12,000 jobs.
The recession is already been going on for 12 months and is the longest since a slump in the early 80s.
At 12 months, the recession is already the longest since the 16-month slump that ended in November 1982. The recession is the 11th since a downturn that occurred in 1945, the year that World War II ended.
To fight the downturn, Federal Reserve Chairman Ben S. Bernanke this week outlined unorthodox policy action that officials can take beyond lowering interest rates. One option would be to purchase longer-term Treasuries on the open market to inject more cash into the financial system.
Some are ready to use the "D" word which seems premature. Dow Jones quotes former secretary of labor Robert Reich as saying we are trending in that direction.
"Today's employment report begs the question of whether the meltdown we're experiencing should be called a Depression," Robert Reich, former secretary of labor and professor at the University of California at Berkeley, wrote on his blog Friday. "When FDR took office in 1933, one out of four American workers was jobless. We're not there yet, but we're trending in that direction."
Long deep recession or depression it is going to be uncomfortable for many either way. Hopefully, we will not get anywhere near one in four Americans being out of work.
Photo: Breadline in New York City, source: Franklin D. Roosevelt Library
Zillionaire: A Brief Look Back at a Dot Com Failure
Time for a look back at dot-com disasters. Here's one that never turned out called Zillionaire. The people behind Zillionaire were also pushing a site in the 90s called DotPlanet, which they said would become as well known Microsoft and Yahoo. Obviously, this dream and business plan did not pan out. Take a look below. (via Everything is Terrible via Boing Boing)
In a statement released Monday, the members of the group's Business Cycle Dating Committee - made up of seven well-known economists, most from the academic sector - said that the economy entered a recession in December 2007.
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators," the members said in a statement. "A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough."
The committee noted that the contraction in the labor market began in the first month of 2008 and said that the declines in most major indicators, like personal income, manufacturing activity, retail sales, and industrial production, "met the standard for a recession."
You can read the NBER's report here. Every news outlet is coveirng the story today. Below is a video from MSNBC talking about the year-long recession and whether video games are immune. They might be immune for now but if the recession is deep enough it is bound to touch games eventually.
Best Buy Cuts Profit Outlook
A warning from Best Buy has renewed concerns about the economy. Best Buy CEO Brad Anderson says this is "the most difficult climate" ever seen by the company. The only good news behind that is it could mean consumers will be treated to big discounts this holiday reports the AP.
"Rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen," Chief Executive Brad Anderson said in a statement. "Best Buy simply can't adjust fast enough to maintain our earnings momentum for this year."
But Best Buy's misfortunes may spell opportunity for deal-seeking shoppers, especially during the traditional Black Friday shopping extravaganza on the day after Thanksgiving.
Morningstar analyst Brady Lemos said he expects Best Buy to offer deep discounts on products to try to drive sales and keep customers coming into stores.
"It's big news for consumers," he said. "I think they'll want to sell as much as possible."
Stocks Fall Over 5%
The news that Barack Obama is the President-Elect was not enough to motivate people to buy stocks again. Reuters report that Wall Street suffered a 5 percent retrenchment. Concern about the economy is also causing a continued downward movement in oil prices.
Warren Buffett on Fear an Investing
Katie Couric reports that despite continued signs of an economic downturn Warren Buffett thinks it is a good time to buy. Warren Buffett says "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."
A year ago the stock market was at a healthy 14,164.53. Today the story is much different. The DOW is down about 40% from its high a year ago. That is a lot of value lost in this terrible bear market.
Today was another down day. The DOW fell over 650 points and the Nasdaq fell over 95 points. It went under 9,000 and just kept falling.
Dow: 8,579.19 -678.91 (-7.33%)
Nasdaq: 1,645.12 -95.21 (-5.47%)
S&P 500: 909.92 -75.02 (-7.62%)
GM was one of the big losers today. GM shares were down over 30% on the day.
This graphic from Marketwatch tells the story of the huge difference for investors between today and one year ago.
Dow Plummets Over 500 Points
Stocks tanked today despite the recent bailout and the likelihood of a interest-rate cut. The Dow sank over 500 points and the Nasdaq continued to get beat-up by the ongoing bear market. Here's today's ugly numbers
Dow: -508.39 points (-5.1%) to 9,447.11
Nasdaq: -108.08 points (-5.8%) to 1,754.88
S&P 500: -60.66 points (-5.7%) to 996.23
Marketwatch quotes Tony Crescenzi, chief bond market strategist at Miller Tabak & Co., who says investors are "clamoring for interest rate cuts."
Equities remained sharply lower as minutes from the Federal Reserve's last formal meeting revealed rate cuts were put on the table at the mid-September gathering, and after Fed Chairman Ben Bernanke in a speech opened the door for a possible interest-rate cut soon.
"Despite its scale, the Federal Reserve's massive injection of financial liquidity of late and its announcement of a new facility that will purchase commercial paper is not registering with investors who appear to be clamoring for interest rate cuts instead," said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.
Worst Week For Wall Street Since September 2001
U.S. stocks had their biggest weekly decline since September 2001 as we head into Monday. The Dow fell over 7% and the Nasdaq lost over 8%. This is despite the bailout rescue plan passing in the House on Friday. It has also already being signed by President Bush. Worries remain about the economy and there are still concerns we will enter a recession.
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