Friday, January 3, 2014

The Bernie Madoff Victims - Or, Were They Caught in a 'Monkey Trap'?

"You don't need to belong to a country club, or drive an expensive car or buy expensive jewelry. You certainly don't have to own three separate dwelling places. It's all pretty obvious." = Joanne Meerow, one of Bernie Madoff's victims, in The New York Times (Madoff Victims, Five Years Wiser, Dec. 8)

In the Caribbean, in places such as Barbados, there is what is called a "monkey trap". It's needed now more than ever as the monkey population on the island has exploded and the varmints invade properties to steal fruit, especially paw paw, figs, and even breadfruit and mangoes. They are also wasteful - in that they often just take one bite and amscray.

There are different monkey traps but one commonly favored is to use a hollowed out breadfruit with a small hole in it - just wide enough for the monkey to insert his paw- and place a small, sweet fig (like a small banana) inside it.  To egg the monkey on, a tiny piece of banana or mango may also be placed just outside the gourd opening. If the monkey were to just heist the tiny morsel he'd be okay  - but it's not in their nature. The monkey wants more....more, more, more, and like too many humans goes for the gusto. But once it grabs hold of the prize inside, he finds that the hole is now too small to withdraw it.

The monkey is trapped. For the proud human trap springer, there will be monkey meat to eat - a real dividend considering how food prices on the island are soaring through the stratosphere.  The monkey trap works because the monkey is unable to properly process the cost of grabbing his interior fig. It's not that he's stupid, only that he's programmed by evolution to snatch first and ask questions later. He must then, as we say, "repent at leisure".

Now, let's switch to the "monkey trap" sprung by Bernie Madoff on thousands of humans who - like the monkey - allowed their own greed and desire for more to trap them when the cost was intolerable financial pain, and loss.

How is it that so many of Bernie Madoff's victims had more $$$  than they needed already, and yet grasped for the fake promise of even more riches?  Answers given in a December New York Times piece may hold many clues, especially coming from one couple, the Meerows. As seen from Mrs. Meerow's quote above, they certainly didn't have to expand their wealth more than it was - they had quite enough to have a very comfortable retirement - more than 99% of Americans.

Other comments made - especially by Mrs. Meerow- shed even more light. For example, she cites a recent visit to their "old country club"  for a wedding, and observes that all its trappings on display "underscored that its society were all about things and jewelry and all that silly stuff." 

Adding: "That's not who we are anymore. Besides, if I had never walked into that club I would never have heard the name Bernie Madoff."

She was saying a mouthful there. An upper one percenter enclave, where baubles and money likely mattered more than anything else. A perfect place to play on members' innate greed to grab even more.  "Hey, you know, there's this guy Bernie Madoff who could really make you a lot more money!"

Another victim, author Geneen Roth, perhaps spelled out the core of what snookered so many Madoff victims into a "monkey trap" partly of Madoff's making, and partly of their own greed. As she put it:

"You can feel stuffed and full after binging on food, but there seems to be no amount of money for which people feel full"

She added:

"Anorexics who think they are fat are no different from those who have all money for all their basic needs but still worry they don't have enough."

And therein lies the trap. The yen for more! The inability or unwillingness to be more conscious of what it was they were getting into and above all, ignoring the old saw "if it sounds too good to be true it probably is".

I too had seen offers come in for high yielding CDs, other vehicles in the 9-12% range nearly a decade ago, but in the low interest rate environment on offer I ignored them. I didn't try for more because I felt we had enough to at least be comfortable. I wasn't afflicted by the American disease of "not enough money" insecurity - driving people to take inordinate risks. For the same reason, I've been out of the stock market since 1996. I have merely observed while it's gone on its roller coaster rides - alternatively wiping the suckers out before the next batch comes in - while I stick with my low earning money markets.  None of Bernanke's games with quantitative easing will get me to jump into this fool's market based on cheap money and financial hucksterism.

In this sense, it's hard to sympathize with Madoff's victims. They let their yen for more obscure their thinking. Even those who weren't necessarily wealthy, still wanted more than what the existing environment offered and thereby laid their own monkey trap.

In the memorable words of Geneen Roth:

"I do feel that my part in this was my own lack of consciousness about money. ....Would I like to get that money back? Yes!  But do I feel that what I've gotten since losing it has given me more wealth in a way, than anything I had before? Yes."

And another thing she's gotten is the ability to see clearly through any future monkey traps!

For the rest of us it means consistently being able to put our long term interest over any short term gains. Can we do it?

To learn more about monkey traps and avoiding them check out this link:

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