In 1998 America was enthralled as two charismatic baseball players, Mark McGuire and Sammy Sosa took aim and destroyed Roger Maris's 1961 single season home run record. Our eyes told us that both men had put on about thirty to forty pounds of muscle each over a relatively short period of time, but we wanted to believe that these guys were for real. We wanted to believe so bad that we disregarded what our eyes were telling us, that Sosa and McGuire were bull-sh*t. In 2004 I sat with my sons in Camden Yards as Barry Bonds strode to the plate during a interleague Orioles-Giants game. Barry Bonds deposited a long home run onto Eutaw Street. I turned to my oldest son and said, "Nicholas, remember that you saw the greatest home run hitter of all time hit a home run." I said this despite having watched Barry Bonds grow from a sleek all-around great ballplayer to a monstrous slugger with a head as big as a basketball, inside of a decade. I knew he was bull-sh*t but I wanted to believe something else, so I did.
In the late 1990's and the early 2000's there was a company that was so respected and feared that nobody doubted their genius. Business periodicals rated this company the top company in America. The problem is no one was really sure what they did and how exactly they made such staggering profits. That company was Enron. Three quarters or more of what Enron considered its core business was complete bull-sh*t. During the same time we watched the "dot.coms" and telecom companies soar to amazing heights based on assumptions that went beyond fantasy. Their business models were like ancient temples made to worship bull-sh*t. Now of course we are sitting in the middle of one of history's greatest financial debacles. We have learned that many of the things that drove finance, like the "Yen Carry" trade, massive trade and budget deficits, negative savings rates, home purchases five to six times the buyers annual salary, AAA rated risk underwriters leveraged fifty to one, etc, etc., were complete and utter bull-sh*t. Bull-sh*t has proven it can last a long long time and make a lot of people very rich. However, history proves to us time and time again that eventually reality or the laws of nature take over and the bull-sh*t gets shown for what it is...bull-sh*t.
Now we have the "Madoff Fiasco". I honestly did not know who Bernie Madoff was until Thursday night. I really thought I had seen everything but this disaster is just astounding. I've seen the scam before but the size of it and the length of time that it went on is just amazing. What's not amazing is the amount of hedge funds that put nearly all their money into Madoff. I have always wondered why investors in a hedge fund wouldn't be a little pissed off to know that the "expert" they gave their money to just handed it over to another "expert" and still charged them two & twenty management fees. Personally, I have to think that a lot of professional investors (not all, because there's an awful lot of dopes managing money) thought that Bernie was making his nice steady returns by front running big orders from his market making operation and/or operating on other inside information. Bernie wasn't a black-box guy. He somehow managed to buy stocks, sell calls and buy puts and make money no matter what the environment, year after year. Smart guys had to know that these returns were impossible without some hanky-panky. Unfortunately for the smart guys, it wasn't the hanky-panky that they thought it was.
Madoff has to be the greatest con of all time. As the stories unfold, a picture is painted of a man who used every facet of his being to build his bull-sh*t. He has to be some sort of sociopath that just divorced his everyday life from what he was doing to his family, his friends, his charities, his business partners, his country. When you look at his operation you see all the makings for fraud. He was virtually unaudited and unregulated, he was his own custodian and trustee, and his earnings were solid and completely non-volatile. It's almost as though he studied prior frauds, like Charles Ponzi and improved on their faults. Who the hell knows, maybe he did! What you do hear from his many victims is they uniformly seemed to love Bernie and they convinced themselves that what he was doing was real. A close look or a close sniff should have set the bull-sh*t alarms off, but no one really wanted to look or sniff. They wanted to believe, just like we wanted to believe in Sammy Sosa and Mark McGuire.
Anyway, maybe this is it. Maybe this is the event that finally brings an end to a three-decade run of advancement through bull-sh*t. Maybe the "Madoff Fiasco" will finally reorient our senses and enable us to dig our way out of this mess.