The business got very, very crowded in recent years. But the thing that killed most of the funds was the collapse of the investment banks. Greatest margin call of all time as the investment banks ran out of money rather unexpectedly. This certainly exposed the charlatans, but pretty much wiped out all the firms with margin debt.

The reality is that if anyone can explain it, we’d still be here next Sunday. The investments and strategies that are involved can be so esoteric as to be unbelievable; They literally defy explanation. A few simple rules for investing:

If you don’t underatnd it, don’t buy it.
If you can’t afford it, don’t extend yourself for it.
Don’t throw good money after bad.

I have a slightly longer piece of advice from Ben Graham to Warren Buffet, if anyone’s interested. As the old asying goes, if you sit down at the poker table, and can’t figure out who the sucker is after 30 minutes, it’s you.

“Embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months, or years may elapse between the commission of the crime and its discovery.

(This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth .)

At any given time there exists an inventory of undiscovered embezzlement in – or more precisely not in – the country’s business and banks. This inventory – it should be called the bezzle.

-JK Gailbraith, The Great Crash

Trickle down effect… we’re having a tough time in the housing market (FL is one of the big states really hammered by the housing issue), we’re in the midst of the recession (or whatever it is) like everyone else, but we always had the people on ‘The Island’ that were for the most part not affected. Now they’re absolutely shaken and its not good for our bubble economy down here either.

I know, to a lot of people they’re rolling their eyes and thinking, “Big deal”, but to some of the people who live in the areas where the suckers live… it is a big deal.

We know someone who called their broker and yelled at him, “I know people who pulled their money out and are STILL making 18%. WHY can’t you do this for me?!” Turns out all those people were with Madoff. They were making… 0%.