Hi Everyone,

It has been interesting reading about the huge Ponzi scheme that Bernie Madoff created.  What always comes to mind here as a financial advisor how can people neglect the number one holy grail of investing, which is diversification.  No matter how good an investment sounds or is, you can not commit large sums to just a single investment.

Nevertheless, many people believed him and trusted him with all their life savings, and not just individuals, but also foundations and financial institutions.  Considering all the scrutiny that financial advisers are put under with all the required disclosure, why did the SEC never even look at him?  After all, he was taking care of a lot of money.

With all the believe and trust out there, could we draw a comparision to the Social Security system?  It works just like Madoff’s scheme, the money from the people that invest is used to pay back people who invested in the years past.  If government does not have the courage to do something before it is too late, it will make Madoff’s Ponzi scheme look like pocket change.

I do want to say here that I think the Social Security system of the United States is one of the healthiest in the western world, due to the fact that we still have a fairly healthy birth rate and the amount of immigration.  Nevertheless, it can not be sustained forever without increasing taxes or decreasing benefits or both.  Once it becomes a pure wellfare system, which it will likely become without changes to the system, for everybody from middle class up, social security will be just what Madoff created, a Ponzi scheme where they maybe see pennies on the dollars, but likely nothing.

Maybe our new government can learn something from the events of the past week, but if anything, we will likely get more regulation, even though this is one of the most regulated professions already and the regulators are not doing their job.

Please feel free to comment.

Patrick