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Tuesday, January 27, 2009

When it rains...

Warren Buffett once said that it's only when the tide goes out that you can tell who's been swimming without a bathing suit. (Of course, given Warren's investments in Wells Fargo, American Express, Conoco Phillips, US Bancorp, and GE, he's down to a thong himself.)

But Buffett has been a great investor for a long time, and is famously honest as well as witty (I hope they put together a book of his annual reports sometime). And before his GE and Goldman Sachs investments last fall, he did say that he had no idea where the stock market was headed in the short term. (One more thing he was right about.)

A lot of people are not so honest. Our economy is at ebb tide right now and many of them are scrambling for cover, of which there isn't much.

This morning it was announced that yet another operator of a Ponzi scheme, Nicholas Cosmo, founder of Agape World, has surrendered to authorities. His take was $380 million.

The NY Times article stated, "In 1997, while working as a stockbroker...Mr. Cosmo was accused of misappropriating funds, according to court records. He pleaded guilty to a single federal charge in 1999 and was sentenced to 21 months in prison and ordered to pay at least $135,000 in restitution. He was also told to undergo 'extensive gambling therapy' while in prison, according to court records."

Cosmo was born in 1971, making him only 26 at the time of his first arrest. Given that, and that people who become "addicts" of vices with no physical component are much more likely to be sociopaths, it seems a fairly safe bet that Cosmo is one such.

After all, it takes a very special kind of person to operate a Ponzi scheme. Put yourself in their shoes. You have to be comfortable looking people who consider you their trusted friend straight in the eye and assuring them that their money is in good hands, all the while intending to do nothing but steal from them. Then, after you take their money, you have to go about your life as if nothing is amiss, and not let it bother you. There's only one type of person who can do that well, a sociopath.

Speaking of such, another Ponzi schemer, Arthur Nadel, who had gone on the lam a couple weeks ago, was arrested in Tampa today by the FBI. Nadel had made $300 million disappear. Sadly for him, he wasn't quite as effective in making himself disappear, and was caught just a few miles from his home base of Sarasota.

Many of these guys will never be caught. But when they are, it's always gratifying.

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