All Madoff, All the Time

The financial press can’t seem to turn the page on the Madoff Affair. Yes, it’s big news that a prominent New York financier has allegedly defrauded some high-profile investors such as Mort Zuckerman and Steven Spielberg, not to mention a few European banks, out of a total of $50 billion.

But it seems to me that the real culprit is lack of regulation, not 70-year-old Madoff (pronounced MAY-doff, as in “made off” with your money).

Although it appears that Madoff, a former NASDAQ chairman and owner of his eponymous broker/dealer firm, was not operating a hedge fund per se, his Ponzi scheme thrived because of the lack of oversight in that shadowy corner of the financial services industry.

As I was discussing with Pamela Cucinell on her AstroChatter BlogTalkRadio program earlier this week, I think it’s quite interesting that the Madoff scandal began to unravel over Thanksgiving weekend (even it didn’t become public until a week ago). That’s when Uranus was making a station opposing Madoff’s natal Neptune, according to commenter Gian Paul.

More important, it’s when Pluto moved into Capricorn. Back in the early 1980s, as Pluto moved into investment-oriented Scorpio, deregulation opened the door for individual investors and pension funds alike to increase their exposure to the stock market.

As Pluto transited free-wheeling Sagittarius from 1995 until this year, investment turned to speculation.

Now that Pluto the Transformer is in staid Capricorn to stay, we’re going to see an emphasis on capital preservation, as opposed to chasing outsize gains through investment vehicles such as hedge funds, which are unregulated by the U.S. Securities & Exchange Commission.

Hedge funds have the ability to invest in a wide variety of instruments — some blame them for the dramatic run-up in energy prices earlier this year — and they have attracted the rich and famous by delivering outsize returns. Indeed, Madoff’s investors were lured by his apparently steady returns of 12% to 15% a year. Of course, that record was bogus.

Now, that the music has stopped, the Madoff Affair will lead to greater scrutiny of hedge funds, private equity, and other investment pools that have been operating relatively untrammeled for the past 14 years.

Welcome to Pluto in Capricorn!