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LETTERS

Madoff clients ignored the cardinal rule about diversification

March 22, 2009

Re Michael Hiltzik's column, "How could savvy investors have been fooled by Madoff? Easy," March 16:

Hiltzik's candor is refreshing. It's true that even smart, sophisticated people can be conned. But I can't comprehend why Hiltzik failed to mention the cardinal rule of investing: Diversify your holdings. We hear this advice constantly from financial experts, yet most of Madoff's victims ignored it and put all their eggs into a rotten basket.

Would I have turned over all my retirement savings to a slick con artist? Heck, I wouldn't invest all my savings with my own mother, let alone a Bernie Madoff.

Bonnie Sloane

Los Angeles

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Michael Hiltzik asks "why should we believe that . . . we won't be fleeced again?" To be fair, Hiltzik is not the only person who has failed to distinguish between what is ordinarily good consumer practice and investment due diligence. The solution, as simple and effective as surgeons washing hands to avoid infection, is one routinely practiced by fiduciary advisors: 1) Your advisor should not be the custodian of your investment assets, and 2) never write a check payable to your investment advisor, except for fees.

Jaws may drop and brows furrow in disbelief, but yes, it is this simple.

Michael Grodsky

Los Angeles

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Michael Hiltzik's mea culpa -- "I would have been fleeced by Bernie Madoff" -- rings hollow. For those who lost everything, smart investing also calls for spreading it around. That would result in proper asset allocation, but also diversification of risk. Money managers who didn't abide by this and individual investors who chased per annum returns too good to be true are ultimately responsible for their own actions.

"Personal responsibility" used to be a watchword of our culture; the day that returns, all individuals, companies, governments and organizations will be a lot better off.

Jeremy R. Serwer

Needham, Mass.

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I cannot begin to imagine the stinging insult that victims of grand thief Bernard Madoff must be feeling upon learning that government-dependent AIG is using a portion of its $170 billion in bailout loot to provide its executives with tens of millions of dollars in bonuses for their "talent."

Madoff investors did what they were supposed to do, having invested huge sums for self-sufficiency and retirement, albeit with a degree of naivete.

AIG, however, piloted the company into the ground with risky bets, told a gullible government that it needs a blank check in order to avoid worldwide economic calamity, and then squandered the money.

As AIG is looting government coffers, Madoff victims are broke, due in part to a government regulatory process that failed them, yet they are told that they are on their own.

We live in a cockeyed nation in which it is becoming increasingly difficult to respect our institutions and our government. Can and will our president right the listing ship of state?

Oren M. Speigler

Upper Saint Clair, Pa.

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Though financier Bernard Madoff is behind bars, there are still a lot of unanswered questions in his case.

Because his Ponzi operation was so massive, with nearly 5,000 clients being cheated out of $65 billion, many have speculated that other accomplices had to have been involved, including Madoff's wife, children, brother, relatives and close work associates.

Since he is 70 years old, was Madoff just acting as the fall guy so his children and wife could benefit? Was Madoff merely a front man for organized crime, with the latter calling the shots?

If his family was not involved, at what point did they become aware of his scheme?

Last year, Madoff and his wife reported a combined net worth of $823 million. So where is the rest of the $65 billion? Was it laundered by organized crime? Was it deposited in secret Swiss bank accounts?

Kenneth L. Zimmerman

Huntington Beach

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