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December 30, 2008

Madoff Now Makes Everyone with an Outstanding Record Look Suspicious
by Reggie Middleton

I am a fairly open person with my finances. Hey, I even publish my personal research on the Web. I think that puts me in the minority, but there are certain things that just have to be considered trade secrets. I can' t give away the whole enchilada. In looking through WSJ.com I came across the following story - Fairfield Extended Madoff's Reach: Fairfield Greenwich is emerging as a central player in helping Bernard Madoff extend his reach and raise billions of dollars world-wide.

I can see why sophisticated investors would not have invested with Madoff if or when he failed to articulate how he made his money. I believe I am rather transparent, though. The issue is that I would no more transparent if I were running money for others. The thought came to my mind earlier today as I started preparing for my taxes. The last two or three weeks have brought a nasty drawdown to my account, one that (in retrospect) I should have traded out of. I knew it was coming but I didn't want to generate any more taxable short term gains (lord knows I have enough tax liability as it is).

So, here I am at the trough of a very, very big drawdown (the same that I warned about it in my words of wisdom to individual investors) and my brokerage account says that I have a 465% time weighted internal rate of return since January 1, 2008 (I was in the high 600% range, to give you an idea of the profits that were recently disgorged). I have averaged roughly 50% cash for the year (in a bid to dampen volatility, although it significantly dampens my return to the song of about 50%) and I have used leverage for a total of about 2 weeks throughout the year.

Any outside investors who would press me on those returns would be directed to the rich documentation that I provided via performance marking, time stamped posts detailing the research returns, and the verbose description of my investment style. Any requests for additional data would probably be denied. I could always simple produce my actual trades and account statement, but I feel that would be pushing it. I would have been willing to have an auditor audit my results and vouch for them. This way I could have some privacy, and still express a modicum of veracity expressed through a third party. The combination of all of these would have made me more transparent than any mutual, hedge or investment fund that I know of, yet still I can see potential investors pressing for more.

Keep in mint that the much touted Warren Buffet showed very similar characteristics to that allegedly displayed by Mr. Madoff, see Warren Buffett: People Thought "I Was Doing Some Sort of Ponzi ...".

Reggie Middleton
Reggie Middleton, LLC
Perpetual Interests, LLCTM
http://boombustblog.com/

Who am I?

Well, I fancy myself the personification of the free thinking maverick, the ultimate non-conformist as it applies to investment and analysis. I am definitively outside the box - not your typical or stereotypical Wall Street investor. I work out of my home, not a Manhattan office. I build my own technology and perform my own research - in lieu of buying it or following the crowd. I create and follow my own macro strategies and am by definition, a contrarian to the nth degree.

Since I use my research as a tool for my own investing to actually put food on my table, I can stand behind it as doing what it is supposed too - educate, illustrate and elucidate. I do not sell advice, I am not a reporter hence do not sell stories, and I do not sell research. I am an entrepreneur who exists just outside of mainstream corporate America and Wall Street. This allows me freedom to do things that many can not. For instance, I pride myself on developing some of the highest quality research available, regardless of price. No conflicts of interest, no corporate politics, no special favors. Just the hard truth as I have found it - and believe me, my team and I do find it! I welcome any and all to peruse my blog, use my custom hacked collaborative social tools, read the articles, download the files, and make a critical comparison of the opinion referencing the situation at hand and the time stamp on the blog post to the reality both at the time of the post and the present. Hopefully, you will be as impressed with the Boom Bust as I am and our constituency.

I pay for significant information and data, and am well aware of the value of quality research. I find most currently available research lacking, in both quality and quantity. The reason why I had to create my own research staff was due to my dissatisfaction with what was currently available - to both individuals and institutions.

So here I am, creating my own research for my own investment activity. What really sets my actions apart is that I offer much of what I produce to the public without charge - free to distribute and redistribute, as long as it is left unaltered and full attribution is given to the author and owner. Why would I do such a thing when others easily charge 5 and 6 digits annually for what some may consider a lesser product? It is akin to open source analysis! My ideas and implementations are actually improved and fine tuned when bounced off of the collective intellect of the many, in lieu of that of the few - no matter how smart those few may believe themselves to be.

Very recently, I have started charging for the forensics portion of my work, which has freed up the resources to develop the site to deliver even more research for free, particularly on the global macro and opinion front. This move has allowed me to serve an more diverse constituency, which now includes the institutional consumer (ie., investment turned consumer banks, hedge funds, pensions, etc,) as well as the newbie individual investor who is just getting started - basically the two polar opposites of the investing spectrum. I am proud to announce major banks as paying clients, and brand new investors who take my book recommendations and opinions on true wealth and success to heart.

So, this is how I use my background and knowledge in new media, distributed computing, risk management, insurance, financial engineering, real estate, corporate valuation and financial analysis to pursue, analyze and capitalize on global macroeconomic opportunities. I have included a more in depth bio at the bottom of the page for those who really, really need to know more about me.

Visit his blog Boom Bust Blog.

Copyright © 2007-2009 Reggie Middleton

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