Exploring the Complex Psychology Behind Ponzi Schemes
● The Ponzi Scheme Puzzle: A History and Analysis of Con Artists and Victims
By Tamar Frankel
Q&A with author, featured on The New York Times/DealBook blog.
The term “Ponzi scheme” arguably deserves its own classification within the Dewey Decimal System. Alongside the biographies of notorious schemers, a growing collection of scholarly works, legal texts, and articles aims to deepen our understanding of this long-standing fraudulent practice. However, the latest contribution to this field, “The Ponzi Scheme Puzzle: A History and Analysis of Con Artists and Victims” by Tamar Frankel, adopts a fresh perspective. As a legal scholar with Boston University Law School since 1968, Frankel’s book delves into the psychological underpinnings of financial criminals, seeking to understand what drives their deceptive behaviors. Her exploration was sparked by a colleague’s description of such individuals as “those mimics of trustworthiness: con artists.” Over a span of more than ten years, Frankel analyzed over a hundred Ponzi schemes to inform her findings.
According to the U.S. Census Bureau, new orders for durable goods enjoyed a robust increase of 4.2% last month. However, this positive news is tempered by a persistent decline in a crucial subset: business investment, which comprises new orders for capital goods excluding aircraft and defense. Should we overlook the encouraging rise in overall durable goods orders in light of this ongoing weakness in business investment? If the overall economic landscape appears cloudier than the headline figure indicates, what implications does this hold for the broader economy? To gain better insights, it’s essential to examine the nuanced data closely.
Marketwatch’s Ian Salisbury reminds readers that many actively managed mutual funds may be incorporating ETFs into their holdings. This preference for index funds within a portfolio that’s meant to consist of individually selected securities can signal that investors are essentially paying actively managed fees for merely following the market—often referred to as actively-managed beta. In simpler terms, “You’re not getting what you paid for, my friend.”
The Labor Department reports a slight increase in jobless claims for the previous week. However, when we analyze this data against the backdrop of recent trends, it becomes evident that this indicator remains on a positive trajectory. For the week ending August 18, new filings rose by 4,000 to a seasonally adjusted total of 372,000—the highest level seen in five weeks. Nevertheless, this increase pales in significance compared to the year-over-year change, which shows a substantial 10% decline in unadjusted claims. This aligns with recent patterns and is a promising sign of gradual improvement in the labor market.
“It’s the end of the world as we know it and I feel fine.” — R.E.M.
The Congressional Budget Office recently issued a warning concerning an impending recession next year unless Congress takes measures to mitigate the potential impact of expiring tax cuts and automatic budget reductions. The so-called fiscal cliff appears to be drawing near. How should you respond to this information? There’s little one can do at this stage. However, if you’re inclined to base your decisions on forecasts extending six months or more into the future, now may be the time to reconsider this approach. Historical precedent suggests caution before making drastic changes driven by predictions.
Arnott: Emerging Markets Are Today’s Low-Hanging Fruit
Morningstar.com | August 9
The chairman of Research Affiliates discusses why he sees potential value in developing-market bonds, urging investors to establish a ‘third pillar’ within their portfolios.
Financial advisor Ron Vinder from UBS Financial Services shares his success in managing client portfolios using a diverse range of ETFs. He highlights that rebalancing this mix is a crucial component of his approach, as he notes in Barron’s. “When an asset class performs well, that’s when people tend to buy more of it while selling what’s underperforming.” This behavior is all too familiar and reveals why the anticipated premium from rebalancing is compelling. If everyone actively diversified and rebalanced their portfolios, the performance edge would likely diminish. The reality, however, is that investor behavior remains stubbornly rigid, even when circumstances suggest a change is warranted.
Last week’s update of the Capital Spectator Recession Risk Index (CSRRI)—a straightforward but insightful diffusion index based on a wide array of economic and financial indicators—indicated a low probability of July marking the onset of a new recession. While a broad review of historical data can offer valuable insights into the business cycle, it is merely the starting point. To project CSRRI results for the upcoming months, modern econometric modeling techniques can provide further clarity.
The Capital Spectator will take a brief hiatus for a few days. It’s still summer, right? Regular updates will resume on Monday, August 20. Cheers!
Industrial production accelerated in July compared to June, reports the Federal Reserve . This positive news follows yesterday’s better-than-expected retail sales report for July. Considering these data points within the broader context of economic conditions, there remains a strong case for anticipating growth in the near term.