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- Economist.com | NEW YORK
- Crime and punishment
Rufus: I’d like to invest as well.
Gabriel: And as much as I appreciate your support, there are other investments better suited for someone in your situation: municipal bonds, mutual funds. I’d be happy to show you how to set something up.
Rufus: I know how to open a mutual fund... I don’t appreciate being patronised
Gabriel: No, No, No. That wasn’t my intention, I apologise
Rufus: My money is just as good as anyone else's. That's how the game works, isn't it? Opportunity arises in the private rooms of restaurants and on exclusive golf courses, and the rich get richer and the guys in the middle are never there. Well, I am right here and I want in.
The investment turned out to be a Ponzi scheme (and yes, I occasionally watch "Gossip Girl"). But this highlights the popular view that long-term investors holding mutual funds have become suckers, missing out on the backroom dealings that make the rich richer. The truth, of course, is that even the balance sheets of the wealthy have taken a large hit—they often have even more equity exposure. And, as in the show, many of those insider deals turn out to be frauds.Why do seemingly smart investors hand over their money to shady characters? I once interviewed a "reformed" con artist who claimed that the surest way to rope in your target was to convince him he was in on a scheme that no one else knew about. People like to feel special and there's something seductive about profiting from being an insider. The exclusivity of investing with Bernie Madoff probably explains some of the lack of diligence."
Don the libertarian Democrat wrote: