with this: “..most of their “data” is in the form of documents, which are not conducive to software modeling. ”

see:
http://www.icerocket.com/search?tab=web&fr=h&q=Optical+Character+Recognition+Data+Mining

LSS: the technology exists, long has, that can slice and dice ‘documents’ any which way from Sunday..

the rest, though, re: ‘trading’ is spot-on, and should lend, additional, incredulity to the Fact of so few ‘insider trading’ “busts”..
http://www.thefreedictionary.com/incredulity

What is shocking to me is that so many funds of funds and banks (aka “Wall Street fat cats”) have invested billions with Madoff.

Have they ever examined Madoff’s 13-F?

It has a bit more than $200 million of securities, but Madoff was supposedly managing over $17 billion.

http://www.sec.gov/Archives/edgar/data/1386924/000138692408000019/edgar13f09302008.txt
(View it in Firefox, Opera or Safari browser; IE-7 does not display it correctly)

Did any of those “fat cats” ask themselves where the rest of their unaccounted billions that they invested with Madoff were?

Amazing “fat cats” groupthink phenomena!

http://www.physorg.com/news98015219.html

It is about Benford’s law stating the first digit of a number is often related to log(1 + 1/d).
The source link says scientists don’t have a clue, I myself has solved this problem about a decade ago and if I can solve it very likely a lot of other folks can solve it too.

There is more written on that stuff:

http://www.dspguide.com/CH34.PDF

At first I wondered why the author takes the Fourier transform but from page 17 of the 22 page pdf file he nicely coughs up all the important results. To me that was new; I just dived into the end results directly via ’sheer calculation’ but you can do it with the Fournier transform too.

So I am glad I have learned a little bit today…

At last:

The way Benford’s law is always formulated is rather misleading; there is no reason to look at the first digit only.

Better is stating: The likelihood that a number starts with the digit’s abcd is proportional to
log(1 + 1/abcd).

Lets leave it with that.

Jsu saw Barry’s post on Merrills outlook..funny, CNBC coined a new term…”the great recession”.

Now the bottom will not come till they acknowledge the depression.

People are going to flee any hedge fund with even the slightest hint of opaqueness, basically many of them, forcing fire sale liquidations off a 2 Trillion dollar asset base. Now we know why Citadel suspended redemptions…The Madoff Affect. If they all decide to suspend redemptions, there will be a torrent once they re-open, making matters even worse. Many of these investors are older and should put their assets into…yes bonds, not equities.

Someone smart needs to step in an make an orderly plan for unwinding hedge funds now…nobody in the government qualifies…they will likely just do a bailout (next chapter in BN?)

Here is your answer via Bloomberg, “Madoff, 70, who had advised the SEC how to regulate markets and donated regularly to politicians”

I will not be surprised if Mr. Cox and/or Bush family were Madoff’s clients (directly or indirectly).

P.S.
Barry, the Dow would rally 5000 points on the news of someone like you replacing Mr. Cox

We need:

1. The creation of new trading exchanges for instruments such as CDS. We need transparency.

2. Fix credit rating duopoly by implementing Credit Rating Agency Reform Act of 2006, that Mr. Cox just starting to consider implementing this law (two years after the law was passed)

3. Fix Mark-To-Panic stupidity that is pro-cyclical and inflates gains (during upside) and exaggerates losses (during downside). It allowed Enron to mark up its books during a booming energy market despite no cash coming in, and it is forcing banks to take billions in “unrealized” losses (even if the loans on their books are still performing and they have no plans to sell them)

4. Reinstating the uptick rule immediately. The SEC likes quoting extremely poorly designed studies to justify their stupidity for removing the rule without realizing that those studies were done in up-trending low volatility markets, ignoring that the rule was created to work in high volatility down-trending markets. The studies were like testing the effects of seatbelts in a non-moving vehicle and saying that seatbelts do not work during a crash.

5. Easing rules that discourage use of the equity market for growing businesses, such as Sarbanes-Oxley.

6. Complete transparency of the hedge funds and levering off the playing field with regular investors. The hedge funds and WS firms like Goldman must report not only their long positions but also short positions. In addition, they should report them at least every month. This information must be available to the public. We need transparency to discourage market manipulations.

7. Etc.

The government really is only good at one thing. Killing people for doing bad. They need to start getting back to what they do well and then everything else will take care of itself

What I should have said is:

The government really is only good at one thing. Killing people. They need to start getting back to what they do well and, as long as they kill a lot more bad people than good ones, everything else should take care of itself

There, I feel much better