Tuesday, January 6, 2009

Big Losers :: Playing with math

Let's say you invest $15 million in a fund or a company or something, and they are sending you statements that your investment has ballooned to $115 million, and then you find out the whole thing was a sham, or a ponzi scheme, or cooked books, or whatever.

How much money have you lost?

$115 million?


$15 million?

Cash losses versus "on paper" losses.

Perhaps you went to a bank and borrowed $20 million against your $115 million "paper" assets. Then you went and built a house in Aspen, bought and berthed a yacht in the Med, bought trophy wifey a $50,000 fur coat and spent another $1,950,000 to keep her in the style to which she is accustomed - furnishing the house, art, clothes, Hummers, Bentleys, mani's, pedi's, Jorge the pool boy and all that shit.

So I suppose now you are technically out $35 million. Your company is busted. Your real assets are being repo'd by the bank - the house is gone, the yacht, commercial buildings, equipment, the fur, blah blah blah, yadda yadda yadda.

I wonder if trophy wifey is sticking by your side? Through good and bad, for richer for poorer, right?

I suppose things could get bad enough to throw yourself under a train. I dunno.


It's only money.

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