Why do people trust enormous sums of money to a stranger without due diligence, often on the word of another person who they may know only indirectly?
A good part of it is reputation and past performance, and who that person knows.
So Kevin Bacon and Kyra Sedgwick, in a lapse of sound portfolio theory, entrusted a sizable share of their wealth to Bernie Madoff, and are now apparently regretting that decision.
The average person likes to read about celebrity events. It provides an excitement to what might otherwise be a dull period of life. It also makes the ordinary person seem fortunate, smart, to hear of the misfortunes of the rich and famous. Misery loves company, and there is a bit of the voyeur in all of us.
Who would trust their wealth to an opaque and inherently arbitrary store of wealth, based solely on past performance and general reputation?
You would of course.
Don't believe it? Check you wallet and you bank accounts. Where is the majority of your wealth being held, if not in US dollars and dollar related financial assets?
Its not the same thing eh? Let's see how you feel about it at this time next year when Zimbabwe Ben has the monetization machine up to ramming speed.
New York Magazine
Madoff’s Latest Victims: Kevin Bacon and Kyra Sedgwick
12/30/08 at 10:15 AM
...We'd heard that along with Hollywood boldfacers Jeffrey Katzenberg and Steven Spielberg, Bacon and his wife, Kyra Sedgwick, lost money in Madoff's devastating $50 billion Ponzi scheme, and Bacon's rep, Allen Eichorn, confirmed it for us.
"Unfortunately, your report is true," he wrote. He wouldn't elaborate on whether, as we'd heard, they'd lost everything except for their checking accounts and the land they own. "I can confirm that they had investments with Mr. Madoff — no further specifics or comment beyond that," he said, adding: "Please, let's not speculate or rely on hearsay."
But we can't help but speculate! Just think about it: Footloose money: gone. Wild Things residuals: gone. The Singles stash: obliterated. If there's anyone in Hollywood who didn't deserve this, it's Kevin Bacon and Kyra Sedgwick. Those two have worked. It sincerely pains us. At least they have The Closer to fall back on. (For the record I take absolutely no joy in their misfortune. They seem like fine people. I feel genuinely saddened by their misfortune, in the same way I would feel sorry for your misfortune if I knew you. They have a strong cash flow and will recover. You may not be as lucky. Take away a message. Diversify. - Jesse)