Today's Stories

January 19, 2009

Kevin Alexander Gray
Time for an New Divestment Campaign

January 16-18, 2009

Alexander Cockburn
Hail to the Chief

Caoimhe Butterly
Terribly Bloodied, Still Breathing

Audrey Stewart /
Kathy Kelly
Suddenly Bombs Started Falling: Report from Gaza

Jeffrey St. Clair
High Plains Grifter: Geo. W. Bush, a Concise Biography

Ellen Cantarow
I Could Not Save a Single Child

Neve Gordon
How to Sell "Ethical" Warfare

Vijay Prashad
An African-American in Gaza

Jonathan Cook
Israeli Attack Injures 1.5 Million Gazans

Rannie Amiri
The UN in Israel's Crosshairs

Andy Worthington
Guantánamo's Forgotten Child

Joshua Frank
Forecasting Obama

Dave Lindorff
Prosecuting Bush and Cheney

Brian Cloughley
Who Runs America?

Belén Fernández
Changing the Equation

Missy Beattie
Peace and Justice Denied

Fred Gardner
Growing Pot for Research

George Ciccariello-Maher
"Oakland is Closed!"

John V. Whitbeck
Democracy Not Partition

Stephen Fleischman
Card Check

Mischa Gaus
Medicare for All! Tackling Union Opposition to Single-Payer

Saul Landau
The End of the Affair

Norm Kent
Perils of the Grow House

Alejandro López
Give Bush the Shoe! (and Send Us the Photo)

David Yearsley
The Glory That Was Dresden

James McEnteer
Doin' the Time Warp Again

Lorenzo Wolff
An Album That Lives Up to Its Cover

Kim Nicolini
Patti Smith's Dream of Life

Poets' Basement
Three Financial Poems by Brian J. Foley

Website of the Day
Lancet: Medical Conditions in Gaza

January 15, 2009

Pam Martens
Wall Street Powerhouses Invested Alongside Madoff

Karl Grossman
Obama and the Military - Industrial - Scientific Complex

M. Shahid Alam
Gaza's Shattered Mirror

Jules Rabin
Gaza Besieged, Gaza Mauled

Alan Farago
The Nail-Gun Bailout

Ron Jacobs
The State of Black America: From Oscar Grant to Barack Obama

Timothy Seidel
Just Violence in Gaza? The Calculus of Proportionality

George Ochenski
Why No Montana Wilderness?

Todd Chretien
Taking a Stand for Justice in Oakland

Bob Fitrakis /
Harvey Wasserman
Obama's Marijuana Prohibition Acid Test

Website of the Day
Uranium Watch

January 14, 2009

Henry A. Giroux
Killing Children With Impunity

Kathy Kelly
Cease Fire, Cease Siege

Franklin Lamb
A Second Front? Hezbollah Militants Chafe as Gaza Burns

Mike Whitney
The Big Contraction: Why the Stimulus Alone Won't Work

Paul Craig Roberts
The Humiliation of America

Glen Ford
Sullying Dr. King's Legacy: the Congressional Black Caucus and Israel

Aditya Chakrabortty
The End of Property Porn

Dave Lindorff
Fattening the Rats: Feeding at the Bailout Trough

Jonathan Cook
Israel Bars Arab Parties From Elections

David Swanson
Conyers Explains Why He Didn't Push Impeachment

Martha Rosenberg
Fragile: Handle with Risperdal

Website of the Day
Report of a Red Cross Worker in Gaza

January 13, 2009

Norman Finkelstein
The Facts About Hamas and the War on Gaza

Jonathan Cook
Is Israel Using Experimental Weapons in Gaza?

Michael Neumann
Hamas and Gaza: Slave Revolts and Passionate Evasions

Coleen Rowley /
William John Cox
No Victors in the War on Dissent

Robert Sandels
Cuba and the Obama Administration: Subversion Through Trade?

Saul Landau
The Changeling: an Obama Nightmare

David Swanson
What to Ask Eric Holder

Wajahat Ali
Waltzing with War Crimes

Sam Bahour
No Other Option? A View From the West Bank

Stanley Heller
Why It's Useless to Lobby Congress on Gaza

Robert Jensen
Beyond Grief and Rage

Robin Mittenthal
Eating Away at the Land That Feeds Us

Website of the Day
The 50 Most Loathsome People in America

January 12, 2009

Uri Avnery
The Blood-Stained Monster Enters Gaza

Paul Craig Roberts
Our Collapsing Economy

Mike Whitney
Israel's Moral and Political Insanity

Ewa Jasiewicz
Oh, Quiet Night: Only Six Homes Were Bombed

Bill Quigley
A Day in Gaza

Dave Lindorff
From Vietnam to Gaza

Bill and Kathleen Christison
Blowback From a Tragic Error: a Message to Barack Obama

Jonathan Cook
Israel Ponders the Third Stage

Andy Worthington
Seven Years of Guantánamo

Kara N. Tina
Oakland on Fire

Brenda Norrell
Palestinians and American Indians: Russell Means Breaks the Silence on Obama

Nour Kharma
A Plea From a Teen in Gaza: "Will I Die, Too?"

Website of the Day
The Villages Group: an Antiwar Alliance in Sderot

January 9/11, 2009

Alexander Cockburn
Israel's Onslaught on Gaza: Criminal, for Sure; But Also Stupid

Kathy Kelly
Tunnel Vision: Report from Arish, Egypt

Bill Quigley
Report From Rafah: Doctors Stopped at the Border

George Ciccariello-Maher
Oakland's Not for Burning?

Elaine C. Hagopian
Gaza: History Matters

Mike Roselle
Drowning in a Toxic River: What Can be Done to Save Appalachia?

Steve Hendricks
The Torturer-Elect?

Gary Leupp
Revisiting the Tale of Samson

Jonathan Cook
Outcry Over Israel's War Crimes

Karim Makdisi
The Ceasefire Plan: the UN Finally Acts, But Does It Mean Anything?

Rannie Amiri
Livni's Big Lie

Peter Morici
In the Jaws of a Depression

Peter Montague
Can Chemicals be Regulated?

Ralph Nader
Move Fast to Restore the Rule of Law

Andy Worthington
The Dying Days of the Guantánamo Trials

Nadia Hijab
A Music School Silenced in Gaza

Dan Bacher
Unholy Alliance: Nature Conservancy Backs Schwarzenegger's Big Ditch

Catherine Fenton
The American Peace Movement and Israel

David Macaray
Wal-Mart Caught Stealing

Valia Kaimaki
Why Greek Youths Took to the Streets

Richard Morse
Haiti's Gas Gang

David Yearsley
To Gotham City with Dexter Gordon

Charles R. Larson
The Horror, the Horror

Richard Rhames
Gaza and the Goon Squad Meet the Wizard

Stephen Martin
Meltdown Memo to Come?

Lorenzo Wolff
What They Sing About When They Sing About Love

Poets' Basement
Anderson, Beatty and Valentine

Website of the Weekend
Gaza Protest

January 8, 2009

Jean Bricmont /
Diana Johnstone
Gaza Seen From Paris

Franklin Lamb
How Dershowitz Misstates, Misrepresents and Misapplies the Law

Paul Craig Roberts
The Difficulty of Being an Informed American

Kevin Alexander Gray
Give Burris His Seat

Chris Floyd
The Enduring Priorities in Obama's Time of Change

Ewa Jasiewicz
Riding on Fire in Gaza

Steve Conn
Sanjay Gupta and Obama

Harvey Wasserman
Kill the Nuclear Stimulus!

Wayne S. Smith
An Opening to Cuba?

Linda Mamoun
Re-settling Gaza: the Real Goal of the Israeli Invasion?

Adam Turl
Unions and Young Workers

Chris Papaleonardos
Mourning Maria Dimitriadi

Website of the Day
On the Wing

January 7, 2009

Saree Makdisi
What Kind of Security Will This Barbarism Bring Israel?

Franklin Lamb
Bend Over Professor Dershowitz, It's Time for Your Check Up

William Blum
America's Other Glorious War

Belén Fernández
The Trauma Vortex: Israel's Monopoly on Psychological Suffering

Lawrence Davidson
What is New About Gaza?

Allan Nairn
Adm. Dennis Blair and the Church Killings in East Timor

Jonathan Cook
What is Israel's Objective?

Muhammad Idrees Ahmad
Watching the War on BBC

Deepak Tripathi
Bush, as He Leaves

Cal Winslow
Now is the Hour to Defend Democracy in the Labor Movement!

Manuel Garcia, Jr.
To Students Planning Careers: Be Mindful

Dr. Hannah Safran
No More Recycled Military Solutions

Website of the Day
CNN: Israel Broke the Ceasefire First

January 6, 2009

Pam Martens
It's All One Big Lie

Victoria Buch
Real Estate War in Gaza: the History and "Morals" of Ethnic Cleansing

Neve Gordon
Israel's New War Ethic

Tami Sarfatti /
Yonatan Mendel
What Silence Says: Gaza is Still Waiting on Obama

Mike Whitney
The Gaza Bloodbath

Alan Farago
After the Fall

Gary Leupp
A Hamas Coup d'Etat in 2007?

Larry Everest
Silent Partner: the US-Backed War on Gaza

Ron Jacobs
The New Iraqi Sovereignty

David Macaray
Union-Busting is Alive and Well

Stephanie Basile
Where's Anna's Money?

Stacey Warde
An Uncle's Unrest

Website of the Day
Israeli Refusenik on Gaza

January 5, 2009

Paul Craig Roberts
Will There be a Recovery?

Sousan Hammad
Phoning Home to Gaza

Wajahat Ali
Flying While Brown

Mats Svensson
Longing in Gaza

Jen Marlowe
Abeer's Baby

Muhammad Ali Khalidi
Gaza Phone Tag

Brian Cloughley
Israel is Immune From Criticism

Faheem Hussain
Gaza and India: a View From Pakistan

William Cook
Consider the Realities of Gaza

Dr. Trudy Bond
The Madness Among Us

Christopher Ketcham
The Revenge of the Blogger at the National Press Club: a Rotten Washington Interlude

Steve Early
Who Rules SEIU?

Dave Lindorff
When It Comes to Terrorism and POW Cases, Equal Justice Under Law is a Joke

Website of the Day
The Endangered Fish of the Colorado River Basin

January 2 - 4, 2009

Alexander Cockburn
Diary of 2008: an Incredible, Hope-Filled Year

Uri Avnery
Molten Lead in Gaza

Jonathan Cook
The Real Goal of the Gaza Assault

Paul Craig Roberts
Whatever Happened to Western Morality?

Brian Eno
Stealing Gaza: an Experiment in Provocation

Ralph Nader
America Must Stop Shirking Its Responsibility on Gaza

Omar Barghouti
UN Complicity in Israel's Massacre in Gaza

Graham Usher
Where Pakistan's Generals and the ISI Draw Their Lines

P. Sainath
The Economy is Worse Than It Appears

Belén Fernández
Pardon Our Dust: Israel's PR Campaign for Gaza

Deb Reich
Shiv'a in Gaza, December 2008

Gary Leupp
Defacing Mr. Jefferson's Wall: Preachers and the Inauguration

Michael Yates
Top Chef or Top Wage Thief? Tom Colicchio and the Economics of Restaurants

Joanne Mariner
How to Close Guantánamo

Seth Sandronsky
Funding the Israeli Military: the US Pipeline

Cynthia McKinney
We Lived to Tell the Story

Sonja Karkar
Israel's Dogs of War

Deepak Tripathi
Gaza in Perspective

Robert Fantina
Obama, Afghanistan and Israel

John Ross
The Year No One Can Remember

Norm Kent
The Heat on Duval Street: Why Head Shop Raids are Unfair and Unjust

Larry Portis
Syria and the Arab Barbie Doll--Before the Deluge

Richard Rhames
Is Conscience Dead?

Dee C. Lubell
We Come From the Sun: Zora Neale Hurston and Richard Wright

David Yearsley
A Gay German at the Courts of the Medici and Hanover, and of Course the BBC

Lorenzo Wolff
Joe Ely, the Fighting Rooster of Rock

Marc Catone
Looting Lennon's Legacy

Poets' Basement
Five Poems by Grzegorz Wróblewski

Website of the Weekend
Earth in High Rez

January 1, 2008

Jennifer Loewenstein
If Hamas Did Not Exist

Oren Ben-Dor
The Self-Defense of Suicide

Wajahat Ali
The U.S. Response to the Gaza Crisis: Unfair and Unbalanced

Saul Landau
In Cuba No One Man Could Steal $50 Billion From Other People

David Michael Green
What to Expect While We're Expecting

Website of the Day
Morbid Anatomy

December 31, 2008

Pam Martens
Wall Street's Collapse and the Ownership Society

Neve Gordon /
Jeff Halper
Where's the Academic Outrage Over the Bombing of a University in Gaza?

Ted Honderich
The First Casualty of Israel's War

Brian Cloughley
Five Little Girls on a Sofa: Gaza's One-Sided Images

Ron Jacobs
What is Hamas, Really?

Vijay Prashad
Hot Rod and His Sikh Warrior: Blago's Indian Connections

Franklin Lamb
Mr. Mubarak, Tear Down That Wall!

Mike Whitney
My Brilliant Career

David Macaray
What Really Killed the Auto Bailout

Richard Thieme
The Betrayal of the Commons

Mary Lynn Cramer
Who Wins What in Gaza?

Stephen Lendman
The Troubling Case of the Fort Dix Five

Worthy Group of the Day
Western Shoshone Defense Project

December 30, 2008

Paul Craig Roberts
May We No Longer Be Silent

Tariq Ali
The Gaza Ghetto and Western Cant

Robert Bryce
The $775,000-a-Year GI

Jonathan Cook
Electioneering with Bombs

Gary Leupp
The Fishbarrel War

Dave Lindorff
Tough Guys Don't Walk: Will Cheney Seek a Pardon?

Brian McKenna
Ted Downing and Troublemaker Anthropology

John Walsh
The End of the Green Party

Ramzy Baroud
Gaza and the World

Bob Sommer
The Education of David Frost

Worthy Activist of the Day
Support Marie Mason

December 29, 2008

Jennifer Loewenstein
Israel's Attempted Endgame in Gaza

Neve Gordon
What, Exactly, is Israel's Mission?

Joshua Frank
Obama and the "Special Relationship"

George Salzman /
Manuel Garcia, Jr.
The War Against Palestine: Exception From Humanity

Norman Solomon
A Hundred Eyes for an Eye

Ewa Jasiewicz
Gaza Today: "This is Just the Beginning"

Rob Larson
The Banks Laugh All the Way to the Bank

Kenneth Libby
Arne Duncan's Dark Years in Chicago

Robert Weissman
The 10 Worst Corporations of 2008

Elsa Johnson
High Noon at Black Mesa: Bush's Farewell Gift to Peabody Coal

Nicola Nasser
Resolution 1850: Bush's Parting Gift

Belén Fernández
Hanukkah Games

Worthy Group of the Day
Nuclear Information and Resource Service

December 26-28, 2008

Alexander Cockburn
The Medusa's Head

Dr Eyad Al Serraj
The Boming of Gaza: "An Earthquake on Top of Your Head"

Jeffrey St. Clair
Cancerous Air

Bradley Simpson
Obama's New Intel Chief, Dennis Blair, Ran Interference for Indonesia's Butchers

Ralph Nader
Government Without Laws

Gary Leupp
Obama and the Graveyard of Empires

Ellen Cantarow
Richard Falk, Israel and the NYT

Matt Landon
The Great Coal Ash Flood: a Report From Swan Pond Road

David Macaray
SAG's Terrible Dilemma

Patrick Bond
End of Neoliberalism? Sorry, Not Yet

Norm Kent
Invoking Bigotry: Obama and Rick Warren

Brian T. Ketcham
Fuel Efficiency is Easy--Just Don't Let Detroit Tell You How to Do It

Rannie Amiri
War Clouds Over Gaza

Larry Portis
Changing the Ethnic Vocabulary

Richard Rhames
Welcome to Soup Kitchen America

Stephen Lendman
29 Red Flags: Early Suspicions About Bernard Madoff

James L. Secor
Unheralded Coup

Ramzy Baroud
Iraq, the Plot Thickens

Harold Pinter
Art, Truth and Politics: the Nobel Lecture

Cpt. Paul Watson
Tracking the Cetacean Death Star

Howard Lisnoff
Nixon's Cambodian Shock Treatment

Michael Dee
The Bill of Rights, Killed in Action by the War on Drugs

Steve Conn
Eight Predictions for 2009

Poets' Basement
Valentine, Kaung, Moser and Graham

Worthy Group of the Weekend
United Mountain Defense

December 25, 2008

Judy Gumbo Albert
What Were Those 1960s Terrorists Thinking, Anyway?

Rev. William E. Alberts
The Sole of Christmas

Hannah Mermelstein
Caution: Settlers Ahead

Worthy Group of the Day
Citizens' Coal Council

December 24, 2008

Bill Quigley
Five Bailout Lessons From Katrina

Saul Landau
Then and Now: Venezuela and Cuba, 1960-2008

Sam Smith
Evangelism and Politics

Brian Cloughley
Torture, Slaughter and Lies

John Ross
Where's al-Zaidi's Pulitzer?

Eric Walberg
Cold War Shivers

Norm Kent
What Will Obama Do About Marijuana?

Stephen Martin
Reasons for Cheerfulness

Worthy Group of the Day
Collateral Repair Project

December 23, 2008

Michael Hudson
The Ponzi Paradigm

Michael Yates
The Tombstone Economy

Chuck Spinney
The New York Times Flames Out in Defense Dogfight

Vijay Prashad
India's Reckless Road to Washington, Through Tel Aviv

Brian Horejsi
Interior Decorating: Obama, Salazar and the Future of America's Public Lands

David Macaray
Obama's Best Pick?

Neil Watkins /
Sarah Anderson
Ecuador's Conscientious Default

David Michael Green
Hey, Reagan Democrats! Now Do You Get It?

Worthy Group of the Day
Focus on the Corporation

MLK Day Edition
January 19, 2009

What Happened, How It Happened, What Might be Done

Investing with Bernie Madoff

By LAWRENCE R. VELVEL

I first heard of Bernie Madoff at some point in approximately the early 1990s. I think it must have been sometime around 1992 or 1993 because one of the points that made a big impression when I heard of him was that the SEC had investigated and had publicly said it found nothing wrong with what Madoff was doing.

The way that had happened was that two Florida accountants, Bienes and Avellino, had for three decades collected hundreds of millions of dollars from clients and others and invested it with Madoff. The returns on the money were of the medium but steady type for which Madoff has become publicly infamous since December 11th of 2008. The SEC had heard of the arrangement and investigated to see if the deal was a fraud of some type.

At the conclusion of the investigation, the SEC said that Bienes and Avellino, who had been collecting the money on the promise of a return of about 15 percent or so, had thereby been selling unregistered securities. But the SEC found that the invested money was still there -- it had not been dissipated or blown -- and it publicly and explicitly said that it found nothing wrong with Madoff. This was of enormous importance to many who invested after 1992, as I did, and who knew that the SEC had said it found nothing wrong with Madoff. How could there be anything more important than to know the relevant government agency had investigated a deal and found no wrong on the part of the money manager?

The exact words of the SEC official quoted by the Wall Street Journal on December 1, 1992 were, "Right now, there's nothing to indicate fraud." In the next 16 years, although it received many complaints about Madoff and apparently investigated him eight times, the SEC never warned us of possible fraud, never retracted its initial statement, never warned us that things conceivably could have changed since it said that "Right now, there's nothing to indicate fraud," and consequently never gave people a chance to "defend themselves" by withdrawing investments or not making new ones.

The money invested with Bienes and Avellino was given back to the investors. But, the way I heard it, a number of them were intensely (and understandably) disappointed because they had been making consistent decent returns, and they understandably asked Madoff if he would continue to invest for them. Madoff, as I heard it, agreed to continue investing for family and friends as an accommodation to them, doing so, it was said, because he was a good guy -- which sounds absurd to say after December 11, 2008, but was in full accord with his decades-long reputation at the time and for sixteen years afterward -- until December 11, 2008.

What is more, from the day I first heard of Madoff until December 11th, I never heard even a whisper that Madoff was not investing only for a small number of people -- in accord with a claimed initial decision to keep the number small and merely accommodate family and friends -- but rather was seeking investors widely, was investing for huge numbers of people, was getting billions from hedge funds, banks and other institutions. In hindsight call me stupid, but the press wasn't following what Madoff was doing, I only knew a few people who invested with Madoff and years later heard of one other, I have never lived in circles where lots of people invested with him, and I thought Madoff's investing was a small operation in an otherwise large broker-dealer.

The period of the 1990s was one in which massive returns were often being sought and obtained by investors and mutual fund managers. Mutual funds were sometimes reaping annual returns of 25, 30, 40 percent and more on their money. To invest with Madoff was, as odd as it may sound today, a conservative type of investment in which one deliberately forsook efforts to make the huge gains often being obtained by lots of mutual funds, and instead accepted smaller but steady gains. Additionally, one accepted that the gains, whether left invested with Madoff or taken out, would be taxed at a much higher rate than was generally true of much of the gains from mutual funds, stocks and other investments. For the gains with Madoff were ordinary income or short term capital gains rather than long term capital gains, and were therefore taxed at the rate on ordinary income, not the farlower rate applicable to long term capital gains. So investors with Madoff were both taking a lower rate of return and paying much higher income taxes than the capital gains taxes whose attainment was all the vogue then. This is deeply inconsistent with a greedy grab for every nickel one could get, as the media has often portrayed it.

Thus it is that I said then and say now that investments in Madoff were thought a conservative investment, not the greed which has so readily been bruited in the media by reporters who do not know, or at least do not write about, the facts. That they were conservative investments, and did not make as much as hedge funds have held out in their marketing materials, is precisely the point recently made by the first rate financial writer James Stewart. And they were, as said, investments in a system and with a guy in whom the SEC expressly had found no fault -- who was, to boot, a leading and highly respected figure on Wall Street. He had been, among other things the Chairman of NASDAQ for three years and a member of the Board of Governors of the NASD. (For those who know financial history, he might in retrospect be thought the Richard Whitney of today.)

In 1995, this writer, who had been hearing about Madoff for a few years, sought to find out whether Madoff would accept an investment from me. At that time -- and until December 11th struck -- I continued to think that Madoff was running only a relatively small overall total amount of money for family and friends. Because I was, defacto, a virtual family member of one of his investors, Madoff accepted my investment. That, at least, is what I thought then. I never knew, until after the scandal broke, that at some point -- whether it was before or after 1995 I do not know -- Madoff began seeking huge amounts of money, began using feeder funds, including feeder hedge funds, was running billions upon billions of dollars, etc. Nor did I know, until December 11th, that there were three parts to Madoff's business, i.e., that there was a third, investment adviser segment. I had signed a broker/dealer agreement, and thought he was investing my money in that capacity.

So an awful lot was news to me when the scandal broke. But things that were news to me were things that one would have been likely to learn before making investments if the SEC had done its job in 1992: if it had made Madoff explain and prove how he was making money when it investigated the deal in 1992, or if it had made him register as an investment adviser in 1992, or if it had put a stop to the whole business if it already was a Ponzi scheme at that time.

Before I made the final decision to invest, I did the due diligence of which I felt capable and which occurred to me. In particular, I met at Madoff's offices on April 3, 1995 with the fellow I have always been told and always believed was his number two man, Frank DiPascali, to have him explain precisely what was the investing strategy that was being followed. DiPascali explained that Madoff was engaging in what I now know to be called the "split-strike conversion" strategy. Under this strategy, Madoff bought for one's account a "basket" of stocks that were in the S&P 100. To guard against losses, he simultaneously bought options, called "puts," that allowed him to sell the stocks -- to "put" them to someone, if they went down instead of up. To pay the cost of the puts that he purchased, Madoff sold other options, named "calls," that allowed the buyer of the option to "call" the shares from Madoff after small gains.

By guarding against losses via "puts" while offsetting the price of the "puts" by selling "calls" that limited the gains from each set of transactions, and by highly active trading that repeated the process time and again during the course of a year, Madoff could make small profits on each of numerous trades when the shares rose in value rather than dropped (Madoff was swinging for singles, not homers, said DiPascali), while he guarded against big losses from downturns.

Over the course of a year, the small profits (the singles) on numerous trades of stocks that rose in value, would mount up. This was not a strategy for big hits, but for a small profit here, a small profit there; if shares rose, say, ten percent, the strategy might garner one or one and a half percent (because the calls would require the stocks to be sold). Over the course of a year, the small profits would add up (and would exceed any small losses when stocks went down and would be "put" to buyers).

That the foregoing description of the investment strategy was what was told me is evidenced by contemporaneous notes -- which I still have -- of the meeting with DiPascali on April 3, 1995 -- the meeting with the number two man to a highly respected Wall Street figure. The notes of the meeting say:

The program will work as follows: I will be long 30 to 40 S&P 100 securities. The portfolio is configured so there is a perfect correlation with the S&P 100 index. It is hedged using index options. So if market goes up and you are in a short position on options, it causes the long assets you own to go up.

So you are long a basket of securities -- our core assets -- you have hedges. In a volatile market, you'll do very well. In an even market or a down market, you'll do okay.

Your long position is protected against going down by being long on puts on the index. Flip side is you have short calls so there will not be unending appreciation.

They are looking to hit lots of singles. It's a leveraging type of game. If net goes up 10% you make 1 or 1.5%, while you are protected against losses on downside.

Results vary from month to month -- some months you make zero, some 2%. The goal is to do twice the long term Treasury bill rate. So the goal now is about 15%. Last year just made it. Other years exceeded it. Doesn't feel will exceed it now because more people (competitors) are doing it and this limits what you can squeeze out.

So the split-strike conversion strategy was what was described to me as the Madoff investment strategy, was a system that made a lot of sense to me, was what I invested in, and was all I intended to invest in.

Click here to read Part Two of Investing with Madoff.

Lawrence Velvel, dean of the Massachusetts School of Law, is the author of Thine Alabaster Cities Gleam and An Enemy of the People. He can be reached at: Velvel@VelvelOnNationalAffairs.com

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