Mining as I understand it 3: How people make money

Trading/investing in/speculating on stocks

In my opinion, much of the return on commodities stocks will come from ‘speculating’ on commodity prices.  The underlying companies are usually leveraged to the price of commodities.  A 2X increase in the price of a commodity will usually lead to more than a 2X increase in operating profits of a mine.  If the costs of a mine are 50% of the current commodity price, then a doubling in prices will increase mine profits three times.

A small part of the return will come from buying the dips and selling the rallies.  (Because let’s face it- this is how most value investors make money.  They aren’t always good at picking stocks.)

And a small part of the return will come from stock picking.  But very few people are actually good at it.  You know, there are hedge fund managers out there who don’t bother reading 10-Ks.  And many of them invest in mining stocks without bothering to read some university textbooks on mine exploration and mine engineering.  Some people think that it’s a good idea to go long ATPG, without understanding how PUDs can be manipulated.

Royalties

There are two reasons why royalties can be very, very profitable.  (But only by people who really, really know what they’re doing.)

Firstly, they are a way to rip off companies which are badly in need of financing.  Companies in distress.  Or junior mining companies where the CEOs do things that don’t make a lot of sense for its investors.  And royalties offer the chance for due diligence, so it’s not as risky as investing in a stock where it’s really difficult to do due diligence.  NI 43-101 is not perfect as geologists can do subtle things as using a favorable interpolation method (this can make a 20% difference).

And when dealing with junior miners, royalties offer added protection from the CEO doing awful things to its shareholders.  The royalty holder is not affected by share dilution, overpaid CEOs, CEOs wasting money on promotion, excess overhead (e.g. liability insurance for insiders), takeunders, etc.

Secondly, they are leveraged to big increases in commodity prices.  If a commodity price skyrockets, then naturally the mining company will want to do more exploration on its property and to expand production.  The royalty holder benefits from all this without having to put up any capital.  (Though not all royalties have this feature.)  This is kind of like an out-of-the-money call option and sometimes people seriously underestimate its value.

On the other hand, sometimes there are downsides to mineral royalties.  The mining company may try to underpay its royalties.  (This happened to Terra Nova, which went to court.)

If a royalty is too large, it discourages mine expansion whereas a smaller one would not.

Examples of successful royalty strategies

Pierre Lassonde + Seymour Schulich / Franco-Nevada

Altius Minerals (ALS.TO)

Labrador Iron Ore Royalty Corporation (LIF.UN) – They don’t even do anything fancy.  Most of the asset value is in their royalty, plus an equity stake in the mine covered by the royalty.  On the other hand, this company was rather lucky as iron ore prices have skyrocketed.

Kevin McArthur / “Tip of the iceberg”

Kevin McArthur is the ex-CEO of Goldcorp and now runs Tahoe.  He is interviewed by The Globe and Mail here.  He seems to attribute his success to finding tip-of-iceberg opportunities.  As I understand it, this means buying properties that have a lot of exploration potential.  This probably comes in the form of extensions to the existing deposit.

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Mining as I understand it 2: How people will lose a lot of money

Fraud, deception

1. Fraud, e.g. Bre-X.  Junior mining companies are almost always extremely promotional.  Many of them will try to deceive investors into paying more for shares of the company than they otherwise would.  Some of these forms of deception ARE NOT STRICTLY ILLEGAL.  Or if it is, the perpetrators aren’t ever going to get punished for it.  Some companies will pretend like they have an operating mine when they don’t.  They buy ore concentrates and then resell them (UUU, GORO, etc.).  This allows them to issue press releases that state concentrate sales.  One might wrongly assume that the concentrate is the output of an operating mine.
2. Employee fraud.  In the case of Bear Lake Gold, it seems that the project geologist decided to commit fraud knowing that he would get caught.  He also doesn’t seem to have profited from the fraud (other than short-term professional acclaim) and he probably will never be working as a geologist again.  Crazy stuff can happen.
3. Accidental mistakes.  Or “accidental” mistakes, depending on how cynical you are.  Canada Lithium for example had to significantly reduce its mineral reserves due to errors on the geologist’s part.  To be fair, it could have been an honest mistake.  And Canada Lithium’s management was rather vindictive and childish in their press release in how it mentioned the geologist by name.  (They want to push the blame on her.)
4. Overstated NI 43-101 reports.  NI 43-101 regulations came about due to the Bre-X fraud.  Its proponents set standards on technical disclosures in order to try to prevent future frauds.  However, sometimes people will try to game these regulations.  Canada Lithium for example (they went by a different name back then) issued a technical report on one of its properties stating that it had several thousand ounces of gold.  The next quarter, the property was written down to almost 0 (i.e. it is worthless).

DISCLOSURE:  I own shares in Canada Lithium.  Yes, I am long.  At around 46 cents, it trades at close to cash and this is ignoring the value of the lithium deposit (whatever it is).

Commodities bear market

(I could definitely be wrong here.)  We are currently in a bull market for commodities.  Several years from now, it will turn into a bear market for commodities.  Retail investors will own commodity stocks because “they hedge against inflation”.  They will own gold “to protect against fear and uncertainty”.  These beliefs will have an element of truth to them.  However, they will become part of conventional wisdom and people will not question their validity (at least, their portfolios won’t).

Degenerate gamblers will discover commodity futures.  Loose regulations around them allow gamblers to be ridiculously leveraged.  They will be much more popular than they are now.  You are going to see the return of CTAs (commodity trading advisors), which are sort of like the mutual funds of commodity futures.  (They are regulated by the CFTC and not the SEC.)  Physical bars of gold will be considered a legitimate asset class.  People will make board games about trading commodities (I played one when I was very little; it sucked).  Grandmothers and shoeshine boys will own commodities.  That will be the time to sell.

Valuation-wise, you will see new companies that are over-leveraged (i.e. unsafe levels of leverage) and chasing extremely marginal opportunities.  Then a crash in the commodities market will wipe out all the overleveraged players and the bubble will slowly deflate.

Of course, things probably won’t work out this way.  Or maybe it will, but I will be totally wrong in my timing about when the bear market begins.

Mining as I understand it

How the resource exploitation process works

Exploration

First you have to find an economic ore deposit.  Exploration geologists look at all the previous mines and look at any patterns that exist (e.g. a lot of deposits are found near existing mines).  They also utilize scientific knowledge about how ore deposits form (e.g. diamonds can only form under high heat and high pressure; they only end up near the surface if stuff from deep down is ejected upwards, e.g. in kimberlites).

In addition to drilling, geologists may look for things associated with ore deposits.  They may go looking for anomalies in gravity, induced polarization, etc.  While ore deposits can cause such anomalies, all sorts of other rock configurations can also cause anomalies.  So the geologists will drill a lot of holes and find a lot of duds.  They most basic method is old school prospecting.  You walk around the surface looking for rocks.  Certain types of rocks are likely to host valuable minerals.  Some rocks obviously contain ore just by looking at it if you are familiar with the different types of rocks.  Nowadays geologists will sample surface rock and get the samples assayed for minerals that aren’t visible to the eye (e.g. economic amounts of gold).  They may also look for “indicator” materials- stuff that correlates to certain types of ore deposits.  And they may look for boulder trains that may lead to a deposit elsewhere.

Most of the really obvious ore has been found.  Finding future deposits will only get harder and harder.  On the other hand, technology may introduce new technologies that make low-grade deposits economic.  We may also discover new technologies to help in exploration.

One thing to note about mineral exploration is that the chance of finding an economic deposit is very, very low.  Many geologists will never find a deposit in their entire professional careers.

Pre-feasibility and feasibility studies

In this stage, a mine engineer will evaluate the various technical parameters that determine whether or not a deposit is economic.  The more important ones are:

1. Size of the deposit.
2. Mining method.  Underground mining typically costs three times that of open-pit.  However, various underground mining methods differ in their cost (the cheaper ones sometimes cannot be used).
3. Mining dilution.  If the ore deposit is very narrow (only a few meters), mining machines will have to move a lot of waste rock.
4. Ore processing / metallurgy.  For some ores, the metals cannot be easily (cost-effectively) recovered.  Some ores have impurities that cost money to remove (e.g. arsenic, sulphur, etc.).
5. Infrastructure.  Mines need roads, access to ports (sometimes), power, water, etc.
6. Royalties, taxes, etc.  Sometimes prospectors and former joint venture partners will have royalties on the property and these need to be factored in.

Other parameters (that are mostly the investor’s job) are:

1. Political risk.  Some mines may have difficulty due to NIMBY groups.  For example, in Australia a lead mine was shutdown after it started production due to residents’ pressure on their politicians.
   Some foreign countries are run by corrupt regimes that demand high payments from mining companies.  They may escalate these requests in the future (a deal is not a deal).  Leaders (sometimes socialist, sometimes not) may appropriate foreign assets.  Even in the US and Canada (considered to be the lowest-risk countries), foreign takeovers are often blocked while domestic ones are ok.  It doesn’t even make sense because a country can appropriate the assets of foreign countries; it is a good idea for them to follow the host countries’ rules and regulations (though some do not).
2. Future commodity prices and exchange rates.

More exploration drilling usually occurs during this stage.  If even more ore is discovered (this is a good thing), the mining plan may be changed.  Mine construction may be intentionally delayed to avoid building a mine and processing facilities that is not ideal for the deposit.

Financing

The feasibility study may determine that the ideal level of investment is higher than what the mining company can afford.  So the mining company can sell the asset to another company with more money.  Or they can raise money through selling equity, rights offerings, selling royalties on the property, raising debt, etc.

Sometimes there are government-related/government-sponsored entities that will make dumb loans to mining companies (e.g. they don’t charge enough interest relative to the risk).  Their mandate may be to help economies develop.  In practice, government workers who do their job poorly tend to get to keep their jobs.

Mine construction

Hopefully there are no cost overruns.  A companies’ management may have incentives to understate the cost of mine construction to make the economics appear more attractive.

Mine production

It usually takes 5-10 years (sometimes more!) for a mine to actually start operating.  Mining companies are usually very overoptimistic about when a mine will actually start operating.

By this time, commodity prices may be very different and this will affect the economics of a mine.

As the end if a mine’s life comes closer, there is an incentive to find more ore near the processing plant since all the infrastructure is in place and paid for.

Exploration drilling may occur when a mine is operating.  Some exploration drilling may be deferred until an underground shaft is built.  Drilling very deep is expensive and drills will slowly start going off target the further the drilling gets.  Starting underground lowers the exploration cost.

All these things mean that the plan for a mine will likely change several times over the course of its life.

Sanofi / Genzyme Contingent Value Rights (GCVRZ)

See a different writeup on GCVRZ here for some background: http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/53388

In my opinion, they are only slightly undervalued (maybe 20-30% at $1.03/CVR) and here’s why.

Drug potential

Now that the first set of phase III trial results are in, it seems that:

PRO

Efficacy better than the traditional CRABs/ABCRs for relapses. (The phase III trial only compared efficacy to Rebif.  But it is likely that doctors and patients will extrapolate.)

?Efficacy only slightly better in terms of disability.  However, the phase III results weren’t great as this was not statistically significant.

Arguably more convenient that most other treatments on the market.  You have to sit in a hospital for 5 days while on all sorts of drugs (with a small chance of being well enough during the infusions to be able to go home).  This may not be so bad compared to constant injections with Rebif, monthly injections with Tysabri, etc.

CON

One person died during phase II trials from ITP.  This will be a huge cloud over this drug.

Major side effects… a chance of developing thyroid problems / Grave’s disease (treatable) and a heightened chance of developing ITP.  While ITP is treatable in theory, its mortality rate is not zero (e.g. as demonstrated in the phase II trials).

—

So here’s my quick analysis of the drug.  Its efficacy and mortality rate is similar to that of Tysabri.  In the initial phases, I feel that doctors and patients will rate Tysabri as safer because it has been around longer and therefore the long-term effects are better understood.  Over time, the tide will likely shift the other way as ITP is better understood than dying from PML with Tysabri (there is no cure for PML…).  So I make the simplifying assumption that Lemtrada will perform similar to Tysabri.

Tysabri is on track to doing about $1.3billion/year sales 7 years after its FDA approval.  If Lemtrada performs similarly to Tysabri, then it has a chance of hitting the $3 sales milestone of >$1.8billion sales after you figure in inflation.  It has an EXTREMELY low chance of hitting the $2 sales milestone of $400million sales during the launch year(s).  Tysabri never had sales that were that strong during its launch phase (and was even pulled off the market due to safety concerns over PML).  Sanofi may also have an incentive to sabotage/defer/stop sales during this initial period to avoid paying the $2/CVR.

Of course, it is likely that Lemtrada and Tysabri will split some of its market share as they are similar in risk/benefit.  So I wouldn’t count on the $3 milestone as being a sure thing.

Another way of looking at it is to realize that the payouts are rather lofty goals in the context of the drug industry.  A blockbuster drug is defined as one that makes $1billion/yr in sales.  Tysabri took several years to reach that point.  And the drug industry is having a very difficult time cranking out blockbuster drugs.

Bottom Line

At this point, I would say that analyzing future sales of Lemtrada is very hard.  I’m not that smart.  But I don’t see a margin of safety here.  FDA approval at 90% probability gives almost 90 cents of value.  The $3 sales milestone will take several years to materialize and its present value is worth tens of cents depending on what probability and discount rate you use.  But how much do I really know about pharmaceuticals?  In my opinion, these rights are easier to evaluate than a pharmaceutical company.  This market doesn’t look that inefficient.

Other factors

– Devaluation of the US dollar is slightly favorable for CVR holders.  Of course, this is a two steps forwards one step back kind of thing.  While the higher payoffs are easy to trigger, you will receive US dollars that aren’t worth a lot.

– Lemtrada is not cheap.  Some think that the treatment will be $60k.  Most people simply cannot afford this without health insurance.  Future changes to the health insurance industry may help or hurt sales of Lemtrada.  I don’t understand the industry well enough to know what will happen.

– I could be understating the potential of Lemtrada???  Maybe it is God’s gift to MS sufferers that cures the disease and reverses its effects, as Genzyme’s pre-marketing efforts would like you to believe.

– To be fair, a comparison to Tysabri may not be a great idea as doctors have to weed out patients who are susceptible to PML.  As well, you can only get Tysabri from a doctor who are part of its restricted distribution program (again, so people won’t die from PML).

– Sanofi is allowed to repurchase these rights.  After 2014, it can force all rights holders to sell their rights if they under $0.45 for a period of time.  This could be unfairly used against rights holders???

– Tax treatment is uncertain.

Investing frameworks II: Dealing with uncertainty

Here’s my way of dealing with uncertainty:

1. Avoid blow-up risk.
2. Stick with I-can’t-believe-this-exists situations where the risk/reward is riduclously distorted.

If I am wrong, I don’t want to lose all my money.  With particular instruments, you can even lose more than all your money.  Historically it has happened to people who write options contracts and are short volatility.  It can also happen if you take on mortgage debt or take on debt to finance a business.  If you don’t sell common stock short and if you never sell options, then your portfolio can never go below 0*.  You also won’t make a killing by short selling stock and by writing options contract, so there isn’t a lot of sense in doing it.
*On the other hand, I may not necessarily practice what I preach because I short sell very small amounts of common stock and options.  At the end of the day, we cannot avoid all risk and shouldn’t worry about extremely small risks.

Secondly, stick with situations where the risk/reward is distorted.  There is nothing wrong with holding onto cash.  If you simply saved a lot of money and held cash, you would lead a worry-free life without financial worries.  Nothing wrong with that.  And if you take risk, you might as well have your cake and eat it too.  Find situations where there is little risk and a lot of reward.  Because these situations exist.*  You simply have to wait for them.
*Remember to think for yourself: this is my opinion and I’m not sure I could prove it.  The problem I see with this theory is that it goes hand in hand with loading the boat on your best ideas.  If you’re wrong about a situation being high reward and low risk, then you’d be taking on a lot more risk than you intended.  And this may work badly for most human beings because we tend to be overconfident about our abilities.

Investing frameworks I

Trying to beat the market involves predicting the future.  This is not easy.  One needs to find theories that can be applied in the real world to predict the future.  A useful theory makes predictions that can be tested and falsified.  If a theory can’t be proven wrong, then how do we really know that it’s right?  We don’t.  Avoiding unprovable theories weeds out hokey bull**** stuff out there.

The problem with the stock market is that it is run by human beings and human beings often change.  If people get burned by some fad that loses them money, then they probably won’t get sucked into the same exact fad again.  Like .com stocks, tulip bulbs, and so on and so forth.  So sometimes when we come up with theories, everybody will know that theory (or market inefficiency if you want to call it that) and then the theory might not work so well anymore.  A great example would be the classic Ben-Graham techniques of buying stocks below liquidation value and buying stocks with long track records of profitability.  These situations are much rarer than they used to be, since almost everybody is familiar with these techniques.  That being said, human beings often make the same mistakes repeatedly.  Casinos have a lot of repeat customers, there have always been numerous real estate bubbles in the same areas, etc. etc.

That being said, let’s dive into some theories/frameworks about how to make money in the stock market.

Simple math

Yes, in some cases there are almost risk-free ways to make money.  These are generally called arbitrage trades.

One type of arbitrage trade is where a stock trades in two different currencies.  In theory, you could buy the stock in one currency, sell it in the other currency at a higher price, pay for the currency conversion, and then profit.  Nowadays, all sorts of high-frequency trading computers are all over this type of trade.  For the retail investor, there is no opportunity due to higher transaction costs and not having a super fast infrastructure ($$$).

Almost risk-free arbitrage trades

One type of arbitrage trade that is sort of available to retail investors is in special situations where the computer-wielding players aren’t looking.  Companies may announce tender offers to buy back shares (they will buy at a certain price), usually because they think that the shares are undervalued.

There may also be opportunities in stub stocks, where one company (call it the parent) owns shares in another company (call it the child).  If you want to own stock in the child company, it may be cheaper to buy shares in the parent company and get the parent company’s other businesses and liabilities thrown in for free.  You can buy shares in the parent company and short sell shares in the child company.

There may also be odd situations such as Medquist Holdings where you could have bought MEDQ shares and sold MEDH shares short.

In practice, these trades aren’t 100% risk-free.  If it’s a tender offer, there may be a limit as to how many shares get tendered (though I am not aware of any situation where this has happened).  If you are selling stock short, you have to:

1. Pay interest to borrow the shares (this interest rate can shoot up)
2. Get bought-in on your shares (other people will engineer buy-ins to profit from short sellers)
3. You are exposed to margin (liquidation) risks (where you can lose more than anticipated because your broker can liquidate your account however it wants and some try to profit from that situation).

Other arbitrage trades are risky

You may read about other types of trades that are labelled “arbitrage”.  Make no mistake about it, many of these trades are risky.  This includes merger arbitrage and trading futures and derivatives against the underlying.

The stuff we are less certain about

Moving away from situations that only require simple math, we get into the world of:

• Predicting human behaviour.
• Valuing businesses.
• Market structure. / Fleecing retail and institutional investors.
• Other.

Incentives drive behaviour

Throughout history, this has almost always been the case.  It’s pretty rare to find human beings who go against their self-interest to do the right thing.  Whenever people are faced with the wrong incentives, they usually figure out the behaviour that serves their self-interest.

If a school’s funding is dependent on standardized testing, you will usually find teachers helping their students cheat or cheating on behalf of their students / their school.  When it comes to stocks, you usually find that insiders and the boards of directors pay themselves a lot of money.  They have a mutual interest in keeping their pay high and will usually work together to maintain the status quo, even though they are supposed to be working for shareholders.

When management does not own a significant amount of stock in a company, they don’t really have skin in the game.  If stockholders are getting a raw deal, management isn’t really affected.  So management may do things such as empire building, where they make the company grow even if it doesn’t make money for shareholders.  This increases their social standing and tends to increase their paycheques (because it’s easier to justify higher pay for larger companies).  They may also do deals with investment banks and pay ridiculously high investment banking fees in return for kickbacks.

When it comes to accounting, management will often use overly aggressive accounting to inflate their reported profits and drive the share price higher.  I tend to call this fraud, but I throw the f word around too much.  This increases their pay since it’s usually tied to the share price, especially if they own options.  In rare situations, management will switch to overly conservative accounting to drive the share price down.  This is because they haven’t been granted their options yet and they want to get their options when the share price is low.  And then they switch to overly aggressive accounting.  It’s dangerous to buy into stocks with overly aggressive accounting so it pays to figure out the insider’s incentives.  Some people are really smart and the accounting trickery that they use may be difficult to figure out.

What are the incentives?

Human beings are not always driven by money.  Bernie Madoff committed a massive fraud even though he didn’t really need the money.  He had a profitable market making business (though its profits were declining).  He could have used his smarts and his connections to continue making money legitimately.  I would say that his pride led him down the path of fraud as he didn’t want to admit that he wasn’t making a lot of money for his clients.

On the flip side of this, there are rare situations where management pays themselves too little as a matter of pride/ethics.  Warren Buffett of Berkshire Hathaway is the best example as his salary is $100,000 and the use of the company jet.  He could easily get paid a salary that could buy multiple company jets every year.  As a hedge fund manager he could probably rake in a billion dollars a year, if not more.

Valuing businesses

See my posts on value investing for my opinions.

Market structure

Trading is a zero-sum game.  If somebody is making money, somebody else is losing it.

So let’s play follow the money.

The various stock exchanges derive a lot of their revenue from market makers.  In return, market makers get special advantages that allow them to profit from skimming from investors.  (If market makers add value for an exchange’s customers by “providing liquidity”, then I would expect that the exchanges would pay market makers instead of the other way around.)  This stuff doesn’t go on with the futures exchanges, so you don’t have to worry about this type of skim there.

At the retail brokerage level, some of the retail brokers will sell order flow to companies such as Knight Capital Group (NITE).  Knight then goes on to skim from the retail broker’s customers, and in return the retail brokerage gets a kickback (the euphemism for this is “payment for order flow”).  Nowadays the market landscape has changed as the retail brokers sometimes move this activity in house, or they sent retail orders to Knight’s competitors (sometimes these practices fall under “broker-dealer internalization”).

The whole system is fairly complicated and there are various methods and techniques to stealing (e.g. collecting the spread, NBBO manipulation, NBBO exceptions, opening price gap, market orders, all-or-none orders, stop orders, margin liquidation, etc.).  This makes it difficult for investors to catch on as to how they are being cheated.

But remember to think for yourself

Look, there are exceptions to some of the frameworks I already mentioned.  Sometimes fraud/shadiness works against you, and sometimes it works for you.  Maybe it’s not so easy to figure out where insider’s incentives lie.  Or if they are really smart, then they may be good at concealing their accounting fraud and you will get burned even if the company didn’t look shady (see Cynthia Cooper’s book on Worldcom).  And therefore you have unexpected losses.

And if a particular criteria is subjective (e.g. shadiness), then maybe it’s an unprovable theory that isn’t so helpful in real life.

And even I admit that “incentives drive behaviour” (my favorite framework) is not true for all human beings.  There are whistleblowers and martyrs out there.  And in other contexts, human beings can be incredibly kind and generous.  Most strangers will help you (and/or give you money) if you ask for their help, even if it’s highly unlikely that you will reciprocate.

Most investment returns are bull****

More often than not, you’ll hear about people beating the market or otherwise doing really well.  But a lot of them are misleading and/or overstated.  Here’s why.

People are more likely to report great returns than crappy ones

Most people have egos and/or want themselves to look good.  If their investment returns suck, then they are highly likely to keep their mouth shut because they don’t want to look dumb.

Sometimes, it’s in the speaker’s self-interest to promote themselves or their companies.  And it’s almost always that case that behaviour follows incentives.

Here are some ways to overstate returns.

Cherry picking

Suppose you flip a coin 10 times and it lands heads 5 times and tails 5 times.  The first two flips are tails.  So, you start counting from the third flip.  Lo and behold, your coin flipping record is 5 heads and 3 tails.  It gives the impression that you’re good at flipping heads.  But the actual track record (5-5) is simply average.

Mutual funds do this by reporting the 3-month, 1-year, 3-year, 5-year, 10-year, since inception, etc. return… whichever happens to be better.  If a mutual fund really stinks it up, it will usually end up being merged or shut down.  Which leads us to…

Survivorship bias

If all the poor/unlucky performing mutual funds are taken out, then the survivors will be stacked towards having good track records.  So you end up with a world where it looks like most mutual funds are able to “beat” the market.  But this might not be the case.  (The reality is that most mutual funds charge way too much in fees.  On average, they will lag the market a lot because of these fees.)

Not actual returns

Sometimes people report returns based on backtesting historical data.  It’s not based on actual returns.  The problem with backtesting is that it often suffers from data mining.  If you look at enough data, you will find correlations that won’t predict the future.  For example, if you categorize stocks based on the first letter of their name, you will find that some letter will outperform all others.  However, a company’s name will have little to do with how well that company will perform in the future.

Simply lie about it

Some people like Bernie Madoff just make stuff up.  Is this really news?

My investment returns 😉

2008-2009 combined  +22.1%

2010  +25.8%

Yes, my penis is bigger than yours*.

(*Just kidding.  It probably isn’t.)