THE TWO BERNIES

Signs don't precede they follow.

Now that seems like a paradox if there ever was one. How many recognized the sub-prime mess after the fact? Or the dot.com bubble? Think tulip bulbs or a couple of generations ago the Nifty Fifty.

In the Good Book it says there's not much new if anything under the sun. What that means is there are only variations of past things or events. That doesn't make them new, only garbed in different clothing or packaging.

Investors usually learn this, if they learn it at all, over time. But by the time Hollywood gets around to parading it before the great unwashed masses it's older than all those glaciers climate-change folks worry so much about preserving.

 Bernie Madoff and Bernie Cornfeld shared more than just the same first name. Both sported a certain code, a DNA hardly unique to them. Some call it greed. Others humanness.  Being recent, the Madoff saga is still fairly fresh. Not so Cornfeld.

A former social worker, Cornfeld was a Columbia University product. The stars, however, seldom fall on social work. But mutual funds, we'll, that's a whole different stage. After some success selling mutual funds in the U.S. in the early '50s, a period when the investing public was finally warming up to them after a 25-year drought caused by the great 1929 Crash, Cornfield moved his stage to Paris where he sold shares, often going door to door, to American servicemen and anyone else who would buy.

Success breeds success. And by the early '60s during a bull market--who doesn't love them--he launched a new fund in new packaging called Fund of Funds, buying shares of other mutual funds inside his own.

Like all great pitchmen, Cornfeld had his own catchy oneliner: "Do you seriously want to be rich?" And he called it "people's capitalism."

His new fund was a trailblazer and he set out to find hot mutual fund managers to load up on to put the alpha in his new concoction. One of them was a guy named Fred Alger who became famous in his own right.

Cornfeld became rich himself and did his best to live up to the role, hanging out with celebrities and beautiful women and traveling the world. By 1969 his firm, Investors Overseas Services, Ltd. (IOS), employed 13,000 salesmen, had 750,000 clients in 110 countries and was called by one well-known magazine "the world's largest sales organization."

But, like an unwanted visitor, a bear market one day knocked at the investment door and his firm started losing capital. Three hundred employees filed a corruption complaint accusing him of pocketing money that belonged to them as shareholders. He was arrested and spent nearly a year in jail only to be acquitted a few years later.

By then, however, his best years of fame and fortune were behind him. Sooner or later everyone becomes prey including Cornfeld. Plagued by cries of wrongdoing, IRS woes and a flamboyant life style, he was forced to liquidate his fund. But that's another part of the story for another time.

Cornfeld died in London in 1995 at the age of 67. In his obituary the New York Times described him as "a Brooklyn-reared salesman who became one of the most flamboyant and controversial figures ever to streak through the American mutual fund industry..."

The key word here is streaked for, like it or otherwise, streaks can run both ways.