I am not going to mention the Madoff fund losses to any significant degree here. However, it appears that the potential impact of the Madoff scandal may have even broader implications as the scope of the collapse widens. It may have greater impact on many more companies, pension funds, banks, etc. than is currently known. Each day, as more names of companies, people, funds, and institutions are revealed, I grow more surprised and alarmed to learn how broad and numerous the affected parties are.
The ripple effect of this fund collapse may yet reveal its most devastating consequences as those ripples move outward. This story should be watched, as the potential on derivative instruments and counter-party risk could still have even more devastating consequences as time moves forward. This has the potential to be a hidden time bomb whose worst victims have yet to be revealed. Many of those victims ultimately may even be people, companies, and institutions that never even had funds in Madoff's investment firm.
I'm surprised that so far, the stock market indexes haven't given greater weight to this news. It was certainly a surprise, so no one can credibly claim that it was already "priced into the market". However, it is possible that the biggest, most devastating surprises have yet to be fully revealed.
