When Stephen Ross went to perform due diligence on the investment firm run by Bernard Madoff, he found himself baffled. His client, an investment group, was unsure Madoff’s great returns could be sustained — and the more the Madoff representatives talked to Ross in generalities about their options trading strategies, the less he understood what they actually did.
As he pressed them, they protested that options pricing was complicated. “I know it’s complicated,” said Ross. “I invented your model for pricing options.” He did not in the end recommend investment in Madoff’s funds.
--John Authers, Financial Times, on the limits of BS