Monday, August 22, 2011

Investors Beware

I am starting to get more and more emails from investment firms based in New York, New York. These emails are always touting the performance of their investments and for some reason, they always seem to based in NY, NY. No slam on you New Yorkers, but this is a fact Jack. Usually the email looks similar to this:

Dear Investor,

The "Promoting This Fund Illegally" Fund, LTD returned +.80% in July 2011. The 2011 YTD return is +3.91%.

Please find the performance sheet attached. 

Regards,

Ima Idiot that does not know compliance rules
ima@idiot.com (not a real email address)

For one thing, you cannot send out an email like this to investors. This is considered advertising and all fund advertising has to be approved by compliance. I guarantee you this was not approved by this firm's compliance department.

Secondarily, Non-Public Limited Partnerships are investments that can only be sold by prospectus. There was no link to any prospectus document in the email. Only a two page fact sheet showing performance numbers. You cannot tout performance without full disclosures. It makes no difference whether the performance is good or bad. You cannot tout performance without compliance approval and lots and lots of disclosures.

Thirdly, and more important, Non-Public Limited Partnerships are on My Do Not Buy List. These investments are highly illiquid. They are kind of like "The Hotel California. You can check in, but you can't check out." They will gladly take your money, but you can forget about getting it back. Did I say they were illiquid? If not, they are illiquid.

Non-Public Limited Partnerships, in my opinion are a legally filed way of taking your money similar to a Ponzi scheme. If an investor puts money into it, then the Ponzi Scheme, or excuse me, I meant to say Non-Public Limited Partnership, then takes some of the money that they raised and return it to investors in the form of dividends. These dividends are usually very high based on market conditions. All they are doing is using money coming in to pay investors, like a Ponzi scheme. This means that they are using principal to pay investors. After the money flow stops, then guess what? They cannot pay your principal back.You would have lost it. Of course, readers of my blog do not fall for these bad investments.

Alternatively, I see a lot of Non-Public Limited Partnerships, or L.P.'s as they are sometimes called, touting the latest hot thing, like solar, wind power, or gold mining. Truth be told that solar and wind power companies are being subsidized right now until 2012. Most of these are failing miserably. Just take a look at the stock prices for some of these companies. They are in the tank. Investors who believe in the false hopes of riches are the ones who fall for these tactics. Instead of believing in this garbage, they should believe in God.

I Google'd this fund just to see what I could find and lo and behold, it does appear to be one of those funds that they are trying to suck everyone into based on trying to post glowing articles about it on different stock touting web sites. I knew this before I even began to Google it, because no ethical firm would promote their fund via email without full disclosures. There are a lot of these email promoting, web site promoting companies out there trying to steal money, or excuse me, I meant to say raise money from investors. Don't you be one of them.

The moral to the story is always the same as far as I am concerned. Never invest in a Non-Public Limited Partnership period, especially one promoted by some web site or email. These are on My Do Not Buy List for a reason. There are plenty of people out there trying to steal your money. Stay away from them.