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.

Remember When I Said...

I know that I am beginning to sound like a broken record, but I keep finding vindication for items on My Do Not Buy List. This time it relates to Structured Products. I do not like them for a lot of reasons, but the SEC Staff Report gives even more reasons not to buy them. See the SEC Staff Report via this link:

http://www.sec.gov/news/studies/2011/ssp-study.pdf

When I have more time, I am going to have to do a follow up Blog article on how many items on My Do Not Buy List have been vindicated by regulator scrutiny or financial media articles. I think it will match up pretty well. In other words, I think we will find that there are good reasons for the items on My Do Not Buy List. In case you missed it, here it is again below:

DO NOT BUY LIST

The following investments are on our Do Not Buy List. Although all of these investments are legal to be sold, it is our opinion, that these investments are not appropriate for most investors. Not all of the investments on the Do Not Buy List have all of these bad characteristics, but they have one or more of them.


The Do Not Buy List and their Bad Characteristics

(The numbers following each item refer to the Bad Characteristics listing below.)

• Private Placements – 1, 2, 3, 5, 6, 7, 8


• Structured Investments – 1, 6, 7, 8


• Non-Publicly Traded REIT’s – 1, 2, 5, 6, 7, 8


• Non-Publicly Traded Limited Partnerships – 1, 2, 5, 6, 7, 8


• Promissory Notes – 1, 2, 3, 4, 5, 6, 7, 8


• Regulation D Offerings – 1, 2, 3, 5, 6, 7, 8


• Exchange Traded Notes (ETN’s) – 1, 6, 7, 9


• Precious Metals – 1, 2, 3, 6, 7, 8


• Floating Rate Bank Loan Mutual Funds – 1, 5, 6, 7, 8


• Consumer Credit Funds – 1, 2, 3, 6, 8


• A Shares Mutual Funds (unless commission waived) – 5, 6, 7, 8


• B Shares Mutual Funds – 1, 5, 6, 7, 8


• C Shares Mutual Funds – 1, 5, 6, 7, 8


• Variable Annuities – 1, 5, 6, 7, 8, 10


Bad Characteristics


1. No liquidity, limited liquidity or penalty for early withdrawal.


2. Not publicly traded.


3. Not regulated.


4. Structured like Ponzi Schemes.


5. Excessive commission charges.


6. Higher risk of principal loss.


7. Excessive expenses and management fees.


8. Aggressively marketed.


9. Unfavorable taxation.


10. No tax deferred benefits if in IRA or Roth IRA.

If you currently own any of these investments, or have questions about them, then please feel free to contact me at 904-262-0888 or via email at rick@marianfs.com.

Keeping your informed and as always, at your service.

More Vindication for My Do Not Buy List

My last blog post was vindication for a item on My Do Not Buy List. Just a scant two days ago, I blogged on Regulation D Private Placements and their dubious listing on My Do Not Buy List. Today, more vindication! Another item that I have on My Do Not Buy List gets noticed by both the SEC and FINRA.

The SEC and FINRA have come out with a warning about Structured Products which has been on My Do Not Buy List from day one. Although, in elite circles, they are sometimes called Structured Investments and this is how I list them on my handout. (See link at the bottom of this article.) After all, no one wants to be sold a product. See article here about the joint statement from the SEC and FINRA on Structured Products:

http://www.sec.gov/news/press/2011/2011-118.htm

This article includes a list of questions that investors should ask before investing in these Structured Products. All you have to do is take one look at the complexity of this list of questions and you will quickly agree with me as to why it should be on My Do Not Buy List. See the list of questions here:

http://www.sec.gov/investor/alerts/structurednotes.htm

The bottom line is that if it is on My Do Not Buy List, then you can rest assured that you should not ever invest in it. For your own handout of My Do Not Buy List, click this link below:

http://www.marianfs.com/documents/Do_Not_Buy_List.pdf

Feel free to forward to others for their protection.

Vindication for My Do Not Buy List

Apparently, the SEC agrees with me that Regulation D offerings under Rule 506 are being used by felons and bad actors to raise money from unsuspecting investors. Under Reg D, money can be solicited from up to 35 non-accredited investors and an unlimited amount of accredited investors. These offers are exempt from SEC registration, therefore the potential for misuse exists.

Under the proposed rule, anyone who has had a criminal conviction, court injunction or restraining order would be prohibited from bringing a Reg D offering to investors. I am not sure if the proposed rule goes far enough, however. It seems to me if someone had their securities licenses revoked, then they would fall outside of this proposed rule. Further, what about someone who has been fined in a civil proceeding for previous securities rules violations? They too should be barred from being able to offer Reg D offerings in my opinion.

You can speak up and offer your own opinion at:

http://www.sec.gov/cgi-bin/ruling-comments?ruling=s72111&rule_path=/comments/s7-21-11&file_num=S7-21-11&action=Show_Form&title=Disqualification%20of%20Felons%20and%20Other%20%22Bad%20Actors%22%20From%20Rule%20506%20Offerings

Readers of this blog have long been informed about Reg D offerings and their pitfalls for investors. The bottom line is that I do not like them and neither should you, no matter what lies you may hear about how great they are for you.

Be smart out there!

Calling All Financial Advisor Bloggers!

Evidently, my blogging audience is rather small, because if anyone was reading my blog, then they would know not to invest in anything on my Do Not Buy List. Unfortunately, there will always be crooks out there who con people out of their money. It has been a year since I introduced my Do Not Buy List to the world. Based on what has happened in the last year, it is painfully evident to me that my message is not getting out to the masses. Therefore, I would like to call on all the other Financial Advisor Bloggers out there to reiterate, retweet, repeat and respect my Do Not Buy List.

DO NOT BUY LIST

Private Placements
Structured Investments
Non-Publicly Traded REIT's
Non-Publicly Traded Limited Partnerships
Promissory Notes
Regulation D Offerings
Exchange Traded Notes (ETN's)
Precious Metals
Floating Rate Bank Loan Mutual Funds
A Shares Mutual Funds (unless commission waived)
B Shares Mutual Funds
C Shares Mutual Funds

Why do I have these things on the Do Not Buy List? You will have to go back to my December 2, 2009 blog post to find out. All you have to do is put in 'Do Not Buy List' in the Blogger Search box and you will find it.

Also, what you may find very interesting is how many violations of my Do Not Buy List occurred in the last year. Do a Blogger Search on my Blog for 'Remember When I Said' and you will see all the times during the last year that I pointed out people who fell for things on my Do Not Buy List. These articles are proof positive that items on my Do Not Buy List are indeed things that you do not want to invest in, ever.

Stay safe out there. Be smart about what you are doing with your money.

Remember When I Said...

Regulation D offerings were on my Do Not Buy List? Apparently, the regulators agree with me. At the bottom of this article, you will find a couple of instances where firms were touting Regulation D offerings to investors. Low and behold, they turned out to be Ponzi schemes.

Here is the article:
http://www.investmentnews.com/article/20100316/FREE/100319883/-1/INDaily01

I'm telling you. You do not want to invest in anything on my Do Not Buy List. Unless of course, you want to lose all your money.

Here is the link to the Do Not Buy List in case you missed it.

http://keepyourassetstakemyadvice.blogspot.com/2009/12/do-not-buy-list-when-are-you-going-to.html

Stay smart out there.

Remember When I Said...

In a prior blog post, I listed my Do Not Buy List of products typically sold by broker/dealers and their registered representatives, but sometimes sold by unscrupulous investment advisors and non-registered people purporting to be investment advisors. The main reason that they sell these is because they typically pay large up front commssions in the 8 to 10% range of the initial investment.

With this article, you will receive a bonus education regarding investments on my Do Not Buy List. Two of the investments on my Do Not Buy List, both Promissory Notes and Private Placements are mentioned in the article. See this link for the sad story:

http://www.fa-mag.com/fa-news/5116-securities-america-charged-with-misleading-investors.html

Once again, I have been proven correct that these so called "investments" belong squarely on my Do Not Buy List. By the way, do not buy means do not buy ever!

One of these days, people may actually save themselves the misery and listen to what I have to say.