California Alcohol Licensee "Investments"

This one takes the cake as far as Ponzi schemes go.

"I have a great investment for you. We loan money to California Alcohol Licensees who need funds to apply for a California Liquor License. When they get the license, then they will pay you back at a rate of 12% interest once they open their liquor store."

Well, I do not know for sure what the sales pitch was, but I do know that $300,000,000 was stolen from investors who fell for this. Think of it. Investors actually put $300,000,000 into this so called "investment." THREE HUNDRED MILLION DOLLARS OF STUPIDITY!

Are we this dumb and stupid America? Or, is this just the result of pure unadulterated greed?

Readers of my book, Meet Wally Street. The Reason You're Stupid, 2nd edition (aptly named in this case) know full well that Ponzi schemers sell investments that are unregulated and do not exist. If these "investors" had read my book, then they would have never invested in this "investment." The problem is that I'm just a little peon in the grand scheme of things. Nobody knows who I am nationally, therefore most Americans miss out on some valuable Ponzi scheme protection for only $19.95. My 2nd edition book is available most everywhere, like Apple Books, Amazon, Barnes & Noble and others.

"Well, gee Rick. You are nothing but a self-promoter hawking your book." If you think that, then you are stupider than I thought. The choice is to lose your money to a Ponzi scheme, or buy my book for $19.95. Duh! I would venture to guess that everyone who loses their money to a Ponzi scheme, loses a whole lot more than $19.95. Yes, I called you stupid, because you are stupid, if you are one of the ones that invested in this California Alcohol Licensee scam. In fact, this one has to be at the top of the stupidity list. I'm not worried about missing out on you people as a client, since you proved to me your stupidity. I like smart clients who take my fiduciary advice.

Of course, the U.S. Securities and Exchange Commission is on the case and working to get your money back. Who knows how long this will take? Further, who knows how much of your original "investment" you will get back, if any? You can read all about it here: https://www.sec.gov/news/press-release/2019-168

What if you could find a fiduciary who did not want you to open a new account or transfer your assets to their firm? You're looking at him. No risk of a Ponzi scheme from me either, since I do not make you open or transfer accounts before getting a Financial Plan. This is the Future of Advice, in case you did not know.

https://www.firstcoastplanning.com

Avoiding Bad Advisors and Ponzi Schemes

It has happened again. Another high profile Ponzi scheme has been uncovered by the SEC that impacted professional athletes, Jake Peavy, Roy Oswalt, Mark Sanchez and others. How can, not only professional athletes, but regular investors avoid this same fate? Now, there is a way.

Although, it would be poo-pooed by the financial industry itself, I think the time has come for the complete removal of accounts from financial advisor access. Yes. You read that right. What is at the core of what good financial advisors do? They give advice. Can they give advice without having access to client accounts? Yes, they can.

The challenge has been to get access to the information from a client and historically, clients have had to move their accounts to a new advisor in order to provide that information or at the very least, copies of their account statements. Often times, financial advisors will give away a financial plan as long as the client will move their accounts to that particular advisor. This is the old, obsolete way.

The futuristic option is using an advisor who has a financial planning program that has account aggregation that authorizes the advisor to see the client’s holdings, but not their account numbers. Advicent Solutions has just such a software program called Narrator Clients™. As an advisor, all they really need to know is what type of account it is and the holdings within. In fact, account aggregation sends over the holdings without the account numbers and it even keeps the custodian hidden from the advisor. Imagine that. When you really think about it, if you really are a good advisor, then this is all you need. If you are a client, then doesn’t this make more sense? This allows the advisor to give much needed advice, but with absolutely no fear on the client’s part of the advisor stealing their money. I know what you are thinking, “Why didn’t somebody tell me this before?”

Of course, the advisor would be confused about how they get paid under this model which brings us to the new Department of Labor Conflict of Interest Rule. In my opinion, the DOL’s main goal was to force advisors to disclose all fees, commissions and conflicts of interest and recommend transactions that are in the client’s best interest. This rule is infinitely more complex than this simple statement, but this explanation is close enough for government work. It is funny to watch all these financial industry people jumping up and down over this new rule, but they are looking at it from the gathering client assets point of view. A big mistake in my opinion. Please bear with me and allow me to rescue both clients from Ponzi schemes and financial advisors from a bleak future.

In the DOL rule, there is a clause about Level Fee Fiduciaries. According to their definition, Level Fee Fiduciaries are advisors who charge a fee based on assets-under-management, or a fixed fee. Herein lies the solution for both clients and financial advisors. Instead of the fee based on the assets-under-management, clients would be better served by a fixed fee that is direct billed to the client. A lot of financial advisors would balk at this fixed fee method of earning fees. They are so used to gathering client accounts and charging an assets-under-management fee that they cannot see the future. Well, I hate to be the one to break the bad news to advisors, but fee compression is well under way with the advent of robo-advisors. Further, the major name brand custodians are getting in the robo-advisor game and doing exceptionally well at it I might add. The point being that this method of charging an assets-under-management fee is going the way of the dinosaurs.

Picture this, if you will. In order to take as much risk as possible away from getting financial advice, clients should pay a fixed fee to a financial advisor for their advice and keep their account at a major name brand custodian. In addition, do not let your financial advisor have access to any of your account numbers or social security numbers. All they need is the number of shares held and the name of the holding and type of account. If you do not move your accounts to a financial advisor, then you do not have to give them your social security number either. Isn’t that great? A good advisor would still be able to give you much needed advice and earn a living by setting an appropriate fixed fee for the amount of services they deliver.

In this future model of financial advice, how is a Ponzi scheme going to happen? I got your attention now, don’t I? The bad advisor would not have access to your accounts, your account numbers or your social security numbers, or even know where your account is held for that matter and therefore they cannot steal from you. Now, if you write the guy a check to invest in his Ponzi scheme, or excuse me, I meant can’t lose business venture, then I cannot help you.

Included in the DOL rule, advisors will now have to tell clients what they do for their fee. In other words, describe what services they will provide for their fee. With this fixed fee approach, I do believe clients would be more apt to go this route, especially when you consider they are taking the risk of being fleeced by a Ponzi scheme out of the picture. Plus, they cannot run off with your money! That is as long as you don’t write them a check for that can’t lose business venture.

If you are a financial advisor, then you need to change your ways. If you are a client seeking financial advice, then this is your future. A Ponzi scheme-less future to believe in.

Should You Invest in a Hedge Fund?

If you are an individual investor, then in my opinion, the short answer is no. The question is why should you invest in a hedge fund? It boggles my mind why people continue to want to invest in things that they cannot see, touch, feel, hear or taste. Well maybe I am going a little overboard, but most people want to invest in a hedge fund because of one of two reasons.

1. Performance
2. Hedging a portfolio against a shock to the market.

Number one is clearly bad. You should never and I mean never invest with anyone based on their performance. Suppose a hedge fund manager had great performance for the last year. This does not mean that they will have great performance for this year. Performance is the world's worst reason to invest with anyone.

Number two can be accomplished in other ways. You do not have to give your money to a superstar hedge fund manager (who is basically a gambler with your money) because there are now other options. Hedge fund managers take positions that they believe will be profitable in the future. Sometimes they are right and sometimes they are wrong. It is like investing in general. You can have good years and bad years.

I can show you 5 different examples to hedge an index like the S&P 500®. By the way, do not do this at home. This is not investment advice, rather educational in nature.

1. If you believe the S&P 500® is going to go up, then you might buy 100% S&P 500® index.
2. If you think the S&P 500® is going up, but you do not feel real strongly about it, then you could do a 130/30 long short on it. That is 130% long and 30% short the S&P 500® index.
3. Or, if you are not sure of which way the S&P 500® is going and you just want to preserve capital, then you could go 50/50 long and short. You will not make anything nor lose much besides trading costs. Your portfolio value should stay close to where it is currently valued.
4. If you are a bear on the S&P 500®, but not a total bear, then you could go 130/30 short long. Or 130% short and 30% long S&P 500®.
5. If you are a real bear on the direction of the S&P 500® and firmly believe the market is going straight down, then you can go 100% short the S&P 500® index.

What is the right answer? There is no right answer.

Obviously, there is perfect timing for each of these strategies, but also significant risk to each of them if you are wrong. Hedge fund managers do more than make these type of decisions. I wanted to explain to you the various options available to them in simplistic fashion. When they invest your money, they are making a bet similar to one of these five strategies. When they are right, they are heroes. When they are wrong, they are goats.

There is more risk to investing in hedge funds than meets the eye. The SEC recently charged two Minnesota based hedge fund managers and their firm for facilitating a multi-billion dollar Ponzi scheme. (Not again.) See this link below.

http://www.sec.gov/news/press/2011/2011-237.htm

Here is something that I want to get across to readers. Stay with visible, publicly traded investments. Do not fall for the sales pitch for non-publicly traded, exotic or offshore investments. Know where your assets are custodied. Compare your statement to that of your custodian. Be clear on who is managing your money. Know what a feeder fund is and how it functions. Most importantly, know what you do not know.

Stay safe out there.

Really? You Cannot Be Serious?

This kind of stuff just boggles my mind. I cannot understand how people continue to fall for this garbage. Once again, another team of alleged Ponzi schemers in Florida took investors to the tune of $22,000,000. Their sales pitch centered on annual returns of 14% to 124%, according to the SEC.

http://www.sec.gov/news/press/2011/2011-171.htm

It turns out that one of the alleged Ponzi schemers spent 11 out of the last 21 years in jail. These characters fabricated account statements that showed their high returns. They allegedly spent the victims money on jewelry, gifts and property. They also paid themselves millions of dollars in phony management fees.

Apparently, the Ponzi schemers are getting wise to the fact that they cannot post their investment offerings on a web site. These people allegedly told investors that these investments were based in Bermuda and audited annually by a firm based in Bermuda. They also guaranteed in writing that investor funds would be protected.

I'm sorry, but I do not feel sorry for these victims. Here are the immediate red flags that should have told any investor to stay far away and also to pick up the phone and report people like this to authorities.

1. No background check was done on these so-called advisors. Without much effort, they could have easily discovered the criminal background of one of these advisors.
2. The returns being touted were way out of line. Listen to me people. If someone is telling you how high their returns are, then they are more than likely crooks. If you are investing your money based on the returns of any advisor, then in my opinion, you are a making a big mistake.
3. They claimed their strategy worked in both bull and bear markets. Pure unadulterated BS.
4. These so-called funds were based in Bermuda. Are you kidding me?
5. These funds were audited in Bermuda. Oh right. Bermuda is a hot bed of investment auditing activity. Here is a clue. Have you ever been to Bermuda and seen all the auditing busineses on every street corner?
6. These funds were guaranteed in writing by the person selling them. Come on, man! People cannot be this dumb, can they?
7. I have not seen the account statements, but I am certain that it would have been easy to see that they were fake.
8. The offering documents were also made up apparently. This is another strong clue as to something being wrong. If it is not publicly traded, then this is an immediate red flag and a big red flag at that. If it is sold by an "offering document" then watch out!

Unfortunately, there never seems to be a shortage of people who line up to invest their money with thieves and Ponzi schemers. With all these red flags, I'm sorry, but I simply cannot feel sorry for these people who fell for this garbage. I'm sorry they lost their money, but I blame them for making the mistake to invest with these Ponzi schemers in the first place. There were just too many red flags.

Readers of my blog know better.

Are You Kidding Me?

Are you kidding me? Where in the heck do these alleged 'advisors' find these poor people who fall for this line of bull? Once again, yours truly has been proven correct. Right in my local area, a lady allegedly sold Promissory Notes guaranteeing returns of between 15 and 20% for the last seven years. Are you stinking kidding me? What kind of person (in their wrong mind obviously) would give anyone a penny to invest in something like this? I will let you answer that question.

Remember when I said that Promissory Notes were nothing but Ponzi Schemes? Check the Archives of my Blog for my Do Not Buy List posting.

The Ponzi scheme that I am describing above was alleged to be as high as $100,000,000. Okay, let us ponder this for a moment. One hundred million dollars divided by an average investment of say $100,000. This means that there could have been as many as 1,000 people who invested in this alleged Ponzi scheme. A thousand people! Are you stinking kidding me?

Forgive me, but are there that many greedy people out there? I know. I know. Some of the people who fell for this were simply stupid, but the truth is that most of them were greedy and stupid. Yet, they will be the first in line yelling for their money back. Somehow, I do not feel much sympathy for them. It is not like they invested in the stock of a major corporation or a mutual fund. They should have known that this was too good to be true. Come on, man!

Do not try and tell me that these people were duped by this Ponzi scheme. Totally untrue! They were greedy and believed what they wanted to believe. You will never convince me otherwise.

Another clue for the clueless is when your 'advisor' suddenly owns two houses, expensive jewelry, a new art collection, exclusive pianos, high dollar automobiles and is taking extravagant vacations to exotic places. When you see changes such as these, it may mean that you and your money will soon be parting ways.

Remember, Promissory Notes = Ponzi scheme. Never forget it.

Remember When I Said...

Remember when I said that Promissory Notes are strucutured just like Ponzi schemes and you should never invest in them?

Once again, proof positive that I am right and you should never invest in any Promissory Notes. Here is a story about some CPA's selling Promissory Notes that turned out to be a Ponzi scheme! What did I tell you about Promissory Notes? They are structured just like Ponzi schemes. Is it really a surprise that they turn into Ponzi schemes? Not if you read this blog or you have read my book.

See this Press Release from the U. S. Securities & Exchange Commission for the full story:

http://www.sec.gov/news/press/2010/2010-130.htm

I will keep blogging about this as long as I can blog. Be careful out there.

Remember When I Said...

That Promissory Notes are nothing but Ponzi Schemes? I know that I am beginning to sound like a broken record on this subject, but apparently there are people out there that still are not listening. Low and behold the SEC has charged a New Mexico realtor with fraud and obtained an emergency order to stop him from continuing to sell these Promissory Notes. Of course, he is innocent until proven guilty, but the SEC says he offered investors high returns from 10 to 25% over one to three years. Are you kidding me?

I am truly sorry that people lost their money, but come on people? This was a too good to be true example, if there ever was one. Can you honestly look me in the face as an investor that invested in this garbage and tell me that you thought it was possible to earn 25% over a three year period? Oh but Rick, it was real estate and this guy was a well know realtor in the community. Hogwash. You know better.

The investors who bought into this garbage have to take responsibility for their poor judgment. Read my lips. Promissory Notes are nothing but Ponzi Schemes. Promissory Notes are on Rick's Do Not Buy List, so I am better off not falling for the Promissory Notes trap.

Here is the link to the SEC Press Release on this case. Read it and weep.

http://www.sec.gov/news/press/2010/2010-43.htm

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...

Promissory Notes are nothing but a Ponzi scheme? Well, once again, yours truly has been proven correct. Of course, the folks in this press release are innnocent until proven guilty in a court of law. Here is the link:

http://www.sec.gov/news/press/2010/2010-31.htm

It seems that this couple promised returns of 9 and 16 percent to investors. That right there should have been your first clue that this was bogus. Oh but, Rick it was a real estate investment. Well, that certainly makes all the difference...NOT! No it does not. It does not matter what it is as far as I am concerned. Promissory Notes are nothing but Ponzi schemes. They are structured EXACTLY like a Ponzi scheme. Investors put in money and are paid interest on their own money. As long as new investors keep coming in, then investors keep getting paid. However, when the stream of new investors stop, then the original investment somehow mysteriously disappears into "an investment." Like a great real estate investment. Of course, you cannot get your money back, because the "investment" has to have time to grow. After all, they told you this going in. Don't you remember?

Get this people. Promissory Notes = Ponzi Scheme. Do not EVER invest in a Promissory Note. If you do, plan on being a victim.

Be smart out there.

Remember When I Said...

Another round of investors have unfortunately fallen victim to the Promissory Note scam which I previously listed in my Do Not Buy List in a prior Blog post. Here is the article from Investment News:

http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20100106/FREE/100109917/1094/INDaily01

Remember when I said, promissory notes are just like Ponzi schemes. Low and behold, guess what? The guys stand accused of selling promissory notes that turned out to be . . . a Ponzi scheme! Didn't I say this recently?

Proof positive of two things. Promissory notes are Ponzi schemes and never doubt what I say is true. Keep Your Assets. Take My Advice.