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...

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...

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.

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.

Do Not Buy List - When Are You Going To Get This?

If you are an investor, chances are that a broker or financial advisor (and I use that term very loosely) will ask you to invest in something illiquid. They will promise some kind of benefits like tax savings, high current income or great performance. The truth however is that your broker or financial advisor has a financial incentive to sell you that investment and chances are that they will make at least 8% in commissions from selling it to unsuspecting people like you.

What I thought that I would do is create a short "Do Not Buy" list to help investors. Of course, broker/dealers and their reps will hate my guts for blogging about this subject, but personally, I do not care. The investor is more important.

DO NOT BUY LIST

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

EXPLANATION AS TO WHY THESE ARE ON THE DO NOT BUY LIST

Private Placements - These are illiquid, not in your best interest and carry a high degree of losing your money. Generally pays the broker 8 to 12% in commission to sell it. Example - Investment in a new movie or business.

Structured Investments - These have liquidity restrictions, are not in your best interest and because of the liquidity restrictions, you have no way of getting out of a declining market. Generally pays the broker 3 to 5% in commission to sell it. People invested in these watched helplessly as their investments dropped 40 to 50% last year. Example - Dow 30 Trust.

Non-Publicly Traded REIT's - These are highly illiquid, not in your best interest and carry a high degree of losing your money. Generally pays the broker 8% to 9% in commission to sell it. Why should you buy a Non-Publicly Traded REIT when there are plenty of Publicly Traded REIT's available? The answer is that it benefits your broker. As far as I am concerned, that does not benefit you the investor, therefore there is no reason whatsoever to ever buy it. Example - pick one, any one sold by brokers.

Non-Publicly Traded Limited Partnerships - These are highly illiquid, not in your best interest and carry a high degree of losing your money. Generally pays the broker 8% to 9% in commission to sell it. Example - tax credits or equipment leasing.

Promissory Notes - These are highly illiquid, not in your best interest and carry a high degree of losing your money. Generally pays the broker 8% to 12% in commission to sell it. In almost all cases, the investor loses all their money when they invest in these promissory notes. There is no guarantee of anything. The person or entity cannot raise funds through normal lending channels, so they turn to this option. If several lenders turned them down, then why should you be the one to give them the money? Promissory Notes are a mini-Ponzi scheme in my mind. They lure investors in and pay them interest from the other investors principal, then invest the bulk in their "can't fail" business. Sounds like a ponzi scheme to me. Example - Most often, it involves some type of business venture that "can't fail."

Regulation D offerings - These are highly illiquid, not in your best interest and carry a high degree of losing your money. Lots of people get paid to sell it. it depends on each offering. Yes, you get some stock, but with restrictions and no guarantee that it will be worth anything at all. Example - stock offering of a company that "may" go public in a year or two like a bank.

Exchange Traded Notes - These are structured investments traded on an exchange. Do not confuse these with Exchange Traded Funds, because they are completely different. This is basically a basket of investments that is held for a length of time in the hope that they will mature at a higher value. They do have some liquidity features, but other alternatives are available that are better like Exchange Traded Funds. Example - India or China ETN.

Precious Metals - Have you been watching television lately? There are loads of commercials suggesting that you buy physical gold or silver. Let me ask you a question. Have you every heard of these companies before you saw their commericials on television? That is what I thought. And you were thinking about sending them a check? Come on. You can buy gold and silver in Exchange Traded Funds that are fully liquid and publicly traded. There is no need to hold the actual physical metals. Besides, if you buy the physical metals, then you will have holding fees and trust companies fees. Go with Exchange Traded Funds instead. Example - GLD, SLV.

Floating Rate Bank Loan Funds - These are mutual funds based on a pool of bank loans. They have liquidity restrictions where you cannot get out of them except a little at a time. This fact kills the deal for me. I do not like anything that I cannot only get 25% of my money out at a time. What if the returns on floating rate bank loan funds turn south? You are stuck. Dumb, dumb investment. Example - Floating Rate Bank Loan Mutual Fund.

Mutual Funds in Class A, B or C Share Classes - Mutual funds are a dying breed. More and more fund companies who refuse to go to Exchange Traded Funds will lose their assets. In the past, I would say buy no-load mutual funds instead, but now with the advent of Exchange Traded Funds, these ETF's are a much better alternative. The liquidity restrictions on these are self imposed sometimes. If you paid the upfront commission on an A share mutual fund, then you may want to give it more time to get back to even. B and C shares are starting to go away, because the fund companies cannot get the loans necessary to pay the brokers their commissions. The point is that A, B or C class shares of mutual funds benefit everyone except you! You do not need them, when ETF's present a much better alternative. Example - Class A, B or C shares mutual funds.

There is your Do Not Buy List. Most everyone that would sell you these investments on this list are brokers with a brokerage firm that earns commissions from sales. Commissions from sales benefit the firm, not you. When are you going to get this? Let me say it again. When are you going to get this? Quit buying this garbage from brokers that only benefits them and their firms. Stop it now.

If you own any of these investments already, then you may want to go see a registered investment adviser who does things in your best interest. They may be able to devise a strategy to get you out of some of this garbage before it is too late. These registered investment advisers should have no affilliation with a brokerage firm. None at all. No ifs ands or buts.