Sunday, 1 May 2016

Ponzi 101

My brother and I got into a discussion this week....mostly related to finance and ponzi-related schemes.  My general observation is that the public....because of declining CD rates over the past three decades, poor finance understanding, and lousy SEC enforcement....allows these schemes to flow like a stream.  You can probably draw a 100 mile circle around your house and find at least two or three schemes actively working, until someone asks stupid questions or the SEC wakes up from their drug-induced daze to figure out the ponzi values on the operation.

So, my ten tips on seeing through the ponzi fog and knowing when to just walk away.

1.  When you sell securities, you have to be registered in your state.  So when "Joe Jones" is talking up this bond, or this new fund, or investment deal.....ask he registered?  If he says yes....go Goggle up the state board on securities in your state, and call them up.  If we were talking about a $40'd be a waste of time, I admit.  But if you are writing out a check for $10,000....the guy accepting it ought to be registered.  If he's not, then just walk away.  If he says that he's a special type of securities seller and not required by state law to be registered.....he's lying, and you need to walk away.

2.  Who is the guy at the top?  Every funds guy has a name, and has a resume.  If he's some fifty-year old guy who has worked at Janus, Prudential, etc....he has a reputation.  If he's a guy who has a three-line resume or simply sold real estate for the past twenty years, or never been in actual big-time companies.....WALK away.  When the securities dealer just wants to talk over the fund, and NOT the guy who manages the fund, or even discuss the manager's past performance....WALK away.

3.  Guaranteed returns in excess of three or four percent.  Typically, with a decent high-value today's world....the max you will get is two-percent.  With some long-term bond, maybe four percent.  Beyond that, nothing is guaranteed.  It doesn't matter how many times they utter guaranteed or flash some slide on the wall with guaranteed 10-percent interest....WALK away.  Now, if they talk about stocks, dividends, and locking you into a present return (not guaranteed) of ten to twenty percent, that's a different story.  I can find fifty stocks presently on the NASDAQ which are seriously under-priced (particularly oil and natural gas)....these are all stocks which lost value, but return a quarterly dividend of five to twenty percent currently (yearly).  I should note though....these aren't guaranteed, and at any point, the present value might decrease another 10-to-40 percent.   In this case, the dividend might be attractive, but could you afford to lose 10-percent of your value with the risk attached?

4.  Secret or privileged investor knowledge.  When the securities guy says he has insider knowledge and by getting into this special group and putting your $100,000 can be an "insider".  So, one of the general rules of a state securities that you aren't supposed to take insider information and benefit.  It's something that the SEC frowns upon.  It's a small sign that you've got a guy who bends the rules.

5.  Cash investment.  If your securities guy is talking about you investing and doing this by cash avoid transfer fees or paperwork.....that's another sign to just walk away.

6.  Name the companies.  When the investor guru talks up the twenty-percent yearly return (guaranteed of course)....ask him to name the companies that he buys from.  A ponzi scheme guy will typically say it's not regular stock but related to the cruise-boat line, foreign capital situations, or resort opportunities.  They will avoid bringing up actual real stocks because you can Google up NASDAQ and view their yearly dividend payouts.  There are actual new resorts being bundled and built yearly, but none of these are guaranteed (note how that word keeps coming up).  If the guru says five or six stocks....what are they and what's the typical yearly dividend?  You can find that via a dozen ways.  Most stocks (probably ninety-percent) pay less than two-percent a year on how that manipulates itself into 20-percent guaranteed ought to be another sign to just walk away.

7.  The frozen funds slant.  When the guru says that with your $100,000 are an insider now....he'll often hint that there's a period of frozen activity so he can safely and wisely invest and return dividends on your money.  This frozen period is a minimum of six months and usually up to two years.  He might actually generate some fine and fancy monthly reports which always make you happy about the frozen money and active dividend status of the money.  Maybe early on in the Ponzi scheme....if you asked for $5,000 back for some emergency, he might be agreeable.  Near the end, when he's going to reason will be acceptable to return even a nickle of your investment money.  This is different from a bank where you open a CD, and can close the CD tomorrow....losing the profits off the period that you promised to maintain the CD there.  In this case, the bank will return the money that day (in most cases).

8.  "Double your money back".  It's a wicked phrase, and the minute you hear it....WALK away.

9.  The claim of non-taxation.  Typically, a good Ponzi-scheme will note that a fair amount of it's gimmick is to go overseas, make profits without taxation in those countries, and then quietly return the money to you....."tax-free".  Very few countries operate without taxation....those that do....are places of risk.  I always sounds good.  But other than a dozen-odd states which operate low pay-out bonds which are tax-free but rarely pay more than two-percent dividend a year....this is a bothersome topic and rarely fits into a high dividend gimmick of Ponzi schemes.

10.  Everything seems vague.  If you walked into a Ford dealership and he started talking about a new "Wonder-Czeyzch engine", "duplo-tires", "carto-duloony-traction".  You'd stop the Ford kid and ask what the heck these were, and you'd want to have a full explanation in simple terms....before you put down $20,000 for this new car.  When the securities guy or guru starts using new and unusual terms....always vague in detail....stop him and ask for full definitions.  If the definitions are simply vague definitions or full of more $'s a sign to walk away.  Nothing is vague about a bank CD.  Nothing is vague about buying a plain Janus Twenty-Fund.  Nothing is vague about New York state tax-free bonds.

One final note....if any part of a guru's 'get-rich-quick' scheme is about gold speculation....why would you bother using him as a middle-man, when you can buy your own gold coins, bars, just avoiding this middle-to-the-middle man routine?  Gold is pure speculation though, and the prices change hour by hour.....which makes it's attachment to a guaranteed 20-percent dividend to be hilarious and comical.

It simply doesn't take a rocket scientist to recognize a Ponzi scheme.  It does take some brave just smile and walk away.

I could have made this a forty-page introduction, but these ten observations are usually enough for a high school educated guy to see through the Ponzi-fog and be smart enough to walk away.

Saturday, 30 April 2016

The Twelve Apostles

There are probably five or six mandatory things in Australia that you need to see, if you should ever make the trip.

One of those, is the Twelve Apostles, along the southern coast, four hours south of Melbourne.

This is probably a fifteen hour trip if you drive yourself, or twelve hours with some with bus deal.

My personal advice is if you can find an individual guide....hire them, and pay the extra money because they know the twenty-odd things along the way which makes this a once-in-a-lifetime day.

Shortly after you pass Torquay, you end up on the coastal road.  It's a two-laner, which weaves around the coastal region and passes through small towns which specialize as magnets for tourists.

The beaches are mostly deserted and you can pull off at any point and just stand there on a million-dollar beach with just pure wind blowing in your face.  It's not a hot climate kind of Florida and you probably can only wear shorts there for two months out of the year.

Down about four hours into the will reach Great Otway National Park, which features a rain forest type environment and worth an hour's stop to walk through a local trail (free).

Around 275 kilometers into the trip, you will finally arrive at the Twelve Apostles.....a formation along the coast which has an observation deck area.  Plenty of parking and a rest-room.  You might want to note that there is a sign along the walk-way suggesting SNAKES.  They wouldn't put that up, unless there really were just be aware of that fact.

It's the kind of stop that you might want to spend a good long hour there because you will never see something like this again.

I might suggest to drive on west to Port Campbell (20 min away), have some dinner, and try to drive north through the farm country, to reach A1 where you can ride at fair speed back to Melbourne.  In December through February, the sun doesn't really go down till enjoy the back country and hills.

I'd strongly recommend you start the trip by 7AM and just hope by 10PM that you make it back to the hotel in town.

Thursday, 28 April 2016

The Carly Solution

Carly Fiorina as Cruz's VP choice?  Really?

I think if we'd gone back to 1 January of this year and stated that the VP was going to be Carly.....half of the Cruz voters would have backed up.....done some more calculating.....and eventually thirty-percent of the Cruz crowd would have shifted to someone else.

Carly is the one with a judgement issue (the maturity of a 15-year-old girl).  Carly is the one with leadership issues demonstrated while a CEO.  Carly is the one who makes some rash statements that infuriate the general public.

There are ten primaries left at this point.  The two key ones?  California and New Jersey.

Did Ted improve any of his odds in the ten states left?  Maybe in California....he bumped it up another five points.  Will this force Donald to pick a VP candidate now?  Maybe.

Personally, I can't think of a single occasion over the past hundred years where someone did something like this.  But that's how crazy the 2016 primary period has become.

Monday, 25 April 2016

154 Hours....Without Sleep?

I sat this afternoon....reading a piece from the London Telegraph on Prince and his death.  Someone close to the guy noted that the evening in questions (his last evening alive).....he'd gone apparently 154 hours straight (6.5 days).....without sleep.

You typically can only do this....with the aide of drugs and caffeine.

There were a couple of occasions in the 1978/1979 time frame, where I went forty-odd hours straight.  Over the past decade, I've even done a couple of periods of eight hours of sleep total over a three day period.

Last year, my local regional German network (HR) did a piece where their junior reporter attempted to go 72 hours without any sleep at all.  Concentration-wise, she was pretty much screwed up by the 48th hour.

My guess is that Prince got hyped up on some medication....added more medication to the normal supplement, and just kept cruising.  No one was standing there to stop him, and he finally just collapsed.  Kind of a stupid way to go, but these can buy whatever you desire.

Sunday, 24 April 2016

Why is Africa so poor while Europe and North America are so wealthy?

The Washington Post did an article entitled: "Why is Africa so poor while Europe and North America are so wealthy?"

The thrust of this article (by Andrew Gelman) talks of a published paper from a couple of years ago by two economic professors (Quamrul Ashraf and Oded Galor).  Their line of thought?  Mostly a discussion over poverty and genetics.

Gelman (the Post's writer) has one beef with the published paper.....mostly over the statistics involved.

I'm not a rocket scientist but for years have read, studied and admired three general characteristics of Europeans....which translated over into the American environment.

First, craftsmanship started out over 2,000 years ago in ancient Rome to be a big deal.  If you were the local guy who built aquaducts or stone had some reputation, and were called upon for projects on a regular basis.  You don't see craftsmanship in Africa.

Second, as people traveled into Europe (in the beginning) and into America (in the beginning)....they had more or less nothing, and had to build to survive.  This something that has prevailed over the past several thousand years.  For those who stalled and stayed in 'safe' Africa....they just kept waiting for something to come and change things.  The only things to come?  People from America or Europe?  That probably was a signal that the old attitude was screwed-up.

Third, innovation.  You walk around England, Italy, Netherlands, or Germany.....and ask what folks are doing in their garage or factory lab, and they just stand there and grin.  Huns has some fancy wipers that have a sensor to notice raindrops on the surface of the windshield.  Robert has some fancy wine that took twenty years to develop but it's got X, Y and Z. Zino has a fancy new ice cream that is actually healthy and nutritional that he has developed.  You go and look at the past five hundred years of Africa, and ask where innovation has been.....and they just look at you.  There's not much to talk about or brag about.

I don't condemn the Africans or the various tribes who've gone through various dramatic stages of war and find themselves mostly waiting for the next round of war and peace to occur.  It's just that if you wanted to advance or establish some level of security or'd have to establish a craftsmanship trail, build onto something, and advance the idea of innovation and trade.  Otherwise, you stay where you are.

Friday, 22 April 2016

The Tubman $20

Somewhere in the next ten years.....the Jackson $20 will be retired, and the Tubman $20 will be issued.

There are three trains of thought to this.  One....we continually need to upgrade bills and make them tamper-proof.....counterfeit-proof, so it's time to move on.  Second, we should recognize other people besides political figures.  Some would argue that we need to recognize people of color or ethnic origin as well.  Third, we need to do this.....just to be different (it's a sad admission, but this is America).

Here's the thing about getting upset over this whole thing.  The odds are heavily stacked that the Tubman $20 will be around for five to seven years max.  We will have accepted change, and be easily persuaded within three years that Tubman has been on the $20 let's move onto the next person.....some NCAA football coach or WW II general.

My gut feeling is that this will open the door and make it simple to accept continual changes to the $20 bill.

Thursday, 21 April 2016

My Too Many Guns Essay

“When it comes to guns? We have just too many guns,  On the streets, in our homes, in our neighborhoods.”

-- Former Senator Hillary Clinton, 21 Apr 2016

Basically, she says that there's just too many guns, and we need to lessen the number.

Then she just leaves it at that.....letting the audience applause and news people wept tears from their eyes.

So the percentage to cut back?  One-percent?  Three-percent?  Nine-percent?  Eleven-percent?

Generally, if you draw a hundred gun-owners into a forum, and you ask each.....not counting their military-related many of them had ever shot'd probably have one guy stand up.  He'd ever be a law-enforcement guy, or just some unlucky soul who had some punk kid advancing at him at some quick-and-stop gas station with a gun in his hand.  The other ninety-nine folks will just nod, and note that they've never had to fire on anyone.....YET.

I grew up in a rural area of Alabama and if you asked a hundred farmers about their gun situation.....all of them will say that they've got some type of weapon on the farm.  It might be one single shotgun, or just a pistol they keep in the kitchen cabinet.  Most will respond that they might have used a gun two or three times to shoot coyotes on their farm, or some pack of wild-dogs.

My general suggestion for Hillary is to make this kinda interesting and offer a $400 tax-credit for anyone who goes down to the local county sheriff and turns in a weapon of any sort.  Five weapons.....five $400 tax-credits.   Naturally, no one will comment much on this, but these might be old guns which weren't really operational, and the $2,000 will be used to buy a new rifle and maybe take the wife to some Vegas casino for her birthday.

Oddly, after endearing almost eight years of the Obama presidency.....we can be fairly confident that there are probably ten-percent more guns in America today.....than there were in 2008.  Why?  That would be a good question to ask the president.  I'm guessing he'd prefer not to answer that.

One might eventually get to the other questions of there too much beer in America?  Is there too much whiskey?  Are there too many bars?  Are there too many sluts in America?  Are there too many snakes in the country?  Are there too many obese or fat people in America?  Are there too many mentally insane people in America.  If numbers matter.....maybe we ought to talk about a lot of topics with the gun subject.

I'm guessing that might scare folks.....we might actually get to the one difficult subject to we have too many politicians in America?  And what would you get rid of them?