investment fraud

Don’t Be a Pigeon

© Can Stock Photo / johny007pan

We recently were approached by a supposed investment firm. A quick review of its website raised many questions.

It seems obvious to us that the whole outfit might be a scam. But we have studied the economy and markets for a lifetime. So we thought it might be useful to lay out for you the main clues that set us off.

The most notable thing is the use of jargon that sounds authoritative but is incomprehensible. We mean this kind of nonsense: “We create global allocation by opportunistically investing worldwide as an important element in the diversification of our portfolio.” “Generate and protect investor wealth through the long term differentiated returns offered by our unique investment management strategies.” Yeah, right.

The second clue is the lack of disclosures relating to FINRA or the SEC, the primary U.S. regulators of investment providers. These folks are neither registered to sell securities nor as investment advisors.

The third clue is the promise of high returns, which evidently are guaranteed. 12-20% annual returns sound pretty good, right? And different investment return options, guaranteed in writing? Be still, my beating heart!

The fourth clue is the promise that investments are liquid at all times.

We promise volatility, and make no guarantees. This is because we know that stability and investment returns are mutually exclusive—you must choose. Anything that is truly guaranteed carries a remarkably low yield, in our opinion. And anything that purports to offer the opportunity for high returns cannot be guaranteed.

The interesting thing is, that web site and those promises are up there for a reason—they work. People desire stability and high returns, and the knowledge they can get all their money back at any time.

Clients, if you ever have questions about something that seems too good to be true, PLEASE email us or call. You worked too hard for the money to let a scammer get it.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The Three Kinds of Performance

© Can Stock Photo / edharcanstock

In our recent reading, we came across another useful concept from Morgan Housel. He talks about the three kinds of investment performance:

1. Bad.

2. Overall good, but occasionally bad.

3. Always good but fraudulent.
Many have had experience with the first one. The last one is obviously not a place to be. The key to the second one, according to Housel, is communication. Communication builds the trust required to get through the rough patches and down times.

Every day we are grateful for you, whom we believe to be the best clients in the world. You talk to us, you listen to us, we usually understand each other. We work to communicate in various ways, but it is a two-way street!

You know we won’t get mad if you ask a pointed question—if it is in your head, we want to hear it. You trust us enough to start a dialogue when you think we may not be on the same page. When there is something you think we should know, a development in your life or an investment idea, you tell us.

And we do you the honor of believing you can handle the truth. If we need to acquaint you with some aspect of changing reality as we see it, we do so.

Our mutual trust and straightforward communications seem very valuable. It is indeed the key to living with ups and downs. Our best guess is that things will turn out well, on balance, over the long haul. Of course, we can offer no guarantees.

Clients, if you would like to discuss this or anything else in more detail, please email us, call, or set an appointment.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Never Get Scammed Again

Suspicious business deal

We believe that the best way to make money is to earn it by providing a valuable service that people will pay for. Unfortunately, some would rather make money by cheating you out of yours.

We know that if a story sounds too good to be true, it probably is, but it’s not always so easy. Con artists try to get you to let your guard down by buttering you up. Often, a fraudulent pitch begins with the idea that you would be rich if only you could get in on those special deals that only the rich can normally get into. The con artist offers a way in, and people fall for it because they want it to be true.

Fraudsters also like to provide plausible-sounding explanations for their unrealistic promises. One of the best ways to spot a hole in their story is by looking for things that don’t go together.

A few years ago a client managed to avoid a Missouri cattle-feeding scam by knowing that “guaranteed returns” should not be in the same sentence as “cattle feeding.” The pitch for cattle feeding profits made sense, but they knew the cattle business had no guarantees. In the second biggest scam in history, the Stanford Bank claimed it could pay 8% interest due to low overhead, but another client realized that 8% interest did not belong in a world of 4% rates no matter how low the overhead was.

These schemes have plausible explanations on the surface. But even when the details sound reasonable, looking at the big picture usually reveals the details do not match up with each other. If somebody wants you to invest in a way that does not quite make sense, please call us.