“When it is too good to be true, it probaby is.” -once said by a wise person.
You've Just been Ponzi'ed
A Gagillion Dollars (ok, maybe not that much).
$50 billion is a lot of money. Do you believe that someone got away with cheating $50 Billion without being caught for 40 years? Well, it’s a true story because in recent news a guy named Bernard Madoff did just that. But how would you keep yourself safe from being cheated?
Lesson from Mom
During dinner my mom would say corporate America just doesn’t make sense to her. Like how the guys in the suits can take private jet trips for meetings (where one trip costs $100,000+). Where insurance companies can charge you only a few hundred dollars for accidents that cost hundreds of thousands of dollars. Or where real estate can be developed at billions of dollars of cost for land that is bare and banks that don’t even have the money themselves. When you add all that up the entire world doesn’t even have all that money. It can’t be understood or imagined when you sum up all the parts. Forget that. I can’t even fathom the the number of zeroes on the national debt clock.
Wisdom of Grandma
My cute 85 year old grandma that has survived WWII and understands little about stocks has some insightful questions for me when I’m home spending time with her. She would ask “So if one person buys a stock and sells it at a loss, where did the money go?” Of course I understand and tried to explain but regardless it’s a good question. So it made me think about when the news reports that the economy has lost hundreds of billions of dollars from the sub-prime mortgage mess. Ok. Yes, the banks lost money. But where did all the money come from beforehand? And where did it go afterwards?
Ponzi!
Too bad the person that says the word “Ponzi!” didn’t win the game. So when things don’t make sense to you and you can’t even understand where all the money goes then that investment may be shady. Someone may be just taking your money and paying it to someone else as a return. And if that person can’t find new investors like you then you will be at the end of the stick (like Madoff’s investors). A classic Ponzi scheme.
Time to Buy Gold Bars?
Don’t panic though. Just because the banks are failing, government is not helping and everyone is watching their wallets… hmmmm, then again… Ok, go buy some gold bars, dig a hole underneath your bed and watch it like a hawk. Just kidding.
Put Your Eggs in More than 1 Basket
Like any other sound investment and financial advice, just don’t put all your eggs in 1 basket. Meaning if you decide to invest and you are concerned of being cheated, just don’t invest more than you could stand to lose when you do invest. If $1000 is a lot of money to you, consider investing $100 only and invest the $900 elsewhere. But if you don’t even care to lose $1000 and your life didn’t depend on it then the risk would be OK to take. Because from small time Ponzi scheme to Lehman Brothers fall out it just reminds all of us that no one investment is worth taking more than we can stand to lose.
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