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Old 01-11-2014, 09:05 AM   #21
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Shoot - the greater fool + greed thing is working on me - after a year of having money sitting in Vanguard's MM account we bought a couple indexes last week and I pl;an to set up bi-weekly transfers from the MM account to those indexes till the MM is exhausted. Also plan on bi-weekly transfers from another savings account of smaller amounts with an aim to have about the amount we normally make in one loan "invested" in the market by year end.

Trying to move away from rentals and lending, as I don't feel my mental acuity is as good as it was and that it probably won't be improving. That said, I still don't see how the market is anything but a greater fool game - only thing is, if everybody is playing it.....
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Old 01-11-2014, 09:45 AM   #22
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I would think it would be pretty hard to nail down accurate figures about fraud as I'm sure many cases aren't reported due to embarrassment and various other reasons. BTW, what is affinity fraud ?
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Old 01-11-2014, 09:55 AM   #23
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Affinity fraud concentrates on an audience of common interests; such as a church or professional association. The word of mouth recommendation that comes from within is a powerful tool of the fraudster.
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Old 01-11-2014, 10:07 AM   #24
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Affinity fraud concentrates on an audience of common interests; such as a church or professional association. The word of mouth recommendation that comes from within is a powerful tool of the fraudster.
I recall watching a TV documentary a few years ago about a (supposed) developer who defrauded many members of the same church........turns out that on his initial visit to the church he sat at the back row and was quickly up at the door talking to the minister as the parishioners departed.......when the minister exchanged goodbyes/handshakes, etc, the fraudster emulated his actions, giving the impression that he was somehow affiliated with the church and thus 'vouched for'........lots of chutzpah.
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Old 01-11-2014, 10:43 AM   #25
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I watch this show on and off during the week and I am always surprised at how seemingly intelligent people can be taken by some slick talking person with promise of a guaranteed rate of return.
Don't underestimate the power of a few simple lines, repeated often. In this sense, it's not that much different from the appeal of simplistic political and religious ideologies to some folk.

In the world of personal investing, some more sophisticated investors may look down on the passive index fund approach but even this methodology requires the practitioner to understand the difference between short-term risk (i.e. volatility) and long-term risk. When attempting to figure out what will happen with our investments, both in the accumulation and withdrawal phase, we are learning to live with a wide range of possible outcomes, of which no single one is possible to predict. Some people, intelligent as they may be, cannot handle this type of risk assessment, and there is nothing like a knowledge void to provide a fertile breeding ground for loopy "investment" scans (15% returns guaranteed! You cannot lose!)

False certainty can be very attractive when you don't understand the waters you are swimming in.
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Old 01-11-2014, 11:10 AM   #26
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You are joking, right?

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The other thing that is amazing, those when caught, tried, and convicted usually get fairly light sentences.

Personally I think the death sentence would be a too lenient punishment for these reprobates.
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Old 01-11-2014, 11:57 AM   #27
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You are joking, right?
Actually I'm not. I think the death penalty is appropriate punishment for someone who had ruined so many lives. Most of these people seem to show no remorse and even start scams back up in while in prison. These predators are parasites that are not going to change and should be treated accordingly. The death penalty might just serve as a deterrent down the line for some scam artist wannabe. May sound harsh but just the way I feel.

And actually I don't have a problem with petty thieves losing a few fingers or even a hand for their crimes either.
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Old 01-13-2014, 03:11 PM   #28
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Not sure if what you put down is actual fraud or just bad business...

As an example... back in the 80s many banks were failing... people would say 'these guys should go to jail'.... my response was 'stupid is not illegal'... IOW, if the person did not break a law (as you suggest, he was using the greater fool theory which is not illegal), then you just had a bad investment and were not defrauded....

Just saying there is a difference....
You are of course correct. A Ponzi scheme is not the same as someone fraudulently promoting a very highly leveraged product as a conservative, sound and safe investment.

However IMO it misses the point, that the techniques used by the con artist involved, and the effects on the investors are the same. In both cases they are likely illegal, some being more difficult to prosecute than others.

And in both, a small minority can gain, but the vast majority will eventually loose all or most of their investment.

Most of the people on this site are very sophisticated and know that there is no one and no technique that will beat the market long term, and that any product with a higher than normal rate of return is accompanied by large and possibly very large risk.

Most of us here are by now pretty much immune to this kind of con. But we got that way over time and by experience. (Experience meaning making mistakes and learning from them) My 20s something self was certainly not aware of all of this (although if you would have asked me then, I pretty much thought I knew it all).

This is what I think are the important points. The con may differ, but the techniques and results are the same, we are not as smart as we think, and experience is a great teacher, but better early than late.

Just as an aside to your other point about bad banks failing in the 80s. I was a shareholder in some of these local banks. Their stock price had been shooting up (manipulated OTC rises on a few hundred shares at a time). All of them failed to some degree or another, most being bought out at pennies on the dollar, some just going bankrupt outright. In every case of which I am aware, they went bankrupt through insider self dealing. Local business people would set up a local bank because it was an easy way to get loans for their pet risky projects. These banks were just a form of bad business.

Or were they?
The original stock prices were highly manipulated. I didn't know it at the time, my young self again. But a 5% stock rise on a few hundred shares would certainly tip me off now. My broker, whom I had great confidence in eventually went to jail.

I think more times then we like to belive some of these "bad businesses" are really cons themselves.

"Just saying there is a difference...." Yes sometimes, but it is not always clear.
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Old 01-13-2014, 03:19 PM   #29
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"Just saying there is a difference...." Yes sometimes, but it is not always clear.
You're right. When I was doing fraud investigations we ran into that issue often. The state statutes we worked with meant we had to show a clear and deliberate intent to deceive and thereby enrich one person at the expense of others.

We had to often tell people that being stupid and making bad business decisions is not a crime. While they had recourse in the civil courts that avenue was rarely pursued.
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Old 01-13-2014, 04:03 PM   #30
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It would be great to see these crooks have to do some public service, the kind of stuff Mother Theresa did with India's poorest and sickest. Emptying bed pans for 8 hours on their day off would be a good start.
That would not work; they would somehow come up with a way to market the contents of those bed pans to make it look like a "can't lose" scheme ...
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Old 01-13-2014, 04:17 PM   #31
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Actually I'm not. I think the death penalty is appropriate punishment for someone who had ruined so many lives. Most of these people seem to show no remorse and even start scams back up in while in prison. These predators are parasites that are not going to change and should be treated accordingly. The death penalty might just serve as a deterrent down the line for some scam artist wannabe. May sound harsh but just the way I feel. And actually I don't have a problem with petty thieves losing a few fingers or even a hand for their crimes either.
You could lead my country any day, Frayne! The way I see it, the amount of times you could get caught stealing would be twice as it would get pretty hard to do after that.
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Old 01-13-2014, 10:54 PM   #32
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You are of course correct. A Ponzi scheme is not the same as someone fraudulently promoting a very highly leveraged product as a conservative, sound and safe investment.

However IMO it misses the point, that the techniques used by the con artist involved, and the effects on the investors are the same. In both cases they are likely illegal, some being more difficult to prosecute than others.

And in both, a small minority can gain, but the vast majority will eventually loose all or most of their investment.

Most of the people on this site are very sophisticated and know that there is no one and no technique that will beat the market long term, and that any product with a higher than normal rate of return is accompanied by large and possibly very large risk.

Most of us here are by now pretty much immune to this kind of con. But we got that way over time and by experience. (Experience meaning making mistakes and learning from them) My 20s something self was certainly not aware of all of this (although if you would have asked me then, I pretty much thought I knew it all).

This is what I think are the important points. The con may differ, but the techniques and results are the same, we are not as smart as we think, and experience is a great teacher, but better early than late.

Just as an aside to your other point about bad banks failing in the 80s. I was a shareholder in some of these local banks. Their stock price had been shooting up (manipulated OTC rises on a few hundred shares at a time). All of them failed to some degree or another, most being bought out at pennies on the dollar, some just going bankrupt outright. In every case of which I am aware, they went bankrupt through insider self dealing. Local business people would set up a local bank because it was an easy way to get loans for their pet risky projects. These banks were just a form of bad business.

Or were they?
The original stock prices were highly manipulated. I didn't know it at the time, my young self again. But a 5% stock rise on a few hundred shares would certainly tip me off now. My broker, whom I had great confidence in eventually went to jail.

I think more times then we like to belive some of these "bad businesses" are really cons themselves.

"Just saying there is a difference...." Yes sometimes, but it is not always clear.

Yes, I agree that the result to the investor can be the same.... but a Ponzi scheme is clearly illegal... where a leveraged investment that goes bad is not.... the salesman can make bold claims on how easy it is to earn money with the investment, but is that fraud or just puffery.... Annuity salesmen talk how great their product is, but there are many many people here who think otherwise.... are they commiting fraud when they sell the annuity I think not, but others might think so....


Also, I agree that there were a lot of banks that went under due to fraud... and a good number of people went to jail.... but there were a lot of banks that just went under because of the real estate bubble that happened back there (especially in Texas)....
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Old 01-14-2014, 12:04 PM   #33
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When I was with mega-corp we had a VP who set up a shell minority corp. headed by his wife. He then contracted MILLIONS of federal $$ to this shell corp. He and one co-hort would then do the "work" nights and weekends then live-large on the funds.

Took a few years, but the feds figured out the scam via an audit ... they WAY over billed ... got WAY too greedy. SO they had plenty of cash for damn good lawyers and pleaded to a two year term in a minimum security federal pen. Estimated they pocketed $2M each.

So as I sat in my cell - err cube - I realized they "sold" 2 years for $2M and I'll work the next 20 years and not have $2M. SIGN ME UP!
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