Gold Investment Firm Placed on MAS Investors Alert List

[Musicwhiz]

Be very careful of such schemes which promise unsustainable returns! Now it is affecting Gold as well. See attached article from TODAY.

Some promise returns of 4% per quarter (16% per annum) while others offer 9% every 6 months (18% per annum). These are all above the long-term average provided by equities (6-8%) over the long-term, and therefore should be deemed speculative. I highly suspect most of these are Ponzi Schemes, which is why they run into "cash flow problems".

[kazukirai]

Ahaha, MW. You beat me to it! I was about to do a public service annoucement on this.

As usual, some unscruplous people taking advantage of the public perception of Gold as an Asset Class of the moment. However, it's also an indication that Gold as an asset class has come mainstream and gaining popularity.

[SLC81]

It is really look like a PONZI scheme, it is good that MAS now put them into alert list but a bit too late. it has been around in Singapore for sometime. One of my relatives was targeted by this group last year after she made some money from property investment and when she asked me for advise, i told them off, how can they get few percent % interest on Physical gold investment, you have to pay for banks to store your gold actually.

[Nick]

Bonds or yield stocks which trade at 9% yields are often termed as junk stocks due to their high operating risk and potential default. If anyone think a short term 'principal protected' investment carries a 9% yield, he should ask himself why !

[Blackjack]

Actually, it is easy for people with no financial background to believe a low-risk/high-returns investment opportunity is possible simply because they weren't equipped to understand investment in the first place. We should do our part to equip all those around us with such knowledge as and when possible, but we can't really blame them for being "foolish" if they indeed become victims of some scheme, for probably they might have been misled into thinking so by unscrupulous agents.

[kichialo]

Alert List means what? Neither here nor there, half in half out ...

[Musicwhiz]

Alert List means what? Neither here nor there, half in half out ...

Well this means they are on MAS Alert List as a possible scam, so it is to warn people to be more careful. HOwever, as mentioned, usually by the time they are on the list, it's too late for many people who may have lost tons of money!

[d.o.g.]

One of my contacts also came across such a scheme. From what he described I believe it was The Gold Label since the operation was exactly as described in Today: buying gold at a 25% premium, getting interest regularly, and being able to sell back the gold at market price.

I told him to stay away. I hope he did.

The Gold Label appears to be merely a time-delayed Ponzi.

Since you buy the gold at a 25% premium, the "interest" payments are just funded from the 25% premium i.e. the payments are just a return of capital. This can go on for 8 quarters (2 years) before the Ponzi activity becomes necessary to keep up the "interest" payments.

As the company ran into trouble this October, it was only operating for 1.5 years (Apr 09 - Oct 10). So probably the running costs like rent, salary and agent commissions ate into the 25% premium faster than expected.

We should do our part to equip all those around us with such knowledge as and when possible, but we can't really blame them for being "foolish" if they indeed become victims of some scheme, for probably they might have been misled into thinking so by unscrupulous agents.

Few people appreciate such attempts at education. Generally I have found that people are very keen to invest in such schemes by the time they ask me, and they get disappointed when I tell them it's a scam, as if it's MY fault.

In some ways it is economic Darwinism at work. As the saying goes, a fool and his money are soon parted.

[kazukirai]

Few people appreciate such attempts at education.

From my own experience, 8 out of 10 friends are pretty averse to getting financially educated even though they bitch about not having enough savings or not getting paid enough. Their so-called investments usually take the form of endowment policies or at best, mutual funds and ILPs whereby they usually place their faith in the manager or financial advisor. Putting aside the financial sense in doing that, it just means that they still haven't gained much financial literacy.

It could be that they think that I'm in no position to give them advice since I'm not exactly a high-income earner nor a high net worth individual which is why I hope that in 15-20 years time, they don't ask me to give them tips or something which is something some people love to do once they know you've had some measure of success.

It's still asking for fish not asking how to fish better.

Do you guys think this is something that can be changed? Or is this part of human nature that is doomed to repeat itself?

[Jon-san]

Personally, I believe it's a process that can be changed, albeit very slowly. Education levels are on the increase, so more and more younger people are gradually becoming more aware. That said, humans by nature, are greedy, yet lazy. There will always be people ripe for the con. Regardless of what the papers are reporting, financial literacy is improving at a lot slower rate than we are being led to believe. However, it is definitely on the rise. We just have to do our part to protect those closest to us and diffusion will work from there. My 100 words worth.