OCT 5 — This gold investment, to put it squarely, is too good to be true.
In the beginning, when you first purchase gold with the company, they will hand the solid gold bar to your hands to prove their sincerity.
As if that is not enough, they will sign a contract with you, offering you 1.5 per cent to 3 per cent monthly interests, meaning 18 per cent to 36 per cent per annum of lucrative returns.
If you buy a million ringgit worth of gold bars from them, you will be entitled to RM30,000 of monthly interests, or RM360,000 a year!
The same amount of investment, if put in a fixed deposit account with a commercial bank, will only yield about RM30,000 a year.
The returns will be even higher if gold prices soar.
So, some sell their houses and empty their bank savings to invest with the company, while others take their investment a step further, relinquishing their jobs to become full-time agents for this company.
If is said that some 60,000 have entrusted their fortunes to this company during the past one or two years.
Several months back, a company bearing the same name and associated with it in Singapore was reported to have encountered financial problems. The company was later raided by the authorities after investors lodged reports having failed to receive their promised interests.
Before long, the company in Malaysia was put in Bank Negara’s watch list, its assets frozen pending investigation.
We cannot pass down any verdict before the probe is concluded. Sure enough I hope the investors and agents would escape losses and have their investment sums recovered.
If we were to scrutinise this incident carefully, we should be able to draw some good lessons from it.
In the very beginning, the gold bars that they hand over to you are indeed genuine, certified gold bars that are nevertheless sold to you at a price 25 per cent above the market value. In other words, they have already made some good profits from selling gold to you.
Thanks to the profit margin, they are now able to provide unrealistically high interest rates to lure investors.
In no time, the company has managed to draw massive investment funds to sustain its operations and honour the pledges it has made to customers.
Nevertheless, such operations are not sustainable over the long term unless the company has special investment channels that would yield 40 per cent of annual returns in order to disburse to its clients as interest incomes.
40 per cent! A figure that not even Warren Buffet could dream of. Buffet recently admitted that it would not be easy to even get 10 per cent.
What is left will have to wait until the music stops and see who are unlucky enough not to grab a chair. These are the people who have refused to pull back from their investments and have continued to dump their savings into the bottomless pit.
Who is to take the blame eventually?
No way could the authorities be spared. There is always a grey area in gold investment that can be manipulated by irresponsible quarters for their own benefit.
Meanwhile, the investors must also question the rationality of raking in incredibly good returns without having to move a finger or put on a thinking cap.
Think about this, and we should see what has actually gone wrong. — mysinchew.com
source:http://www.themalaysianinsider.com/sideviews/article/of-ponzi-schemes-tay-tian-yan/
Saturday, October 13, 2012
Of Ponzi schemes — Tay Tian Yan
OCT 8 — Some people involved in the recent gold investment scandal argued that it was a new business model and questioned on what wrong was with it, since they were neither stealing nor robbing.
They believed that it was originally a profitable business but, unfortunately, the intervention of Bank Negara and media coverage have ruined everything and broken the golden bowl.
No, it is wrong. It is not a new business model, but rather an old-fashioned, repeated ploy.
It was started about 100 years ago.
In 1903, Italian Charles Ponzi immigrated to the US with only US$2.50 in his pocket, and a resolution to make big money on that piece of land.
He did a lot of jobs, but had faced lawsuits and sent to jail for embezzlement and theft.
After he was released, he decided to do something big instead of just stealing and embezzling.
His mind was quite agile. He targeted at posts sent between the US and Europe countries and started selling postal reply coupons. He set up a company in Boston, claiming that it invested in postal coupons.
He promised clients a 50 per cent profit within 45 days, or 100 per cent profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the US as a form of arbitrage. Many saw it as a windfall.
Only a few of the rich tentatively invested in the beginning and, surprisingly, they received the promised high returns and everyone was overjoyed.
The news spread and people rushed to invest. Ponzi rose to become a business tycoon overnight and was highly praised. Together with Columbus and Marconi, they were called the three greatest Italians. Christopher Columbus discovered the New World, Guglielmo Marconi invented wireless telegraphy, and Ponzi created money.
However, no one knew that postal coupon was not a profitable investment. In fact, Ponzi did not invest in postal coupons.
Instead, he just used the money of new investors to pay the returns for earlier investors and when more and more people invested, he would then be able to issue returns. The snowball continued to roll as long as the number of new investors was greater than the number of existing investors.
However, Ponzi’s luck ran out one day. He faced a commercial lawsuit and the incident was reported by the media.
The investigation found that with the investment amount received, his company should have bought 16 million of postal reply coupons, but only 27,000 postal coupons were sold nationwide over the same period.
The Ponzi scheme was exposed and the Ponzi enterprise collapsed. Tens of thousands of people lost everything and Ponzi was put behind bars.
Similar low-risk, high-return investments could be found over the past 100 years and they were actually elaborate Ponzi schemes, instead of new business models.
The Bernie Madoff investment scandal broke out a few years ago, which was known as the largest elaborate Ponzi scheme in history, and the gold investment scandal are just two among the other Ponzi schemes. — mysinchew.com
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.
Source:http://www.themalaysianinsider.com/sideviews/article/of-ponzi-schemes-tay-tian-yan/
They believed that it was originally a profitable business but, unfortunately, the intervention of Bank Negara and media coverage have ruined everything and broken the golden bowl.
No, it is wrong. It is not a new business model, but rather an old-fashioned, repeated ploy.
It was started about 100 years ago.
In 1903, Italian Charles Ponzi immigrated to the US with only US$2.50 in his pocket, and a resolution to make big money on that piece of land.
He did a lot of jobs, but had faced lawsuits and sent to jail for embezzlement and theft.
After he was released, he decided to do something big instead of just stealing and embezzling.
His mind was quite agile. He targeted at posts sent between the US and Europe countries and started selling postal reply coupons. He set up a company in Boston, claiming that it invested in postal coupons.
He promised clients a 50 per cent profit within 45 days, or 100 per cent profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the US as a form of arbitrage. Many saw it as a windfall.
Only a few of the rich tentatively invested in the beginning and, surprisingly, they received the promised high returns and everyone was overjoyed.
The news spread and people rushed to invest. Ponzi rose to become a business tycoon overnight and was highly praised. Together with Columbus and Marconi, they were called the three greatest Italians. Christopher Columbus discovered the New World, Guglielmo Marconi invented wireless telegraphy, and Ponzi created money.
However, no one knew that postal coupon was not a profitable investment. In fact, Ponzi did not invest in postal coupons.
Instead, he just used the money of new investors to pay the returns for earlier investors and when more and more people invested, he would then be able to issue returns. The snowball continued to roll as long as the number of new investors was greater than the number of existing investors.
However, Ponzi’s luck ran out one day. He faced a commercial lawsuit and the incident was reported by the media.
The investigation found that with the investment amount received, his company should have bought 16 million of postal reply coupons, but only 27,000 postal coupons were sold nationwide over the same period.
The Ponzi scheme was exposed and the Ponzi enterprise collapsed. Tens of thousands of people lost everything and Ponzi was put behind bars.
Similar low-risk, high-return investments could be found over the past 100 years and they were actually elaborate Ponzi schemes, instead of new business models.
The Bernie Madoff investment scandal broke out a few years ago, which was known as the largest elaborate Ponzi scheme in history, and the gold investment scandal are just two among the other Ponzi schemes. — mysinchew.com
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.
Source:http://www.themalaysianinsider.com/sideviews/article/of-ponzi-schemes-tay-tian-yan/
Friday, October 12, 2012
Golden Week Chaos Brings Cheer for China's Economy
The annual Golden Week holiday in China is typically marked by chaos on motorways as millions of Chinese travelers hit the holiday trail, and this year is no different. The upside? The clogged roads are hints the economy may avert a hard landing, at least for now.
This is because the traffic gridlock tells a story that official data don’t: that the Chinese consumer is still confident about the economy, spending and going on holidays, even as the headline GDP figure slows and stock prices fall.
In the first four days of the eight-day holiday, arguably the most important dates for Chinese tourism in the calendar, the number of travelers to 119 major attractions across the country totaled 18.2 million, up 23.4 percent from the same period the year before, according to the National Tourism Administration. This compares to a 6.5 percent growth in 2010, and 8.8 percent in 2011.
Sales revenue at these destinations reached 957 million yuan ($151 million), up 25 percent.
Market watchers say this backs the view that the Chinese consumer remains a bright spot in a slowing economy—GDP of the world’s second-biggest economy slowed to 7.6 percent in the second quarter, its slowest pace in three and a half years.
“Chinese tourists are in a spending mood…something is stirring out there,” Uwe Parpart, chief strategist and head of research with Reorient Financial Markets in Hong Kong said. “People don't travel and spend when the economy is in terrible shape.”
So what’s behind the consumer optimism? According to analysts from Bank of America Merrill Lynch, a few factors are at play. For one, the employment picture, which has a direct impact on the consumer’s wallet, remains fairly robust. While wages in the first half of 2012 grew 13.1 percent from the year before, lower than the 14.4 percent figure in 2011, wage growth actually picked up due to lower inflation.
China, India Consumer Spending to Triple by 2020: StudyChinese Give Luxury Goods a Pass, Go on Holiday InsteadWhat Happens If China Comes In for a Hard Landing?
“Though we expect the unemployment rate to rise in 2H12, it is unlikely that we will see massive layoffs if the Chinese government would take some necessary measures to support growth for the rest of the year,” Ting Lu and Larry Hu, economists with Bank of America Merrill Lynch said in a report on Thursday.
Also helping sentiment is the fact that property prices have stayed almost unchanged in the past year despite numerous tightening measures, Lu and Hu said, adding that the consensus among investors are that real estate prices are about to recover.
Whilst Chinese stocks have staged an appalling performance so far this year, down about 15 percent on average, the impact is limited on Chinese investors who are largely used to high market volatility, and whose stock exposure on average is less than 20 percent of household bank deposits, they added.
“Chinese consumers are still relatively confident about China’s economic fundamentals,” Lu and Hu wrote. “Strong tourism data support our soft-landing views … and also point to a shift of consumption toward leisure, a new source of demand.”
Golden Week a Boost to Rebalancing Efforts
The Chinese government has been trying to rebalance the economy by increasing domestic consumption’s share of GDP and reducing the nation’s reliance on exports so that it would not be too vulnerable to a decline in overseas demand. During the 2009 financial crisis, Chinese exports plunged for the first time since 1983, by 16 percent over the year as demand from its biggest markets collapsed.
According to Parpart, the tourism data point to a resilient Chinese consumer and should give China’s rebalancing ambitions a boost.
“It’s a positive signal. Chinese salaries have increased by an average of over 20 percent over the past year and a half,” he said. “If some of that now goes to consumption, it is what the government likes to see to make the economy less dependent on exports.”
Indeed, to encourage people to travel and spend during the holiday, when normal economic activity is suspended and stock markets shut down, the Chinese government slashed entry-ticket prices at 94 tourist attractions nationwide by 25 percent on average.
BofA-Merrill says the upbeat travel data show China’s economy indicators run beyond the closely-watched electricity and manufacturing gauges.
“Robust Golden Week tourism data also suggest that China’s GDP data… might be more real than what’s perceived by (market) bears, who are focused too much on power usage and industrial production,” the report said.
—By CNBC’s Jean Chua.
© 2012 CNBC.com
Source: http://soc.li/mDYJF7J
This is because the traffic gridlock tells a story that official data don’t: that the Chinese consumer is still confident about the economy, spending and going on holidays, even as the headline GDP figure slows and stock prices fall.
In the first four days of the eight-day holiday, arguably the most important dates for Chinese tourism in the calendar, the number of travelers to 119 major attractions across the country totaled 18.2 million, up 23.4 percent from the same period the year before, according to the National Tourism Administration. This compares to a 6.5 percent growth in 2010, and 8.8 percent in 2011.
Sales revenue at these destinations reached 957 million yuan ($151 million), up 25 percent.
Market watchers say this backs the view that the Chinese consumer remains a bright spot in a slowing economy—GDP of the world’s second-biggest economy slowed to 7.6 percent in the second quarter, its slowest pace in three and a half years.
“Chinese tourists are in a spending mood…something is stirring out there,” Uwe Parpart, chief strategist and head of research with Reorient Financial Markets in Hong Kong said. “People don't travel and spend when the economy is in terrible shape.”
So what’s behind the consumer optimism? According to analysts from Bank of America Merrill Lynch, a few factors are at play. For one, the employment picture, which has a direct impact on the consumer’s wallet, remains fairly robust. While wages in the first half of 2012 grew 13.1 percent from the year before, lower than the 14.4 percent figure in 2011, wage growth actually picked up due to lower inflation.
China, India Consumer Spending to Triple by 2020: StudyChinese Give Luxury Goods a Pass, Go on Holiday InsteadWhat Happens If China Comes In for a Hard Landing?
“Though we expect the unemployment rate to rise in 2H12, it is unlikely that we will see massive layoffs if the Chinese government would take some necessary measures to support growth for the rest of the year,” Ting Lu and Larry Hu, economists with Bank of America Merrill Lynch said in a report on Thursday.
Also helping sentiment is the fact that property prices have stayed almost unchanged in the past year despite numerous tightening measures, Lu and Hu said, adding that the consensus among investors are that real estate prices are about to recover.
Whilst Chinese stocks have staged an appalling performance so far this year, down about 15 percent on average, the impact is limited on Chinese investors who are largely used to high market volatility, and whose stock exposure on average is less than 20 percent of household bank deposits, they added.
“Chinese consumers are still relatively confident about China’s economic fundamentals,” Lu and Hu wrote. “Strong tourism data support our soft-landing views … and also point to a shift of consumption toward leisure, a new source of demand.”
Golden Week a Boost to Rebalancing Efforts
The Chinese government has been trying to rebalance the economy by increasing domestic consumption’s share of GDP and reducing the nation’s reliance on exports so that it would not be too vulnerable to a decline in overseas demand. During the 2009 financial crisis, Chinese exports plunged for the first time since 1983, by 16 percent over the year as demand from its biggest markets collapsed.
According to Parpart, the tourism data point to a resilient Chinese consumer and should give China’s rebalancing ambitions a boost.
“It’s a positive signal. Chinese salaries have increased by an average of over 20 percent over the past year and a half,” he said. “If some of that now goes to consumption, it is what the government likes to see to make the economy less dependent on exports.”
Indeed, to encourage people to travel and spend during the holiday, when normal economic activity is suspended and stock markets shut down, the Chinese government slashed entry-ticket prices at 94 tourist attractions nationwide by 25 percent on average.
BofA-Merrill says the upbeat travel data show China’s economy indicators run beyond the closely-watched electricity and manufacturing gauges.
“Robust Golden Week tourism data also suggest that China’s GDP data… might be more real than what’s perceived by (market) bears, who are focused too much on power usage and industrial production,” the report said.
—By CNBC’s Jean Chua.
© 2012 CNBC.com
Source: http://soc.li/mDYJF7J
Wednesday, October 3, 2012
Gold trading firm Genneva's offices raided
PETALING JAYA: The police, Bank Negara, the Companies Commission of Malaysia and the Ministry of Domestic Trade, Cooperatives and Consumerism jointly raided gold trading firm Genneva Malaysia Sdn Bhd and its affiliates in the country for various suspected offences.
Singapore's Commercial Affairs Department also conducted a similar operation against Genneva Pte Ltd in the republic.
In a statement released yesterday, Bank Negara said the raid was to probe suspected offences under the laws administered by the agencies.
“The public is advised to be cautious in investing money to avoid becoming victims of activities that are illegal and in breach of the law,” the statement read.
Waiting patiently: Customers gathering outside Genneva’s office in Jalan Kuchai Maju 6 as the raid is in progress. The website for Genneva Malaysia remained accessible providing visitors with information on the company's background and contact details, among others.
The firm's Singapore portal, however, was not fully accessible.
The website for the Genneva Pte Ltd at http://www.genneva.com.sg/, takes visitors to a single page with the message that reads: “Work in progress, to ensure all obligations to our customers and consultants are met.”
The message urged for calm and cooperation during “these trying times as we work out amicable solutions for everyone”.
Genneva Singapore's Facebook stated: “Pray for positive outcome while the new management is working round the clock to solve problems.”
“We Shall Overcome!,” read a message posted on the page yesterday afternoon. (http://www.facebook.com/GennevaWorld.Sg)
Meanwhile, several clients and gold traders of the company cried foul over the raid.
A trader, who only wished to be known as Nick, said money earned from the purchase and sale of gold had helped fund his son through university.
“There has never been any complaint by the clients. The company has helped the livelihood of thousands of people. Why are the authorities interfering in a legitimate business?” he asked.
Another trader, S. Shanti, said the money from her buying and selling of gold, which she stressed was done with the relevant documentation and tax deductions, had helped pay for her mother's dialysis weekly treatment costing RM1,000 over the past three years.
“If they put a stop to this company, how am I going to foot the expensive bill for my mother's health?” she asked outside the company's office in Jalan Kuchai Maju 6.
She was among 100 customers, aged between those in their 20s and 70s, who had gathered at the office in support of Genneva after hearing of the raid yesterday afternoon.
They hoped that the authorities would complete the investigations and leave the company alone after that.
It was learnt that Bank Negara held a briefing with all the other agencies in Putrajaya at 8am before the simultaneous raids were conducted.
Staff at the Jalan Kuchai Lama office had their statements recorded until about 9pm before they were allowed to leave.
Officers at the scene were tight-lipped over the operation. However, they were seen carting away documents and files from the two premises located opposite each other.
As of 9.30pm, Bank Negara officers were still going through the records while customers of the company waited.
Source
http://thestar.com.my/news/story.asp?file=/2012/10/2/nation/12110572&sec=nation#1349158501604223&if_height=609
Singapore's Commercial Affairs Department also conducted a similar operation against Genneva Pte Ltd in the republic.
In a statement released yesterday, Bank Negara said the raid was to probe suspected offences under the laws administered by the agencies.
“The public is advised to be cautious in investing money to avoid becoming victims of activities that are illegal and in breach of the law,” the statement read.
Waiting patiently: Customers gathering outside Genneva’s office in Jalan Kuchai Maju 6 as the raid is in progress. The website for Genneva Malaysia remained accessible providing visitors with information on the company's background and contact details, among others.
The firm's Singapore portal, however, was not fully accessible.
The website for the Genneva Pte Ltd at http://www.genneva.com.sg/, takes visitors to a single page with the message that reads: “Work in progress, to ensure all obligations to our customers and consultants are met.”
The message urged for calm and cooperation during “these trying times as we work out amicable solutions for everyone”.
Genneva Singapore's Facebook stated: “Pray for positive outcome while the new management is working round the clock to solve problems.”
“We Shall Overcome!,” read a message posted on the page yesterday afternoon. (http://www.facebook.com/GennevaWorld.Sg)
Meanwhile, several clients and gold traders of the company cried foul over the raid.
A trader, who only wished to be known as Nick, said money earned from the purchase and sale of gold had helped fund his son through university.
“There has never been any complaint by the clients. The company has helped the livelihood of thousands of people. Why are the authorities interfering in a legitimate business?” he asked.
Another trader, S. Shanti, said the money from her buying and selling of gold, which she stressed was done with the relevant documentation and tax deductions, had helped pay for her mother's dialysis weekly treatment costing RM1,000 over the past three years.
“If they put a stop to this company, how am I going to foot the expensive bill for my mother's health?” she asked outside the company's office in Jalan Kuchai Maju 6.
She was among 100 customers, aged between those in their 20s and 70s, who had gathered at the office in support of Genneva after hearing of the raid yesterday afternoon.
They hoped that the authorities would complete the investigations and leave the company alone after that.
It was learnt that Bank Negara held a briefing with all the other agencies in Putrajaya at 8am before the simultaneous raids were conducted.
Staff at the Jalan Kuchai Lama office had their statements recorded until about 9pm before they were allowed to leave.
Officers at the scene were tight-lipped over the operation. However, they were seen carting away documents and files from the two premises located opposite each other.
As of 9.30pm, Bank Negara officers were still going through the records while customers of the company waited.
Source
http://thestar.com.my/news/story.asp?file=/2012/10/2/nation/12110572&sec=nation#1349158501604223&if_height=609
Tuesday, October 2, 2012
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