Another Ponzi scheme
Interesting article from Clark Howard’s website:Cosmo’s Ponzi scheme targeted middle class
Bernie Madoff $50 billion Ponzi scheme made many Americans numb to the very idea of Ponzi schemes. But that’s a dangerous attitude to have in a down economy — typically a time of vigorous Ponzi scheme activity.Madoff targeted the sophisticated, the wealthy and the famous. Yet it was the middle class which was the target of Nicholas Cosmo and his alleged $380 million scheme geared toward blue-collars workers and government employees.
The consistent element with Madoff, Cosmo and all other Ponzi schemers is that they claim to have a “special” way for you to make money. In Cosmo’s case, he was involved in high-yield bridge loans, according to The New York Times. Some 1,500 people took their entire life savings and handed it over to Cosmo. They even took second mortgages on their homes to “invest” with Cosmo.
Here’s a fact: CDs only pay 2 or 3 percent and that’s one of the few options for growing your money with no risk. What people fail to realize is that investing by its very nature means you put your principal at risk; it’s very different than the safe harbor of saving.
No one can promise you returns without risk. Beware of the “can’t lose” promises — no matter how small or great they are; remember that Madoff himself was only promising 10 percent!
Be particularly wary of affinity fraud as well. That’s where someone like you — either in profession, religion or ethnicity — pitches you on a “can’t lose” scheme. There’s danger in letting down your guard just because someone is familiar to you in some way.
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Tags: bernie madoff, Clark Howard, nicholas cosmo, ponzi
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February 17th, 2009 at 2:28 am
While you have the right idea, CDs also have risk, even if that risk is limited to devalutation of the underlying currency such as in the case of a soverign default. Similarly, precious metals may lose value compared to a benchmark currency.
There is always a risk assets may not be sufficent to maintain a particular standard of living. At best one can try and manage that risk.