Friday, May 2, 2008

Scam Artists' Investment Bonanza--Do You Recognize Historical Bonds Scams?

--Like old soldiers, historical bond scams never die. They don't fade away either.

It's said that normal people once smoked pot to make the world weird. Then, as the world got weird, took Prozac to turn it back to normal. Historical Bonds? Normalcy? No match. Always weird.

One of the fastest-growing scams in stock and bond fraud now is the hustling of historical bonds. Hot item are the bonds of the Chicago, Saginaw, and Canada Railroad, which went bankrupt in 1876. These ancient bonds, valued at $25-$700--to memorabilia devotees only--are bringing up to $150,000 each on the investment sucker market. And, there are a lot more of this type offering from scam artists currently making the rounds.

What are some of the sales pitches used?
Here are six:

1. Payable in gold. Hard to believe, but this appeal, peddled by the scam artists, actually sells to the naive, who must have been asleep or not born yet in l971 when President Richard M. Nixon put the final spike in the gold coffin, killing off the last semblance of the thought that gold could be a redemptive reward for investment from the U.S. government.

2. Are backed by the U.S. Treasury. Really far-fetched. When dealing in history, remember, it's easier to get older than to get wiser. It has never been U.S. Treasury policy to back private corporate bonds.

3. The Treasury Department has established a federal sinking fund to retire these historical bonds. That's right out of Scam Artist School, class #101. No such fund exists.

4. Can be used in high-yield investment "trading programs," sanctioned by the IMF, United Nations, or the U.S. Federal Reserve Board. Yes, sure, and the moon is made of blue cheese.

5. Some proceeds go for humanitarian and infrastructure programs. This is supposed to hit your sympathy button for third world countries. Realistically, all proceeds would go to build the infrastructure of the scam artist's bank account.

6. These are supposedly a hot item with European banks, tradable for high-yield debentures and "medium term notes" in the EU. No such bank participation exists.

Albert Einstein said: Only two things are infinite, the universe and human stupidity, and I'm not sure about the former. Fastest way to poke a hole in the scam artists' arguments is to check with any stock broker or bank officer. And, you will conclude that the quickest way to double your money is to fold it in half and put it back in your pocket.


Andrik McVean said...

Yeah...lots of scam now day and they usually come by email. And it was very...very irritating me. human stupidity infinite ? how about human thought?

Terry said...

Is this one a teaser, Jack?...I'll bet you are coming up with a more general stocks and bonds piece next, right?

Warren M said...

I think the key line here is, it's easier to get older than to get wiser. It is so hard to believe people can actually go for this kind of investment. I got hit about a year ago on this one...I remember the name, Saginaw. I laughed it looks like a lot of others don't though.

Jack Payne said...

Andrik, that's right, a high percentage of these still come via email--which shows, it is still paying off.

You out-foxed me, Terry. Yes, I've got a much broader investment scams piece coming up soon.

How could P.T. Barnum--100 years ago, with his "Sucker born every minute" quote--have been so omniscient? Who knows? But, he sure was.

Overlander said...

It's so hard to think anybody left on the planet would think that any U.S.-backed investment was redeemable in gold. Where do these people come from? Were they released from mental institutions?


Fascinating information. I love your style of writing!

McAlee said...

These scams feel almost cartoonish, they are so ridiculous in their pretenses. How does the FBI ever figure out how to charge these scamsters? With a straight crime, or mental imbalance?

Dolcett said...

I agree with Warren on the key line.

Jack Payne said...

Thanks, Heidi. I just visited your blog...and was carried-away impressed.

Overlander, the naive-level of the common folk is often so extreme that I can see where it can, in many cases, be mistaken for mental imbalance when it comes to investing their money. And, yes, McAlee, that would seem to be a noodle-scratching problem for the FBI, wouldn't it?

Warmer said...

It looks like we are getting into a favorite lines contest here lately. Okay then, my favorite is the end line, about the quickest way to double your money is to fold it in half and put it back in your pocket.

H. Wilson said...

I like that last line too. I dearly love opaque one-liners.

Anonymous said...

Great article Jack but this, this I have to remember and throw at my kids and their buddies:
It's said that normal people once smoked pot to make the world weird. Then, as the world got weird, took Prozac to turn it back to normal.
BTW welcome to the MW Society. I'm really looking forward to seeing your work there. On behalf of Mike and I, I warmly welcome you in to the fold. Now, I hope you can shake up some of those sleeping dunderheads over there as well.
Take care my friend.

C. Riggins said...

The Supplicant nailed it. The opener is the best.

Jack Payne said...

Yeah, this favorite lines thing has got me a little puzzled. Maybe I should pay closer attention to how I am phrasing things.

But, hey, H. Wilson, now you've got me puzzled even further. What is an "opaque" one-liner?

And, J.D., I'm glad to hear that I am bringing meaningful fulfillment to your life with such notations as to pot / Prozac users and ugly, redheaded ducks.
Yes, too, I am looking forward to my participation in the MW Society.

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