A Rude Awakening for Gold Investors & Traders
It was explosive news when an unprecedented raid on the 1st October 2012 has set 60,000 investors of Genneva Malaysia tongues wagging for the innovative gold trading scheme by Bank Negara Malaysia (BNM) with joint operation from Royal Malaysian Police, Ministry of Domestic Trade, Cooperatives and Consumerism; and the Companies Commission of Malaysia.
Pageantry Gold, Caesar Gold and Worldwide Far East were thrust into limelight five days later, where similar items; boxes of documents and gold bars were seized. In Singapore, similar raids were conducted by Commercial Affairs Department at Genneva’s offices at Orchard Towers after received complaints from the publics claimed that the company had stopped paying its customers and agents in addition failed to fulfill its buyback guarantee.
Since then, I have been receiving calls and email from the fallen victim of Gold Guaranteed Schemes ranging from friends to strangers weeping for help and seeking for prudent advice.
Majority has only one question in their mind;
They want to know what’s next?
Schemes or Scams
Despite being actively practice as a gold & silver educator, I am going to emphasize that I am in no position to judge whether the Gold Guaranteed program is a legitimate scheme or a potential “Ponzi” scam. I have been personally approached by a precious metals trading company to endorse such schemes with very tempting offer. However, I have rejected that offer effortlessly because my questions remained unresolved.
My questions were:
- What is the UNDERLYING VALUE CREATION strategy to generate returns for investors?
- If you have invested RM10,000 and given a bar of gold, how is the company generating the guaranteed 2% returns per month and still able to give payout at 1.5% commission to investors? With a combination of 3.5% per month, this equates to 42% per annum. In the last marketing poster that I saw, the company was providing 3% guaranteed return per month!
- Is the money taken by the company and invested into other assets? If yes, what is the UNDERLYING ASSETS that have been invested and how is it possible for the company to guarantee the returns from their investments? If it is not through investing, are the returns generated from raising more money from new investors then?
If all these questions can be resolved, I confidently deem that even Warren Buffett, the best investor in the world will consider resigning from his position in Berkshire Hathaway and join this company as an agent to make guaranteed 42% per annum.
My Investment Checklist
As an investor, I personally believe that it’s not gold, stocks or properties that makes you rich but it’s what you know about gold, stocks or properties that create wealth. Before investing, it is very important for you to ask the following questions:
FIRST, discover the company’s profile and track records. What is the company’s history and reputation?
SECOND, understand the business models. How does this make money? Who profits from this investment, what interests and conflicts are involved? What is the basis for this investment? What are the risks?
THIRD, find out the people behind this organization, along with its principles and partners. What are their ethical standards and reputation? Are the ‘Invited Guests’ to the company’s events taking an incentive from the company?
FINALLY, do the questions sound a little too troublesome? Yes it might be. But like it or not, this is your hard earned money. You are on your own! Don’t expect help from Bank Negara Malaysia or Securities Commission or anyone else. This is your cash and your retirement. I’m not seeking to exonerate the many failures of third parties – rather, I’m emphasizing that this is your responsibility.
The Defense of Skepticism
While browsing through facebook, I have found two newly formed groups: ‘Genneva Malaysia Supporter’ and ‘Bank Negara Against Genneva Supporter’.
From Genneva’s reports, there are 60,000 investors. While reading the newspaper reports, I’ve seen some investors investing half a million ringgit to as much as six million ringgit. So let’s just assume that the average purchase is RM50,000. If 60,000 investors were to invest RM50,000 on average, this brings Genneva’s total sales to RM3 billion. This means that if Genneva is giving guaranteed 2% returns per month, they must be able to prove how they are able to generate RM60,000,000 per month to return to investors, put aside commissions to dealers, business expenses and director fees. Oops… Have I also forgotten the endorsement fees given to the VIPs of conventions & opening ceremonies?
While some are questioning the integrity of Genneva’s business model, they are many who are supporting Genneva’s gold guaranteed program as well. I believe that in order to be fair to Genneva’s clients and agents, Bank Negara Malaysia should disclose to the public how much of Genneva’s assets that were frozen so as to show that they are not victimizing Genneva. If Genneva is truly genuine, the book records will show how the returns are generated for investors and the company is still able to generate profits to sustain this business model.
Being transparent to the public with audited account and proven transactions will help supports of Genneva and Bank Negara to eliminate all the guessing games at this moment. Rather than investing on gut feelings, loyal supporters of Genneva can now be sure that they are relying on hard facts!
If Bank Negara Malaysia discovers that the business model is not sustainable to provide the promised high monthly returns, nor would they be able to provide the buy back guarantee of gold, Bank Negara Malaysia will be doing our nation a good job to prevent more investors getting involved with such schemes.
So, the key question right now is this, does the amount of assets and monies held in these companies equals to the amount collected from their investors?
Knowledge is Power
In today’s world, there are many financial predators with innovative ways of taking your money without you knowing it. When I look at how these schemes are being run in this country into the ground – I’m surprised that some of them can last longer than expected. It is criminal!
If this worries you, my encouragement to you is to increase your financial intelligence. Rather than listening to advice from unqualified advisors, invest in your financial education and use the knowledge you gain from financial education to invest in real assets that produce real cash flow.
Discover the Truth about Money & Energy
I will be speaking at ‘A Rude Awakening – The Truth about Gold, Silver & Oil’. This seminar will uncover the hidden secrets that the gold, silver & oil industry never wanted you to know and how you can profit from discovering the truth about money & energy. For more information, please click here.