The law of efficient markets

[Guest guest]

> Gauranga das wrote:

> > 99 is what many experts in many different fields are saying. ITs amasing

how

> > the usa economy is still being proped up. Everyone knows that the bubble

is

> > going to burst and anyone with any brain substance at all will get out of

> > the markets. If anything, they should be looking to sell short the S&P 500

> > futures market. .

 

Bad idea #1. When buying a securitiy, one has a limited potential

downside and unlimited potential upside. When selling short, one

has the exact opposite: LIMITED potential gain and UNLIMITED

potential loss. I'm normally not emotional enough to capitalize,

but I'll do it here because this is such a bad idea. I repeat:

LIMITED potential gain and UNLIMITED potential loss.

 

> > Program A

> > Minimum Investment US$ 10,000. and multiples of 10 K ie 20K, 30K etcI

> > Returns 10 % a month.

> > Duration of contract is for 10 Months.

> > Contract Agreement are given.

> > Receipt of Funds

 

This has all the marks of a scam -- this is guaranteed by the

law of efficient markets. It is well known that the maximum return

that one can achieve (in dollars) without taking on any risk

is roughly 5.00% per year -- the Fed funds rate. If one is

willing to take on substantial risk on a fixed-income (bond)

investment, one might get as high as 20% per yet. The above,

though, promises over 100% a year without any risk. If this

were actually possible, the law of efficient markets guarantees

that so many people would rush in to purchase this investment

product that demand would greatly exceed supply. At that point,

the base price on the product would shoot up -- rather than

being able to provide $1000 monthly income on a $10K investment,

investors would be in such a rush to buy it that the base price

would shoot up to roughly $240K (and would still only produce $1000

monthly income). This would then bring the product in line with

the Fed Funds rate, which is all you can get without taking on

risk.

 

Nevertheless, we don't see this product offered at $240K , we

see it offered at $10K. Therefore, we can conclude that it will

not live up to its claims.

 

> > Because I know I can deliver these types of returns, I put them into

writing

> > in the agreement contact.

 

Contracts can always be reneged in a number of ways. Even if

a contract is made within the US, it can be broken by Chapter 11

bankruptcy protection. Further, contracts across countries

are practically unenforceable -- I don't think that any country

will agree to extradite someone based on failure to uphold a

financial contract.

 

Therefore, the best plan is to stay away from such schemes (or

should I say, "scams").

 

Regards,

 

Vijay