Would you want to know if you’ve been sucked into a Ponzi Scheme?
I followed the Bernie Madoff scandal in 2008 pretty closely. In case you don’t remember, Madoff was convicted of the largest ponzi scheme in history.
At its peak, just before Madoff was arrested, the scheme had grown to over $65 BILLION dollars. Yes BILLION with a B. The scandal threw gasoline on the fire of the 2008 collapse of the market.
Harry Markopolos was the man behind discovering and exposing the fraud. Markopolos explained that to him the fraud was obvious almost a decade earlier. After looking for just 30 min or so at Madoff’s supposed performance, which resembled basically a line going straight up at a 45 degree angle, he knew exactly what was going on.
What did he see that everyone else ignored? Markopolos said in the documentary this one fascinating line:
Markopolos didn’t need any sophisticated algorithms nor did he have to break in Mission Impossible style to access private records. You could say his approach was more Sherlock Holmes style than anything. To him it was elementary.
Well, unknowingly, the majority of people are caught in the same scam Bernie’s investors were caught in.
Its the scam of straight lines.
Think about it.
Last time you met with a Typical Financial Adviser, they probably showed you a glossy pamphlet with nice charts and graphs then said something like this. “If you put in X, then after 20, 30 or 40 years, you’ll have Y and this is all based on complex strategies like dollar cost averaging and dynamic asset allocation blah blah blah…”
And they showed you a nice straight line at a 45 degree angle up and Typical Financial Advisers are not the only ones that fall for this. Options traders, gold and silver bugs, crypto currency insiders and real estate gurus all fall for the scam.
Just about everyone teaching or selling a strategy wants to project results using the same logic. If you do X, you’ll have Y after whatever time period. But all these straight line projections at the end of the day are a scam.
So if there are no such things as straight lines in finance, and projections are worth less than the paper they are printed on, how then can you know if you are on track to meet your goals?
That is exactly what we at Cash Flow Tactics are dedicated to teaching investors.
Rather than relying on projections to tell you whether you are on track, you need to learn to make the right decision in each moment with the money and time you have to invest.