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I hope you will carefully consider four business ideas which I will share
with you. Some may consider them to be great business ideas, others might
consider them scams, depending on your perspective.
If you can keep in mind what I presented in my last email about the
implications of interest rates... all of that might be helpful to understand
the following business plans, which might also help you to understand scams
in the gold market.
Implications of Growth Rates
(9 growth rate examples)
http://silverstockreport.com/2016/growth.html
The key example to keep in mind is the last one, as follows:
1.0038 (x to the y) 6000 = 7,640,962,639 = 7.6 billion.
That means that 0.38% interest on 1 gold coin will grow (over 6000 years)
to 7.6 billion gold coins (more than exists).
To me, this suggests that even extremely low interest rates lead to
payments that are impossible to make, because that much gold just does not
exist.
Other people believe lending at interest rates is a perfectly acceptable
and totally natural business activity. To each their own. For them, they may
wish to consider the following business plans:
Business Plan or Scam #1.
Offer to sell gold at 1% below spot, and offer to buy gold at 1% over
spot. What a deal! This will be a better deal than any other gold dealer on
earth! You will have many customers flocking to your door (unless they
realize that it might be a scam). You might wish to place limits on the
offer, however, otherwise, you will end up bankrupt in a week as people would
buy and sell all day long until you were broke. So, you might wish to offer
the following terms of the above offer.
A. You vault all the "gold" on behalf of all customers. They
don't get to take home or hold any of the gold, they only have "gold
accounts".
B. A customer can only trade in one direction at a time. They can go long
gold, or short gold, but not back and forth.
C. All customer positions must be held for a full year. No position can be
dumped or off loaded or reversed until after a full 1 year hold time.
By placing those three limits on trading, you can really limit the losses
of "losing that 1%" on all customer "long gold"
positions.
Obviously, you can't make money by buying gold, because that would simply
lead to a guaranteed loss of the 1% negative spread you are creating. So,
you'd have to invest in something else. Also, you'd have to invest in
something that would outperform gold, to succeed. Of course, if most client
positions are long gold, and if gold goes down by more than 1%, and you just
stay in cash, you are "gaining"!
To limit losses further, the company may wish to go into the futures
markets to offset total company open liabilities, in case the customer's net
positions were more long than short, you could buy call options, for example.
But that might not work, because the cost of options might probably be more
than 1%. Or, you could just take the proceeds, and invest in Berkshire
Hathaway stock, which goes up by about 20% per year, and pocket the 19%
difference. Or, you could take all the proceeds, and buy silver with it,
hoping that silver will "outperform gold", and make up for any
liability that might arise. Or, buy futures contracts on silver to help
eliminate the spread that comes with physical silver.
On the other hand, you can see what a great business plan this would
really be. You would essentially be borrowing money, from the public, at 1%
rates! That's a very low interest rate! And, instead of having to "apply
for the loan", people would be throwing money at you, and the amount of
money you would could borrow through this scheme could be in the multi
million dollar range, if not the hundred billion dollar range, or even the
billion dollar range. To my knowledge, there is no other business offering to
buy and sell gold on such fantastic terms of "1% better than
spot"!. Eventually, your company might go bankrupt, of course, in
several ways: First, the interest rate in the long run is a killer. Second,
there are always operating costs. Third, client redemptions can cause the
company to bust. Fourth, funds might be raided by company insiders. Fifth,
you get the idea. But in the meantime, the company might get a good 5-10-20
year run, and you could pay yourself an oversized annual salary before things
go bust. After all, that's what corporate shells are for, right? Before you
go bankrupt, you might even want to take your company public!
While there are no companies out there making this kind of an offer, you
might be able to discern that some do offer similar things on only slightly
worse terms. Such as offering to sell gold at $1 to $10 or less over spot, or
offering to buy gold at $1 to $10 under spot (withing 1%), for example. Have
you ever thought about how that might be enough for them to make a profit?
Worry no more, for them, that's like borrowing money, but you are paying to
lend money to them! Who says negative interest rates make no sense; it's
being offered in the real world on those terms.
And of course, if the market things that buying gold at "1% better
than spot" is too good to be true, you might change the offer to
"half a point better than spot", and actually reduce your borrowing
costs!
Business Plan or Scam #2.
Offer a "guaranteed 10% return" in some kind of hedge fund or
investment fund. Limit redemptions until after that one year hold time. Take
the money, and either buy Berkshire Hathaway stock which tends to gain 20%
per year and pocket the difference, OR, just buy silver, at the bottom of a
bear market, like about now, and hope it all works out. Or try a combination
of Berkshire Hathaway AND silver! What could go wrong? Besides, if it does,
that's what that corporate shell is for, right, to limit your own liability
when things go bust. This would be a million times more honest than offering
a guaranteed 10% and never investing in anything, which the ponzi scheme guys
do. If you bought silver at the right time, and if the fund grew quickly
enough by word of mouth, it might actually work, and your fund might even
grow big enough to grow the silver market!
Business Plan or Scam #3.
Offer people a chance to earn far more than they normally would on price
movements in the silver and gold market. But offer terms somewhere less than
what is offered in the Futures market, but better than what is found
elsewhere. Or, so what, offer terms better than the futures markets! Take a
risk, right?
Business Plan or Scam #4.
Offer to sell real physical silver or gold at cheaper prices than all
competitors in the market, and just take 3-6 months to deliver. In this way,
your company essentially "floats" on customer orders, as if it were
that source of loan money at 1% or less interest rates.
I believe this is why you NEVER want to order from the people selling gold
at the cheapest prices you can find. And this is also why you NEVER want to
order gold from anyone who takes longer than mail delivery times of 2-4 days
to deliver. About every 3-5 years, a large bullion dealer goes bankrupt and
people lose from $10 to $100 million. And everybody could see it coming a
mile away, except the newbies thinking they found a great deal on gold from a
guy who might be a little slow to deliver but who "always
delivers". Until he can't, obviously.
Please leave your comments on this article online at: silverstockreport.com/2016/scam.html
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