We have defined a "hyip junkie" as somebody that continually participates in one program after another with a poor track record of success. Many hyip junkies do not understand the reasons for their failure, but will continue to plod forward hoping that at some point the next US $5 investment paying 100% every three days will make up for all of the earlier failures. Clearly, it would be highly usual for a junkie to get lucky, and rarer still for success to come by way of skill.
Most programs, which are available for participation to hyip junkies, are not real programs. In some cases, they do not even call themselves real programs, preferring instead the amusing category of "game". It is possible to earn money in a game; it is just that most people do not.
Most people do not take games very seriously, which is why the monetary participation requirements are fairly low. What is the harm in testing something with a few dollars? Does it really matter when it fails and you are out US $10? Very few people will care that much over US $10 they thought they would lose anyway. Of course, on the game side, US $10 from a lot of people is a lot of money.
Some people do take games seriously, and try a lot of different methods to see if they are really a good deal. This is not rocket science, but all trades, all industries, all professions, all crafts, all hobbies, all sports, all skills, all (and so forth), require a lot of training and experience in order to be any good. While it is easy to be a backseat driver, armchair quarterback, or to watch something done, that does not mean you are capable of doing any of those jobs well. For example, an actor who plays a doctor on TV is not really somebody that is a good judge of which aspirin is the best.
Many members email us long lists of bizarre questions which they think will prove to them if the program is a real program or not. A lot of times, our responses are checked against information published by failed programs as to how trades work. In other cases, people have no idea how anything works, but are happy with something that sounds good.
We have previously published several articles on why it is foolish to email anyone thinking you can check if a program is real or not with some test questions. Hopefully a few additional notes on this subject will help many people.
As previously published, the purpose of a scam is to separate people from money. In other words, a scam is a dishonest program meant to trick people so that the scam operator can steal money under false pretenses.
Believe it or not, a scam operator will lie to you in order to make you feel good about participating in a program, specifically to steal your money. There are a lot of small scams out there, maybe a thousand or two. There are also some big scams, maybe a hundred or two. The main difference between a big scam and a small scam is how well the scam operator can lie to people asking foolish questions.
A talented scam artist will create bigger scams stealing more money. A less talented scam artist will trick less people and steal less money. If a scam reaches the point where you know about it, it is probably a medium or large sized scam, run by a reasonably talented scam artist.
From our experience, it seems very likely that some of the companies that have closed over the years were probably legitimate companies, but made to look like scams by governmental authorities seeking to limit your participation in offshore tax advantaged high yield programs. It is also likely that many of the closed programs were U.S. based, and whether real or not, the US Government eventually closes all US based programs because they are in the jurisdiction of the US Government.
It is never a wise idea to join a program that is based in the United States, operates in the Unites States, or is managed by United States Citizens. The US is very militant about keeping tax dollars within the tax system and excluding competition for traditional investments such as stocks, government bonds, and bank CDs.
While there are real and working programs today, and have been many in the past, these programs are a small percentage of the total industry. Unfortunately, most of the closed programs probably were scams and most of the programs open today are probably scams.
If you write to the program manager of a scam, it is not likely he or she will say they are a scam. A scam that becomes a larger scam, meaning one that you might hear about, became a large scam by knowing what people want to hear when they try to test the program with a long list of bizarre questions. If they are not correct in what they think are the right statements to instill confidence, then that scam would remain a small scam and you would not hear about it in the first place.
In other words, survival of the fittest. In this case, those that lie the best, become the largest. The larger the scam the more people who are tricked. All of these tricked people thought they were great judges of scams, armed with their lists of test questions and tactics to minimize risk.
What is a test question? Basically, any question you ask which you think will help you judge if a program is real or not. When you ask these test questions (to any and all programs), there is no way to know if you are just reading something you want to read or if you are reading honest and legitimate information about how the program really works and operates.
To sum all of this up, all programs (including nearly all scams) will be able to answer any question you have in a competent and satisfactory manner. Once a scam becomes large enough for you to hear about it, they have already received and answered just about every test question people think will help them identify a scam.
In most cases, you will have no ability to validate any of the information you are provided with. So, you can either accept the program manager statements or not. Also, it is not likely that you have the ability to judge a scam as a scam, which is why so many people continually lose money in program after program. Very few people can spot scams, which is why there are thousands of scams.
This is not being critical of hyip junkies it is just a fact. For example, a lot of people look at art, but could not tell a real painting from a fake. Most people handle money every day, but cannot tell real notes from counterfeit forgeries. A lot of people reads books and newspapers, but cannot write one. Most people use a VCR, but cannot program one. Many people drive a car, but cannot tune or repair one. Many people use computer software, but cannot install it. Many people walk, but can not jog. Most people watch TV, but only know a few buttons on the remote. Many people critic-sporting events but can not play the game. Many people (and so forth).
It is rare for somebody to understand and accept his or her limitations. This is why, many people feel they can perform activities they cannot or are experts of something that they are not.
Your list of questions to any scam is basically the advertising tool the scam operator will use to entice you to participate. You are kind enough to let the scam operator know exactly what he or she needs to do in order to obtain your money. Your questions serve no real purpose in allowing you to test the legitimacy of a program; they just allow the scam operator to make you feel better about your participation.
Because most people are not very good at judging scams as scams, you are basically asking somebody else to make up your mind on what is a legitimate program. You should not get in the habit of asking people to give you warm fuzzies about anything. You must assume responsibility for your own decisions and make those decisions as best as you are able with the information on hand. Under no circumstances, should you email people whom you think might lie to you, knowing they probably will.
In other words, never trust any scam simply because they answered your email well, because a scam that becomes large over time will always answer your email well. You abdicate your personal responsibility for judging programs yourself, which is why so many hyip junkies continually lose money over and over again programs that seem ridiculously foolish.
We get a lot of email, with no end of little questions by hyip junkies to see if they can tell if the program is a real program or not. We answer the questions we receive as best and as accurately as possible. However, to be honest, there really is no difference to what we write versus what many scams write, and you would not be able to tell the difference anyway.
To be clear, this does not mean we are a scam. Rather it demonstrates that the questions are pointless and should never be asked by anyone, to anyone, because the answers are not meaningful. The questions test nothing, except your ability to be manipulated.
Hopefully the members that have participated in many failed past programs now understand a little bit about why this happened. Basically, you asked the scam operator for warm fuzzies in order to make up your mind about sending them US $10. When the expected warm fuzzies came back, you participated as the scam operator intended. Later, when the scam failed, you incorrectly blamed the program operator because he or she gave you the warm fuzzies, which was the reason why you participated.
The fault of the loss was yours, not the scam operator. You specifically asked the scam operator to lie to you, knowing that he or she would lie to you, in order to feel better about participating. Ideally, this understanding of past failures will help many people avoid similar problems in the future.
Hopefully a few notes on this subject will help explain to people what is actually happening in the world and what is not. Ideally, this information might help you avoid scams in the future.
Please keep in mind that a program that describes itself as following the correct procedures does not necessary mean that program is really in trade. Through the years, scams have always modified the statements they make so that they are always in tune with the most popular thinking among victims. Note - this does not mean they report what they are doing which actually happens in the real world. If the clientele is somewhat sophisticated, they may describe themselves along these lines. However, in most cases, the scams will simply report whatever is in tune with what the victims expect to hear.
In order to enter into trade, a reasonable level of funds must be on hand up-front. It is not possible for a smaller amount to be invested, so small groups with less than US $1,000,000 on hand are probably not actually earning any money anywhere.
According to the IMF, which sets the guidelines managing Fed (US based) and European based trades, a trader may not speak to a potential investor unless that investor has at least US $1M in cash for placement. This must be proven in advance, and there are no exceptions.
In rare cases, it is possible for smaller levels of investment to be piggy backed onto a trade someone else is participating in. In rare occasions US $500,000 or maybe US $250,000 can be placed into trade through somebody else already in trade under the table in exchange for part of the profits, but this is rare. These are called trades, but bit investors never sign any contracts with the trader or trade bank.
Contrary to this information, many Internet groups publish they are in trade after ten people place US $10 into their electronic currency account. Ten people, at US $25 per head, is US $250. Ten people at US $5 per head, is US $50. Ten people, at US $1 per head, is US $10. At the other end of the spectrum, 1,000 people, at US $25 per head, is US $25,000. Most programs charge around US $5 or US $10, which results in either US $5,000 or US $10,000.
Clearly, these levels are far below what is legally possible to place into trade through traditional trade methods. Actually, they are too low for just about everything.
In addition to minimal participation a level, the IMF also mandates that all trades be performed using only United States Dollars. It is not possible to perform a Fed trade, a US based bank program, or a European bank program in any other currency type. This has been the standard since World War Two, and does not show any signs of changing. As a result, it is not possible to trade Euros, Pounds, Yen, Francs, or any otherworld currency. It is also not possible to trade any of the electronic currency company dollars either. All trades, regardless of where or what they are, can legally only work with United States Dollars.
Besides doing a bank trade, some groups bill themselves as doing currency trading or something similar. While this is a completely different situation, it is fairly simple to see that this is probably not physically possible.
Besides OsGold, there are several large electronic currencies and an assortment of smaller electronic currencies. The main electronic currencies, in alphabetical order, are E-Bullion, E-Gold, Evocash, and Net Pay. In addition to these four large currencies, there is another to six to eight smaller currencies that may grow over time.
All of these electronic currencies are private companies, generally from Panama. They are not financial institutions or governments, which is why they are not allowed to directly accept deposits or perform financial transactions. This is the legal reason where they must use are funny names for everything and why you need to use exchange service providers in order to perform deposits and withdrawals.
While electronic currency funds do have value, they are not legally able to operate (or present themselves) as real money. Electronic currencies are a private money unit that has value only in that computer system; sort of like Monopoly money during a Monopoly game.
In the real world, electronic currency funds have value only as long as an exchange service provider will honor electronic currency withdrawals at specific and acceptable exchange rates for real money; for example, OsGold. There is a lot of money tied up in OsGold, which has no value until the different parties involved stop arguing and somebody honors an exchange rate at some level.
At this point, some members are probably thinking electronic currencies are a bad idea. This is not correct; they are a very useful invention, which serve a very real and beneficial purpose. There are few other financial vehicles which offer comparative privacy and easy of use.
Clearly, electronic currency money does have value, as long as the exchange rate holds for the conversion back and forth. In some cases, the electronic currency is backed by gold on deposit, which is basically an insurance policy that the exchange rates will be honored. In other cases, the funds are backed by money in a bank somewhere, which is about the same and just means there is more liquidity and less overhead.
So, money in an electronic currency does have value, but is not real money and the value is only in context to the obligations of the electronic currency company honoring withdrawal exchange rates at the same level as deposit exchange rates.
While government issued money is even less tangible, by law it is real money and you are forced to use it. Unlike a private company incorporated in Panama, the 200 some national currencies are real money backed by the strength and power of 200 some militaries. In reality, national money is just scarps of paper with no value. However, the government printing this paper mandates you must use and most people are use to that because it is the way that things are. Your parents accepted the paper as money and your state sponsored school system did not instruct you any differently.
By law, these financial notes must be used as the basis to pay for goods and services, as long as the issuing government remains in power. For example, old bond issues by pre-war Germany or Confederacy notes from the US Civil War. No more government, no more value. If those governments had made it, those scraps of paper would have value the same as all of the other governmental money today.
This system mostly works, but the flaws allow for inflation and other problems. Regardless, electronic currency funds are always termed in national currency a value, which shows the strength of this system in spite of several notable failures.
Because there is a great deal of difference between a private company incorporated in Panama and a national government recognized by the United Nations, it is not possible to freely exchange electronic currency money with any national currency money. In other words, you cannot perform currency trading with an electronic currency because electronic currencies are not in the FOREX system where national currencies are traded.
The FOREX system will never trade electronic currencies for two main reasons. First, electronic currencies are not real money and will never become real money. Second, electronic currencies are too small to be of any interest to businesses or financial institutions trading in the FOREX system.
The FOREX trading network supports many international financial institutions and governments, allowing them to perform international monetary exchanges worth approximately US $1,500,000,000,000 (US $1.5 Trillion) daily, every single day. All of the electronic currency companies combined together, over an entire year, would still be a small fraction of the volume traded through FOREX during a single day.
To participate in FOREX trading, much smaller participation levels than a bank trade are needed, sometimes as low as US $100,000 or maybe US $25,000. In high volume pooled situations, sometimes an even smaller participation level can be used. These levels are still much higher than a few dozen people depositing pocket change into something, even though many companies report they are in trade, and paying profits, with the first person depositing US $10.
While highly unlikely, it is possible that some FOREX traders will accept an electronic currency deposit for trade, but those traders must still move the electronic currency funds into a real bank account in order to use those funds for currency trading. Electronic currencies are not a security, meaning that no value in traditional financial transactions can be assigned. Funds must be removed from the electronic currency and placed into a bank account for trade and then moved back for disbursement.
The requirement to move funds is a problem for many high yield companies, who often list a payment over short time frames or even daily. It normally requires a few days to wire transfer funds from one bank to another bank or from an electronic currency company to a bank. In most cases, it would not be as simple as this. It would be foolish to directly move funds to a trade account, as the trade account would than have no privacy. So, at least two wire transfers would be needed in both directions, or the privacy of the trade would have no meaning.
If a single wire transfer requires at least two or four days for transit, this means that most electronic currency deposits would require at least four to eight days to be placed into trade and four to eight days back. All in, that means at least ten banking days for transit time (not counting any additional time to actually earn any money).
In some cases, funds might remain in the electronic currency to avoid these wire transfers, if the trade covers these deposits on the trade side through earnings. In that case, it would be easier to avoid performing any wire transfers and instead to reinvest trade profits in the trade bank and leave electronic currency funds where they are to cover payments.
In the case of programs that pay out every week, every three days, or even daily, these time factors are very important. The time frames for payment are too short, meaning that it is not possible for funds housed in an electronic currency company to earn money though any kind of trade because the time to perform any wire transfers is longer than the payment timetable for earnings.
In a trade that promises to pay a daily profit, or even a profit every three days or a week, how can that happen when it requires around three days (or more) before funds can even be entered into trade? Of course, the earnings do not stop there, more profits are due in another three days, which is about the time frame needed for funds to come back from trade. In such a short time frame, of course, the funds did not actually spend any time earning anything.
If the trade pays daily, or every couple of days, clearly it has very little relationship to a real trade. In spite of the difficulty meeting this payment schedule through wire transfers between the disbursement account in an electronic currency and the trade account in a real bank, these trades do not exist in real life. There are some trades that pay monthly, mostly at the US $1M level. The earnings are too small on a daily basis to make weekly payments worthwhile. Most trades at the ten million dollar level pay weekly, but some are monthly depending on how often the trader and the trade bank want to process disbursements. At the daily level, only places at the hundred million dollar mark sometimes participate. Often, US $100M trades pay weekly, but sometimes they will pay daily. There are no trades that pay every couple of days and there are no trades below the US $100M level which pay daily.
Knowing that the trade that is advertised is not physically possible, what conclusions can be drawn about the nature of that trade?
In most cases, hyip junkie programs offer a high earning rate over a short period of time. The plan is to blind people with greed over easy quick earnings so they do not think too hard about how the earnings are not physically possible. If you have a choice between a program that costs US $10 and returns 10% a week or another program that costs US $10 and returns 100% a week, which program will you try if you are willing to see what happens with US $10?
If your pocket change could earn 100% weekly or every couple of days, why bother collecting your pocket change? The wizard responsible for inventing that system clearly does not need to deal with you or spend time answering your questions if his own pocket change will be worth more than yours tomorrow anyway.
Since all trades require at least US $1,000,000 in order to participate, and pay much lower than 100% weekly, it is very sad that greedy people buy into such high levels of promised income with such low levels of participation. Of course, that is the point.
Another common tactic of these programs is to offer a high instant sponsoring bonus. Paying sponsoring fees out of deposits instead of earnings probably means there are no earnings. The purposes of high sponsoring payments are fairly easy to understand.
First, many people think the sponsoring bonuses mean the program is working, when it does not. It only means that some of the money the program collected was paid to you when you caused others to give the program money. Second, these payments appeal to the greedy nature of people, enticing them to sponsor more and more people (as quickly as possible) in order to maximize the instant referral payments.
If a company collects US $1,000 from members, and pays out US $400 in referral income, they still have US $600 on hand with little or no effort, as earlier members at the expense of later members did all of the recruiting. The sponsoring bonuses are even advertised as instantly performed out of member deposits, to heighten the desire to earn these bonuses. People getting excited about getting money, and getting money quickly, which is the point.
Because these payments are made from new member deposits, they say nothing about the trade. For some reason, many people believe that receiving a portion on the new member deposits have any relationship to trade earnings, which they do not. As a result, many people think getting an instant sponsoring payment think this means a program is really working, when it means nothing about the program beyond their desire for high new membership enrollments.
From a different standpoint, if a real trade exists, it makes much more sense to deposit US $1,000 instead of US $600 into that trade, which makes the entire concept of up-front referral fees somewhat questionable from a financial standpoint. Assuming a real trade exists, up-front sponsoring fees would be a small fraction of the sponsoring fees that are available from trade proceeds.
For example, assuming a real trade exists, and pays 100% a week, the sponsoring bonuses would be US $400 today, US $800 in one week, or US $1,600 in two weeks. Why pay somebody US $400 instantly today out of member deposits when they could earn US $1,600 in a few weeks instead?
Of course, a program promising to double funds in a week when half of those funds are paid as sponsoring bonuses, would have to actually earn twice that level. Using the above example, after paying out US $400, the US $600 left which is actually placed into trade would need to grow into US $2,000 next week (not US $1,200). This is not a 100% increase; it is a 333% growth. While some people may foolishly believe 100% (US $1,000 into US $2,000) is possible over the course of a week, turning US $600 into US $2,000 (a 333% earning rate) over the same time frame should raise questions with most people.
Of course, taking this a step further, up-front instant sponsoring bonuses become even more foolish. Each week the US $400 would not double; it would be a little more than tripled. In two weeks, you are not losing US $1,600 in that case; the actual trade earnings mean this would be more like US $4,444 in lost sponsoring bonuses.
This information directly contradicts much of the current understandings that people have about how high yield programs work, which is unfortunate. In many cases, the game which hyip junkies get excited about for a few weeks or maybe a month or two is not even physically possible. While many games do give some people a profit, you should be aware that they are just games. Even though some people do earn a profit, most people will not.
Granted, this is a very small list of obvious scam hints. There are many other aspects, which indicate a program somewhat questionable and should not be taken seriously. Some have been written about in earlier newsletters and others are even more complex then these topics they probably should not be mentioned.
Of course, it is entirely possible that some programs that seem foolish may actually work. In all scams, some people do earn money. Furthermore, it is a big world out there. Although it seems unlikely that something physically impossible can happen, we use to think the world was flat. Of course, for the impossible to happen, most people would call that a miracle.
It should be clear, even if you have not understood all of the proceeding notes, about why many high yield companies do not list an end date. Technically, they do not even have a start date.
Many people become worried when these programs close or something happens in the world that they believe causes these programs to close. For example, when OsGold closed, many companies processing payments through OsGold also closed. This had nothing to do with OsGold, the war on terrorism, or anything else. In most cases, these closure waves happened because the member deposits used for payments were frozen.
The closings of these companies should not come as a surprise. Armed with an improved understanding of the way most high yield companies’ work, it is easy to see this trend in action.
When a large scam closes, many people become worried because they do not understand what happened. Most of the participants in large scams, also participate in many small scams that have not grown large yet. In some cases, money is pulled out of the small scams to compensate for the losses in the larger scam. In other cases, people are just nervous and pull out funds from the side projects until something else that seems very attractive comes along and the cycle starts over again. In both cases, there is a reduced level of participation in the smaller companies coupled with an increased level of withdrawals.
If you have not noticed yet, this is exactly the same process that happens on Wall Street.
Stocks on Wall Street, and other exchanges, actually have no value. If nobody purchases a stock from you, then the value will drop until a buyer is found. If a buyer is never found, your stock will become valued at zero. Under no circumstances, is the issuing company required to purchase that stock from you. Furthermore, there is no specific or inherent value that the stock holds that would cause the drop in value to stop at any point higher than zero.
A painting by Picasso is valuable because people want to have that painting. He did not print money, and his paining was not greatly appreciated at the time. However, today, because of many factors, many people want his painting and the price is very competitive among those seeking to purchase his paintings. Because the painting itself does not have an inherent value, there is little actual different between a Picasso and a Shmoe. Basically, the cost of the Picasso is based more on the competition among interested purchasers than on the payment Picasso received for creating the painting.
People think the paintings have value, and many people want to own them, so the price goes up because there are very few which may be purchased. The price will increase until only one person is willing to pay it. Or, the price will increase until somebody who owns one is willing to sell it.
After a company issues a stock, and invests the mandatory funding levels, the company has no further financial obligations in regards to that stock. In some cases, the company may offer a small percentage of profits as an enticement to purchase those stocks, or it may allow a limited voice as one person among millions in determining limited corporate policies, but these situations are rare. It all boils down to money, and the issuing company has no obligation to honor the stock value at any specific price or to purchase stock at any specific level. Actually, there is no requirement by the company to purchase the stock at all, which is why they have no real connection to the company.
Like a Picasso, the company name is listed on the stock and people want to purchase companies they think are doing well. Granted, the stock has no relationship to the company, but very few people understand that. As a result, for popular or successful companies, many people want to purchase that stock which gives it value as long as people continue to believe the same way.
To hide the fact that stocks have no inherent value, and to fool most people with basic mass psychology, there are dozens of indicators that have nothing to do with stocks but are used to lend stocks credibility. For example, what difference does the percentage of same store sales have in relation to stocks issued by those stores or anything related to the sale and value of stocks? How about trade values, what difference does it make to specific stock values if Country X gives more widgets to Country Y than Country Y gives gizmos to Country X. On a national level, does it really make a difference to stocks that are unrelated to the items being traded? How about new housing starts? How do higher levels of home construction somehow mean that stocks should be worth more?
It should be clear that none of these indicators mean anything about anything in terms of valuing unrelated stocks. However, most people do not understand that these indicators have no value and are quite meaningless. In most cases, people assume that other people will view these indications as favorable and that other people will purchase stocks, meaning that the stock values will increase.
In other words, the indicators have no value in relationship to anything. However, people assume that other people will assign a value to these meaningless percentages and will act as they think others will act, hopefully first. Those other people will view the first people in the same way, so basically everybody assigns a value to stocks because they feel that everybody else will assign a value to stocks.
This is why a lot of the brokerage house company TV commercials discuss the timing of when stocks are purchased. It makes it sound like if you purchase something first, you will earn money. That is probably true, but is basically just to cause a lot of people to purchase a lot of stocks that actually have no value. As long as enough lemmings buy into this fraud, then stocks will have corrections and bear markets, but people will eventually start purchasing the worthless garbage at some point and stocks will continue to remain at an apparent non-zero value.
For example, a biomedical company is working on a drug for something or other. Even though the drug requires years of testing and research, the fact that they list this effort in a prospectus means people will value the stock more because at some point the drug may be discovered. Of course, nothing changed about the company, and the stock has no direct connection in terms of dividend payments, votes in company obligations, or a specific share value at which point the company will purchase the stocks. Basically, even though there is no relationship between the company and the stock, the stock will raise in value because people like what the company is doing.
In the real world, the company at this point is spending money without return and the possibility that no return may ever be obtained. However, people like it when companies perform research so even though the company is in the red, the stock values generally increase.
Later, that company succeeds in preparing a drug, which it submits to the US FDA (assuming we are discussing a Wall Street stock) for approval. If the FDA approves the drug, the company stock values increase, even though the drug is not being sold yet. In spite of the fact that the company itself has earned nothing, and will not for some time yet to come, the stock value of that company will increase. If the FDA disapproves of the drug, and requires changes or more study, the stock value of the company will drop. This happens, even though nothing about the company changes, and the company itself does not lose any money.
Clearly, the value of the stock has very little to do with the value or earnings of the company. The value of the stock has very little to do with any aspect of the company. For example, the Internet stock IPO’s increased in value by unimaginable levels. Clearly, those levels had nothing to do with the company, they were more a result of what people thought other people wanted to purchase. These wild price changes in stock, up and down, were possible because the stock had not relationship to the company and no inherent value.
Much of the problems with the high yield industry relate to the effort to making something sure something that is worthless retains value. There is also a great deal of effort to maximize tax revenue, but that is mostly the war on drugs and now the war on terrorism.
How can anybody think stocks and Wall Street is a good idea? Mainly, this happens because the government (the US in the case of Wall Street) tells you through a state run school system that the stock system is a good idea. Also, they stamp out all competing financial investments, which leaves stocks about the only approved financial vehicle. The free money through stocks also give companies a lot of free money which enables them to compete internationally in spite of the drain that inflation and taxes have on the US economy. Finally, a lot of rich people have assets tied up in stocks, and eliminating that value would cause an economic depression or maybe even a large-scale economic collapse.
Even though the stock system is a foolish concept, it has become an accepted practice that most people take for granted. This is much like social security. The US Social Security system is roughly the exact same system as the Ponzi scheme scams discussed earlier. They collect money from new members, invest nearly nothing, deduct some to pay for the program operators, and then use whatever is left to pay the older members.
Even though that Social Security scam is predicted to go bankrupt at some point before the decade is out, there has been very little effort to stop or fix this system. Unlike the scams listed above, this system does not conflict with Wall Street and threaten the financial well being of that system. Also, the US government forces participation and legally sets lower and lower payment levels to extend the bankruptcy point.
Interestingly, current theories on repairing the US Social Security system, and other government sponsored investment programs, include allowing US citizens to invest in Wall Street.
Getting back to discussing why small high yield companies close, what would happen if more retired people suddenly started pulling out more money from Social Security? Social Security does not allow this to happen, and actually reduces the benefits they pay every couple of years. They can do this because you have to accept this by law. Small scams are not protected from collapse in the same way, and this causes them to default.
It should be easy to understand that every time a large prominent closure happens, many small high yield companies will close when people pull out funds and the new member deposits also concurrently slow down. After a while, the nervousness stops and the program failure rates drop down again. These trends happen at least once or twice a year, and people usually think this is some kind of difficulty for the industry with the US Patriot act or similar problem. The next round of reasons will probably be related to Iraq or a new round of terrorist threats.
This has been a difficult year for most high yield companies because there were several prominent closures of large scale high yield companies and two electronic currency companies. This has caused people to be hesitant to participate in smaller companies, and to pull out funds from the smaller companies, which mean that smaller programs will become larger programs less often and they open and close much faster than normal. Basically, they are collecting less new member deposits than normal, while at the same time; older member withdrawals are higher than usual. This means, at some point, bankruptcy.
It is unfortunate that there are so many programs that are scams. Of course, this will never change as long as scams can continue to earn a great deal of money from participants that are easy to scam. The same is true about Wall Street. As long as there is at least one sucker willing to pay more for something than you did, that foolish system will continue. As with any other game, some people will earn money, but most will not.
While most of the programs open today are scams, there are some working programs that are real. The secret is not to hide in a closet fearing your own shadow; the secret is to become a wiser seeker of the rare nuggets that are out there waiting to be discovered. There have been many honest, legitimate, and working programs in the past, there are some now, and there will be more in the future. Hopefully the notes in this newsletter will help you during your quest to participate in real programs.
Also, as listed earlier, these programs directly compete for money sitting in Wall Street and other traditional investments like bank Certificates of Deposit or government bonds at all levels. Because these investments are somewhat foolish, the parties that benefit from these investments to eliminate the competition have made a clear effort. There are also tax considerations, as traditional investments are taxed and offshore investments are not.
Some programs that have been closed over the years were legitimate programs made to seem like scams so that participants are more likely to participate in more politically acceptable domestic investment avenues in the future. Basically, it is in the interest of the US government for you to pay taxes onshore keeping stock values on Wall Street high instead of earning tax-free money offshore.
Hopefully these thoughts will open your eyes somewhat and break the brain washing most people have on why some actions are encouraged while others are not. Ideally, these thoughts will also help many people avoid games that will cost them money, or to participate in a way to increase the odds that they will be the successful minority.
It should be clear why many other high yield companies do not list an end date. Basically, they do not have one. When the new member deposits drop below the old member payments, all scams close. That date cannot be predicted in advance, but most scams probably do not expect to last more a couple of months.
In other cases, when a company actually is in trade, announcing a closure date would be counterproductive. Most people would like to enroll in something that will go on forever, compounding up to a billion dollars with a single five-dollar investment. Announcing a closure generally makes most people shy away because they are worried about problems collecting funds at the closure, the time left does not seem very long, or maybe they are disappointed the compounding will not be as high as desired over time.
In an open-ended program, which is not physically possible, the idea that US $5 might compound into a billion dollars one day is very attractive. Of course, that is the point. If the company announces that the compounding will stop at a certain point, your US $5 will probably go somewhere else which does not include those limitations. Not that the other company is better or worse, just that with that other company your US $5 may result in a billion dollars some day while in a more professionally managed program it would not.
This entire concept is somewhat foolish anyway. Rare is the hyip junkie program that survives longer than two or three months. Of course, this is longer than some Internet IPO offerings lasted, but that is beside the point.
Several internet forums, which rate high yield programs, mandate a company must exist for longer than one week (seven days) before they can be considered a real program or a real game. I cannot think of anything that is considered acceptable after one week of operation and testing. For example, would you fly in an airplane somebody designed in a week?
The only things that might be trusted after a week of existence are basically things that do not matter and are unimportant. If they were important, would you spend more than seven days making sure it was the best it could be, that it worked properly, and that it was reasonably safe?
Because announcing a closure in advance does not make much sense to most people, many legitimate companies will not discuss future plans because of the potential negative view of the members. They may know the exact day of closure, or an idea of when contracts will expire, but will not discuss this information because of the obvious negative reactions.
Have you ever given any thought to why TV commercials are the way they are? Or why candy is always placed by the cash register? Or why the important people deliver the good news and the junior staffers deliver the bad news during a US White House press conference? Most people have not, which is why all of these practices are the way they are. It would be very easy to allow people to think they can compound funds until the end of the universe. However, that is not the way the real world operates.
