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  • Guaranteed 8.2% return

    My dad is a successful attorney nearing retirement (67 years old). We are on a family vacation and I overheard him talking to his financial guy. Apparently, he is sending the guy $20,000 for a short term “guaranteed” 8.2% gain. I was immediately concerned because I would put all of my money in this guaranteed return if I knew about it (most of this board would, too, but we won’t since it is obviously BS). When I asked him what it was, he threw out “Bank note” and says his last transaction was with Chase bank. He didn’t really know what he was investing in.

    Now, at this point (close to retirement) $20,000 is probably a drop in the bucket, but it made me wonder what the heck this guy is doing with the rest of my dad’s money. I don’t trust him at all. It isn’t like this guy is some obvious schyster. He sends all his kids to the most expensive school in the city, so he must have some sort of decent reputation (or he just successfully preys on financially unsavvy folks). But if anything, I feel like my parents should be rather conservative at this point.

    For the record, I told my dad I was going to post this because he seemed annoyed at my alarm over his guy. I said he will be called senile and be viewed as an old sucker. I hope you all agree with me. But honestly, if I’m off base, I’d love to hear that too. So please chime in either way, because the more feedback I get, perhaps I can be more convincing that his new deal seems sketchy and he needs to be careful.

  • #2
    Scam, Ponzi. Pick your favorite word.

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    • #3
      My dad, about 5 years ago (80 then) was suckered into some “durable medical equipment” scam for $25k, in large part because a wealthy friend was in for $100k. It was a complete scam, and both he and his friend lost their money, all that they put in. He was evasive about it at the time (my sister alerted me), then was embarrassed, and has since promised he would never do anything like it again.

      More recently, my mother (77j tells me that she has been getting calls to invest in a miracle hearing aid. She lives alone, is happy to take anyone’s calls, and was initially interested in investing.

      There are thieves out there preying on the elderly, for sure.

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      • #4
        It’s probably a structured note. 8.2% for a short term sounds high. Hard to know for sure all of the details without looking.

        Typically, they will be tied to an index or combination of indexes through an option strategy. Chase makes money on the spread between the buy of the options and what they sell them for within the note.

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        • #5
          I agree with the above. Sounds like a structured note. A”friend “ tried to sell me these. Depending on how it’s written, you can lose all of your investment. It’s what you get when corporate bonds mate with options. They are issued by investment banks, so you add their solvency risk to the market risk. You know it’s a bad deal because they’re giving you such a high interest rate

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          • #6
            Sure, it could be a scam. It could also be fine though. Certainly not riskless if it’s earning 8%+. That doesn’t mean it’s bad deal though. 8% could both be high or low for the level of risk. No way to have much of an idea based on what you posted.

            Try to find out more if you want, but also try giving your dad a modicum of credit before calling him senile or an old sucker.

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            • #7
              I think the issue is, $20k at his stage of the game is a drop in the bucket. But, if he makes 8.2% back, does he stop or will he go big?

              Necessary link to legendary investor Klarman's "yield pig" article-- https://www.scribd.com/document/35436864/Klarman-Yield-Pig .

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              • #8
                Likely a risky investment at this point in his life.  Certainly it's not guaranteed.

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                • #9
                  Sounds like a scam.
                  Que video: “Bitconnnnnneeeecccccttttt!”

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                  • #10
                    Not necessarily a scam. I have an acquaintance who fixes up old houses in my city and sells them typically to lower income folks who can’t get a traditional bank loan as they are credit risks. He then sells the note to investors. The investor at that point is essentially acting as the bank. The notes are backed by the collateral of the house. Several of my friends have bought them and rates are 8-10% on a typical loan of 90k.

                    Occasionally the notes default but then the bearer forecloses on the house and the developer will sell it for him again. I have heard criticism of predatory rates of interest but if these folks could get lower rate loans they would. Their only other option is to rent forever.

                    I don’t own any of these investments but they do exist.

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                    • #11




                      Sounds like a scam.
                      Que video: “Bitconnnnnneeeecccccttttt!”
                      Click to expand...


                      What am I gonna do?  My wife says that's a scam!

                      OP - I'd take the opportunity to ask him what else he's currently invested in with that guy.  If he can't answer that question, it might be a good opener to talk about how it's always a good idea to understand what your money is doing.
                      I should have been a pair of ragged claws. Scuttling across the floors of silent seas.

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                      • #12
                        8.2% guaranteed isn't crazy, but it is suspicious.  If the money guy is so successful, why does he need your dad's 20k?  Is he just being nice to a long-term client for a cool $1600?  I agree with your assessment that it makes it concerning where everything else is located, i.e. is this a diversion?

                        Reading through the Bernie Madoff story--without the benefit of hindsight--he was well integrated, had a great reputation, and didn't seem like a shyster either....

                        Good luck, keep us posted.

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                        • #13
                          Just to clarify-- is this 8.2% annualized return? Or 8.2% after a few months?

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                          • #14
                            Time for a talk. Does he understand what he is investing in?  If so back off. Believe it or not most people are still competent at 67.  Is the advisor a fiduciary?

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                            • #15


                              Believe it or not most people are still competent at 67.
                              Click to expand...


                              WHAT?!

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