Monday, January 18, 2010

How to Start Your Own Investment Fund (Reprint)

This is a reprint from July 31, 2008. Bernie Madoff comes to mind. We have witnessed the plundering of the real estate market with no doc loans. As things get worse, the offshore uninsured investment vehicles could be the next big fiasco. It is not illegal to pay yourself 100k to manage a mutual fund while it goes broke.

Cayman Islands are probably where to start. It’s about $2,300 to get set up with the proper paperwork. About 8,000 of the world’s hedge funds and about 5,000 mutual funds work off of that island. Here is a how to link for the really serious at heart. This is kind of boggles the mind. The islands cover an area about 1 ½ times the size of Washington DC with a population of 50,000 people and has 500 billion in the bank. The thing I really like about this is that it doesn't involve duct tape or a handgun, and there is no jail time, it's all above board.

The total cost is under $3,000 in fees and that includes the cost of a post office box, such a deal! Advertising for clients will be your biggest expense. A printing of 1,000 to 2,000 prospectuses might cost around $10,000. Figure about 5 bucks apiece (copy someone else's that looks slick). The lead pipe cinch rule gives you an automatic 3% return on the mail out. So that would be about 30 to 60 new clients. Then as fund manager, you would mail out monthly statement telling everyone how much money they made. [Hint: pick investments for the news letter that went up for the month, a subscription to the WSJ wouldn’t be a bad idea.] The more earnings the client sees in their monthly statement, the eagerer they are to invest more ( tell your friends, we can all get rich). All that is needed is some decent software and a high end color printer, you can retire tomorrow. Balance the redemptions against new subscriptions. Gold, Silver, oil, and market shorting seem to be good areas of concentration lately. This isn’t a Ponzi scheme, because you can close up the post office box at any time and move away. Here is a more serious link about the mess if you are interested.

You can pretty well guess how this will all end up. The hedge funds will fade away worthless and the mutual funds could drop to 10% of their value like they did in 1930’s. Are you feeling lucky? Give it a try. It feels better when the money you lose belongs to someone else. Believe it or not investors are waiting in line to send you their cash so they can avoid paying taxes. Just maybe there is some poetic justice here.


Sackerson said...

I liked this the last time you reprinted it - still not ready to do it, but I may get around to it.

AIM said...

I like this idea. I'd like to be a fund manager and make big bucks no matter what my performace stats are. Let's see... I think I'll call my fund "AIM's Personal Cayman Island Retirement Fund".

By the way...

I think this form of civil disobedience mentioned in the links below is a powerful thing to do. It will have huge impact if many buy red stampers and start doing this. The continuation of a growing, popular, peaceful revolt. Let’s advertise our frustration, disgust and demand for positive change and reform to the government and the whole US population. US dollars… what a great marketing vehicle to get the message out. It will assist in getting other Americans educated and aware of what is going on (“Hey Joe, look at this… what is this ‘End the Fed’ all about?”).

Read the suggestion in the two blogs below. Spread it around.

AIM said...

Hey Jim,

Check this out.

This country must make a dramatic turnaround if we are going to emerge strong in the future. And we must really excel to overcome our demographic barrier (we are an aging population). We need radical change don’t we? Well, to have radical change we need to enter into radical discipline: thinking and doing differently beyond what present reality suggests (and our present reality in leadership and government is all about immorality, irresponsibility, incompetence, corruption, unaccountability, special interests, greed, power, re-election, etc. etc. ad infinitum).

We need to rid ourselves of the main virus… The Federal Reserve and central banking system (their interference with interest rates and prices; fractionalized reserve lending; printing fiat dollars and creating credit; and manipulation of our money supply is the source of most all of our economic crisises and woes). END THE FED!

And we need to oust a Congress of effete, corrupt, bought and paid for hacks and career politicians who are more concerned with campaign contributions and re-election than what is good for the American people.

And we need to blow this whole lobbying system out of the water and stop the strong hidden influences of special interests on our government representatives (banking, big pharma, education, unions, to name a few).

We need real effective change (not Obama change: politics as usual). Our nation is like a ship at sea, a sitting duck, and the enemy has already launched its devastating torpedos and they are heading right towards us. No time for complacency, no time for “standard policies” or status quo… radical change NOW or we will be sleeping with the fishes.

Obama is giving us "change we can't believe" and Bernanke is giving us Hooverism.

Jim in San Marcos said...

Hi Sack

Thanks for dropping by. What turned me on to this scam was some Gent in Europe was running a fund like this and spending it as fast as it came in. He died in an auto accident if I remember correctly and the whole thing fell apart.

Take care.

Jim in San Marcos said...


Thank you for the links.

I don't think the solution is quite so simple.

There are 4 or 5 different groups going in different directions. You have politicians trying to get re elected, you have a government trying to pay the bills (any way they can), you have the rich that want to get richer, the poor that want to get rich and a lot of people who are enjoying a free ride. It all revolves about money.

We tend to look for solutions, and I don't think there are any. This house of cards is destined to collapse and will be rebuilt again in the future.

The only drawback is that retirement isn't going to be quite what we had in mind. Ernie Madoff is just the beginning of the end.

Anonymous said...

Somehow I don't think ending the FED will lower my current 60% tax rate.

Rob in NS said...


Pretty scary what is underpinning the financial system.