Traps for Investors

By KH Tang
http://blessedfool.blogspot.com/
"The World is a dangerous place to live, not
because of the people who are evil, but
because of the people who don't do
anything about it." -Albert Einstien

There are so many traps in the game of

investment . As most public are working
hard striving for financial freedom,
unfortunately, many will step on the traps
because of the lack in investment
education... and then they will be squeezed
until dry!

So, when one discovers a trap, it is good to

share it and alert others...
Here is a trap, let give it a name - "Kill
with a borrowed knife ( 借刀杀人)* ",
which I came across from an out-of-
print book.... And it happened in the
past in Wall Street... before 1929...

When a greedy, rich and powerful

person, say Mr. "BADGUY", discovers
one of the stocks in his portfolio will
become "Rubbish" in the near future
due to some internal information, such
as a drug company will fail some test
in the new drug release or some
technology can not be taken off,
etc... Here are the steps he would
do...
1) Packaging and Marketing... He
would go to Investment firm/Bank to
look for a fund manager, Mr.
"Borrowed_Knife", to start up a
"Investment Fund". Depends on
timing, there will be many tricks, such
as "Certain % Capital Protection",
"Best Track Record Fund Management
Team", etc... As long as the Public, Mr.
"GOODGUY", feel safe and like it, they
would package that way...
2) Distribution at Higher Price along 3) Fire the Manager with Big
with good forecasting Rewards... As long as the fund
Result... Normally, the fund would manager used up the cash in the fund
have a fixed term such as 3-5 years to clean up the rubbish... He would
contract. (Worse of All, some need to later be "Fired" for his incompetence
pay them management fee for using in poor performance on the surface...
the money..) While a large sum of "kickback" would
Once the fund is raised from the be given for the GOOD JOB (in the
Public... Mr. BADGUY would, under his view of Mr. BADGUY), which would
influence, had the company to publish much more than the person continue
excellent business forecast, such as to be a fund manager for the rest of
pouring out the last bit of reserved his life...
from the "Cooky Jars", turning on the
Rumors Factory 24 hrs for good news,
etc.. what ever method it might be,
just make sure it looks good... While
Mr. Borrowed_Knife (Fund Manager)
would start to buy the "Rubbish" from
Mr. BADGUY, at higher price, with the
justification, to the public, of such
good reports and news...
4) The Public is still Confused or
Happy... For some fund, the public is
totally broke... and confused... For
some other scheme, such as "Capital
Protection" to certain %... The Public
would even be very happy think that
they are lucky to have such scheme
protecting them... While no knowing
that the Investment firm/Bank would
just simply put it on paper as P&L...
In general, many Investment firm/Bank
are public listed company and
making much more money from
loaning program... Extra profit would
be distributed to Shareholders any
way, and... Why not help some people
that is "Politically Correct" in the
future tense...
Well, of course... Am I right to say
that...
This is just a story in the past, and
should not happen again. Because
there is government and Law...
亡羊补牢,未为迟也 。
要亡羊补牢，更要亡羊"捕狼"。
"It is not too late to fix the fence of
the farm, after one discovers that
sheep been eaten by the wolf."
-A Chinese Proverb
Yes, it must fix the fence, and it is
even more critical to Catch that Wolf!
to be continue...
* Loot a burning house 趁火打劫.
* Openly repair the gallery roads, but
sneak through the passage of
ChenChang 暗渡陈仓.
* Defeat the enemy by capturing their
chief 擒賊擒王.
* Take the opportunity to pilfer a goat
順手牽羊.
.......
And, how to stay in profit. :-)
*Ref:
http://en.wikipedia.org/wiki/Thirty-Six_Strategies
 "La guerre! C’est une chose trop grave pour la confier à des militaires."
"War is too important to be left to the generals."
- Georges Clemenceau (1841-1929): A French journalist, physician and statesman. He served as
Prime Minister from 1906 to 1909 and from 1917 to 1920.

With the same token:-...

Personal Finance matter is Too Important to be left to the Financial Advisors!

Thus, it is so serious that individual Must spend part of the time to learn and
understand how economy works!

More Articles on Financial Freedom, Stock Market Manipulation, Trading Tools etc.

By KH Tang 7 Mar 09
http://blessedfool.blogspot.com/