Editor's Note: This essay was originally submitted to the Robert Benchley Society as an entry into its 2013 writing contest. Since the essay did not reach the finals of the contest, it is published here to endure further ridicule. Looking back, the essay lacked several key qualities, not the least of which was the writer's lack of familiarity with Robert Benchley's (grandfather of Jaws author Peter Benchley) style. The essay was further encumbered by a 500 word limit and the author's aversion to review and editing, but we hope you enjoy it nonetheless.
All I hear about these days from financial pundits are
warnings of Financial Armageddon. Cries
and bellows of “Credit Tsunami!” and “Global Economic Collapse!” litter the
business landscape. It’s enough to make a person think about alchemicing
gold.
I don’t know who to believe, so I’ve decided to get back to
the basics. In doing so I’ve discovered an oft overlooked and as of late much
maligned investment strategy called the Ponzi scheme.
I don’t see what all the fuss is about Ponzi schemes. If we
take the word “scheme” away (which I will henceforth do here) the term “Ponzi” becomes
quite benign. Its biggest problem is
that its namesake, Charles Ponzi, evidently swindled a bunch of people in a
scam involving stamps—probably S and H Green Stamps. People will stop at
nothing to get a free toaster….
Ponzis have developed troublesome reputations because they
provide returns to initial investors from contributions tendered by successive
investors. Everyone is up and arms about this and acts like it was contrived
from the depths of Sheol. But there is
nothing new under the sun. For decades
this investment strategy has worked handsomely for the Social Security
Administration.
A successful Ponzi, like any investment worth its salt, is a
function of proper timing. Neophyte
Ponzi investors often miss this critical fact. They hear stories of third,
fourth, seventh and so on level investors who came to the Ponzi after the well
had gone dry. So they sit around
wringing their hands when they could’ve already been in-and-out, down the road
perusing the next Ponzi prospectus.
But unfortunately not everyone is as savvy and enlightened
as me. The SEC (short for Southeastern Conference) has issued a white paper on
Ponzis and urges investors to consider
various “red flags.”
The SEC creates unwarranted panic by asking
questions such as these:
1. Does the investment
guarantee certain returns?
Actually, the lack of an offer of a guarantee does not
ensure you are not being bilked or swindled. If a prospectus would actually
guarantee me a loss, I might not
doubt the veracity of its money managers’ claims, perhaps forwarding to them
even my very last dime. Honesty from a money manager is my top priority.
2. Do you understand
the investment?
Implicit in this statement from the Southeastern Conference
is that such investments, if not understood, should be avoided. But if we followed this
advice religiously, who in the world would own life insurance? Speaking of
which, it is only a deluded Ponzi investor that would, as the last man in the
world standing, expect to collect on that double indemnity.
3. Is the seller
registered?
I assume the SEC is talking about being a registered
securities dealer. But even Bernie Madoff, the
mother of all Ponzis, was “registered” when he “Made-Off” with billions.
Don’t listen to the naysayers like the Southeastern
Conference. Follow me. Together we’ll be
Positively Ponzi.
Better come quickly, though. Before you know it, I’ll be long
gone.
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