CNP 0.00% 4.0¢ cnpr group

is this guy talking about cnp

  1. 544 Posts.
    Waiting for Ponzi

    Hardly anybody knows who Ponzi was; some people specifically Westpoint, Fincorp and ACR investors have a better idea of the scheme he invented. Some claim the whole property market is one big Ponzi scheme. Either way there is a big corporate collapse on the horizon, and, once again, I fear for investors.

    Ponzi was an American bloke – one of that country’s most notorious fraudsters who got off the boat from Italy back in 1903. His scheme (now known as the Ponzi scheme) was so lucrative that he has earned a position in financial folklore. Essentially, Ponzi sold investments based on the promise that he could provide returns almost too good to be true. 50 per cent in 45 days even. People would invest and be paid out; the word would spread and soon many people would fall over themselves to invest give Ponzi their life savings. Ponzi would use the money from new investors to pay the return of other investors that needed to be paid out.

    Ponzi made millions and millions of dollars between 1903 and 1920 on investments that had no underlying value. The scheme was bound to collapse. Sound familiar?

    Australia had and still has its own Ponzi schemes. Just think about ACR, Westpoint and Fincorp as fair examples. Just like Ponzi, these property investment schemes borrowed money from investors at a high rate of interest 9.5 per cent per annum thereabouts. They then use that money to fund speculative property developments. It seems that when the projects get delayed or don't sell as well as hoped, these companies simply go back to investors for more funds to pay the other investors promising that they can "sleep well at night". Fincorp and ACR both had orders placed on them by ASIC to cease sourcing more funds. Unfortunately, by this stage the horse had well and truly bolted.

    There are others that say that the whole US sub prime collapse was one big Ponzi scheme. The theory goes that frenzied asset price speculation fuelled by cheap and easy debt, sent property prices soaring way above their real value. Drawing on ever-increasing equity and blinded by this fools gold of fabulous returns and low interest rates, Americans used one over priced asset to fund another. It seems so obvious now.

    There are still Ponzi schemes in the Australian market. I predict we will see another Westpoint/ACR/Fincorp in the next 60 days. Thousands of investors are about to be burnt as we see an impending major corporate collapse along the same lines of the aforementioned three. It will break my heart to say I told you so given that I can’t publicly name them.

    For information on property prices go to www.homepriceguide.com.au

    Michael McNamara is the General Manager of Australian Property Monitors, publisher of www.homepriceguide.com.au

    Michael McNamara
 
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