Saturday, December 1, 2012

100% Risk for 12% Return


I have been invited by a friend to attend a seminar on investment in German Heritage Building offering mouth watering 12% return in 12 months guaranteed by the developer.

One thing good about the advance in technology is that one can simply google search and get all the information about almost anything under the sun. Of course, some are hidden under the shade.

The developer, Dolphin Capital GmbH with its partners has more than 20 years experience, completing more then 12,000 units successfully, but employed only 40 employees and tie up with over 500 sales agencies. They have recently set up Dolphin Capital Asia to launch German property investments in Asia.

It's a short term investment tenure of 12 months with Principal and Profits Assured in a "Buy-Back" clause by the developer. It's just providing funding for their acquired listed buildings for redevelopment, the property is not owned by investors but by Dolphin. It's more like Ah Long San legally lending money to them.

Why don't they borrow from the bank at a much cheaper interest rate?

Why they don't issue bonds?

What's the risk?

Is this another Ponzi scheme?

The return is high, so is the risk.

81 comments:

KAW said...

Hey FAT, you are early today...
As the saying goes, "when it is too good to be true, it is!"
Two other schemes currently battling legal proceedings are the land banking by Profitable Plots and gold 2% buy-back scheme by Genneva. These two surface literally after the mother of all financial meltdown in 2008.

KAW said...

There are three groups of people: The Have, The No Have and everyone else in between The Have-Nots.
The first two groups generally have no problem for obvious reasons we all knew.
Its also a no brainer that the Have-Nots is the largest pool and hence the target.
In the past, it was marketed as get rich quick scheme that got them into trouble as they were too eager to drop the 'Nots'. Time and again they end up dropping 'ts' falling closer to the No Have instead.

KAW said...

After the painful lesson, the Have-Nots decided to get themselves educated. They get wiser or so they think...there are no free lunches and 'get rich quick' favor the sellers.
The opportunists also get one step ahead, this time marketing what the Have-Nots have learned...slow and steady passive income with 'guarantee'. Guess which group jump in again? Why?
John Templeton once said: "The four most dangerous words in investing are: 'this time it's different.'"

KAW said...

Of course this time is different, else you wouldn't bite!

KAW said...

The moral of the story is: Think, say and do the opposite of what the masses have done or are doing because they never get it.
Warning: It is easier said than done because you are swimming against the current of human nature.

coconut said...

you went to this kind of talks?? oh i forgotten, you retired!

KAW, got story mah? what story? haha here is my,

coconut said...

my childhood friend had just went back to shanghai, his children are unable to cope with their study here, so they decided to go back til they finished their studies.

we always hang out together, billiard saloons were our second home during our teens. we literally spend the whole day playing and betting.

so this time round at 50, we decided to "chiat" or "pot black" to bring back our memory.

we set out saloon after saloon, they were all packed, no table available, we becomes frastrated, along the way we also met many people we knew, they kindly show us the direction.

at last! one new set up, the bouncer standing infront of the entrence told us there are tables available, not only that, they are people betting too, lots of sucker as it is new!

i'm so excited, turn my head around and, oh my goodness! my buddy who is quite fat, was rearing a white short and white shirts with shinning buttons.

"@$#%@#$!!! you don't know school uniform cannot enter mah!"

i woke up in an instant! and my cat was starling at my face!

Fat88Trader said...

Thank you so much for all the kind warnings, it's hard to refuse a friend's offer, nothing to lose, so just go there look see look see and feel the atmoshpere. As I have said in my heading, the risk is 100% and I also don't have the muscle of Ah Long San if the investment goes sour. I can trust my friend but certainly not the company marketing it.

So, Coconut, next time you go play billard and if there is betting, call me along, I will place some bet on you, hope to have some fun and make some kopi money as well.

coconut said...

in my dream, no problem, i make sure you are there too haha.

no kidding, in those days sometime when i was playing with another opponent and say our bet is $100 or %200 per game, the side betting can be 10 or 20 times more! its real stressful especially when it all came down the the last ball.

but these kind of betting is rare, we usually bet in points, 50c or $1 a point, no side betting.

however, this game required flexibility and good eye site, like many sport, you go down hill when you reach 24/25.

now i'm 50! bet on me at your own risk, the odds of winning are far worst than the above with no chance of getting back your capital!



coconut said...

like many good player in this field, i eventually becomes a partner in setting up a billiard saloon on our own, to collect "rental" from the players much like a stock broker who collect comms from the traders.

coconut said...

i was only a small share holder back then and i'm suppose to manage the operation. but i wasn't thinking of making money.

just the thought of owning a saloon and can play for free and if i want to, sleep on the billiard table, its enough for me to say yes to everything.

Fat88Trader said...

Such a sleepy market, better go play billard.

coconut said...

not really slow in the morning, i got another mistake inputting order today, sell becomes buy, it cost me a "2 tic" opportunity loss, thats $300 not inclusive of comms.

really painful! really uneccessary, just 1 order.

Fat88Trader said...

Sorry to hear that, hope it doesn't happen often.

coconut said...

actually it does, just like the mistake i made typing errors here, not neccessary under a fast moving market.

still there is a lesson to be learn here. its a opportunity lost, meaning i had a short on this one and i suppose to place another short at higher level, based on signal but instead i cover my short partially, usually i will try and get back my short but this time round, the price just slip, 3 tic and bounce a little.

the problem is it screw up the other signals as well, especially the coresponding counter.

its a true mistake but look in turns of not following the signal or the rule book, how much it is going to cost a trader, day in and day out for not following the signals.

if trade the way i trade, you will understand opportunity lost is the ultimate killer of all the killers among good traders.

coconut said...

so for those who don't quite understand, if your trades brings you $500 losses and $200 win so a net loss of $300 for today.

don't be dispare just yet, look closely what are the trades you suppose to make and you didn't for whatever reasons, you might be surprise to know that your actual results should be a plus should you take all your trades, or suppose trades into considerations.

coconut said...

hey, i'm not talking about paper trades, i never paper trades before or doing any back testing, so don't ask me haha.

i refer to actual trades that is suppose to be executed with price (and not assumptions) but somehow you ignore it or afraid or just can't pull the trigger or whatever your reasons are.

coconut said...

in my case, if i missed it will most likely be afraid usually cos of market direction, be it cutting profit too soon or stop averaging too soon (this one i can blame it on fat haha)

coconut said...

since this post is about returns returns returns and fat ask so many times "whats your returns" so i masell talk about it, hope i'm not too upset and anyhow write.

ofcos when investing we always ask whats our returns? thats quite natural. but can it be also be at trading? maybe so but i have other ideas which make more sense to me.

coconut said...

no choice, i have to use my trading example, i say i lost 18k in oct, what i really mean? you'll be surprise!

what i mean is measure from the top of equity to the bottom and the figure is 18k, and it falls in the month of oct. thats what i mean, or to be exact the equity drawdown. not the whole month P/L is 18k!

if measure the month of oct, then it is still negative but i forgot whats the number, its not important to me, the drawdown is.

coconut said...

as far as i'm concerned, what really matter is my equity up and down movement and it always does moving up and down. and it form a mental chart movement that i'm very aware of, very much like a stock chart or any charts.

in this way i'm all aware of my performance day in and day out and the degree its flautuate. it should reassmble a upward trend like a bull market.

so i suggest instead of caluculating month by month numbers, traders should draw his own equity charting, its very useful i guarantee especially in my case where the maxinium drawdown is always my number one concerned.

Fat88Trader said...

Very Chim!

So your overall portfolio of stock lost $18k but your trading P/L might not be that figure. Am I right?


coconut said...

there are always 2 numbers in your account. one is actual accounts balance, one is equity balance which includes all running P/L.

equity balance is what i mean, not your cash balance or any other portfolio amount.

coconut said...

by trading P/L do you mean realised P/L for closed positions? if so, then they will from part of the cash balance and your equity amount will also be adjusted accordingly.

i usually don't look at cash balance and individual trade's P/L, i look at real time equity balance which inclusive of all unrealised P/L.

coconut said...

the equity balance will change according to market price movement, cash balance does not.

coconut said...

i'm a position trader, i need to know where i am (my equity) every time when the market moves.

Fat88Trader said...

oh ok, so those are your outstanding position waiting to take profit.

coconut said...

ya, outstanding positions is really what matter most, too high no good, too low also no good.

too high can be due to excessive averaging, too low not much profit to take later on.

overall equity movement largely depends on (outstanding but i can't call them outstanding) position size. the larger the position, the more it flatuate.

that being said, my last year losses of 600k is also measure from the top to the bottom, the drawdown amount, happen within month of sept/oct 2011.

if i take the whole of 2011, then the overall losses should be somewhere around 200k or lesser. but it does not matter to me, what important is within 2 months i lost 600k.

Fat88Trader said...

Ok, that's because the value of your portfolio lost $400k and trading lost of $200k, bringing forward to year 2012, probably recovered the $400k when the prices move back up again.

coconut said...

how i wish i still hold on to that portfolio fat. i lost (cut) them all.

the main reason is that my drawdown had reach its maximum and i was worry i will lost into earlier gains let alone 2011 profit.

i started to cut when my losses is around say 400K, by the time i finished, my losses ballon up to 600k, no kidding!

coconut said...

may be you see your portfolio as a long term investment and it really does not matter it go up or down.

i'm no investor, whether its portfolio lost or any running or unrealised lost is a lost to me, its real losses.

in fact i'm current having a net short position (negative portfolio?) on my stocks.

coconut said...

i'm not giving excuses for my lost, its a damb mistake, even thought i'm following my system but i was trading too large.

i will not increase my position size this time round until i have 2 years of consistant result, i will not.

Fat88Trader said...

You had some good years before 2011 making you over confident, that's why the big losses. If you are not trading derivatives, than there is not much leverage, probably you maximise asset allocation fully into stock and cutting too far away.

Yes, I see my portfolio as long term investment and allocate a smaller amount to futures trading. I hate paying those high comm trading stocks in and out, utimately all my efforts will go into other peoples' pocket.

I have been in this line long enough to know it's very important to look at the cost of trading, it's a business.

I have a good friend who use to scalp the Tw together with me about 8 years ago, once he show me his monthly statement making $40k but I got a shock when I saw more than $25k going in comm, his nett profit is less than $15k. He was happy but I told him he need to be very very careful. I showed him my statement making about $40k plus but my comm was around $5k, I made nearly $40k nett, the difference in profit is the comm.

I warned him many times, be aware of the cost but he didn't heed my advice. When market got tougher, he got into trouble. Even if he break even in any year, he lose about $200k to $300k in comm, plus other cost and family expenses.

coconut said...

hey very much appreciated your sharing. and i do acknowlage my limitations and lack of exposure.

that is why i'm trading even smaller, watching every steps as i go, but i really don't have any other choice either.

will look into ways to cut cost definately.

Fat88Trader said...

As long as you are still able to make money from the way you trade, just continue doing so. That's your winning strategy that is still working at the moment.

Do I have any choice? No too, and I have been doing it for 25 years, unfortunately change is inevitable. I am a Kiasu trader. I have to learn again, from you or from anyone else, only thing is I can afford to do it at my own pace.

Singapore Man Of Leisure said...

Fat,

I am curious. Your friend who scalp the TW contract don't have the same commission terms as you?

Or was the big discrepancy in trading costs due to different scalping technique?

coconut said...

ya, nov is the best month so far (not in terms of profit but in equity up trend cos i still carry some losses from the previous month) and my confident running high, your warning comes as timely and handy.

i also trade for quite a while, turn here turn there turn everywhere and i couldn't find anyways that one can make big bucks beside those we had covered.

i don't think my trading is anything fantastic profit wise, just bread and butter that keep me going everyday.

but the big bucks will only comes when there is extraordinary events which is far and few, only then can we see who is good and who's not.


coconut said...

why SMOL? you want to scalp? haha

coconut said...

its always fun to have you around SMOL haha.

Fat88Trader said...

My friend scalp differently from me, he traded much bigger size earning respect from many of the floor traders. My hit rate was 80% accuracy while his was probably 60%, the risk he took was higher, very gutsy, very discipline too by cutting losses fast, in turn generating huge volume. With his size, sometimes he places order to his broking house for them to fill the order so that the other floor traders don't know whether he enter or exit his positions, thus incurring additional order filling fees.

He loves trading CME currency futures as well, orders were placed through the house for 20 lots to 30 lots, that's big position. I suspect he suffered losses from currency trading plus comm and spread, that really kill him.

It's sad, he is one disciplined trader, a great scalper that make it big for more than 15 years despite his low educational level.

Was he a great trader or was he a great gambler?

coconut said...

its not enough information to conclude.

but i think i do believe, good trader usually trade big. he has the character.

coconut said...

after all fat, i think you are better and more discipline.

dispite my instigation, you did not batch, and you have the discipline not to trade, seriously.

coconut said...

you might not be the super doper trader but i very sure you are not in the gambling (sucker) class.

so where are you, lost? haha

coconut said...

don't look at me!

i'm part trader part sucker!

KAW said...

Wah, one day no see...so much to catch up...
Yes coconut, indeed there were some sad stories behind those 'scams' especially the yellow metal. I don't deny the fact that the feeling of holding onto kilo bar is nice...
Anyhow, thankfully I wasn't involved but I still feel sorry for those who kena caught despite friendly advice to be very skeptical...

KAW said...

I think I did a poll in AFACT forum before with regard to the statement of "good traders are good gamblers" or "good gamblers are good traders"...result was very close with just a couple of votes more for the latter.

coconut said...

haha so majority are the same as me, confusion as to "am i a gambler or am i a trader?"

i think the smarter one are whose didn't vote, you ah!

Fat88Trader said...

Yes, my friend have the character of a good trader, full of guts and trade big but to those who are still trading now, he is reckless because he is completely wiped out. Pitiful.

coconut said...

could he bring himself up and try again? i think thats more important.

Singapore Man Of Leisure said...

1) Fat,

Thanks! It's clear now. I was wondering if both are floor traders, how can have different expenses?

Hit rates, fills and spreads. Ah so!


2) coconut,

I am a turtle. Speed is not my thing. Scalping is beyond my competence. I'll stick with position trading :)

Teacher say if don't know must raise hand and ask mah!

Fat88Trader said...

He is in debt to some financial institutions and I have to write off my loan to him too.

No way he can make a comeback unless you are willing to sponsor or employ him to trade for you, and he is not young anymore.

coconut said...

thats very generous of you.

me and my wife had been thinking ways of how to safe guard some money for our children.

we realise that what i'm doing can be very risky and i'm controlling all our money now, yes all of it (ofcos what since i'm managing so well haha knn). and with the kind of horror story you tell, we better get going fast!

coconut said...

however, that does not mean i'm that reckless as your friend, i don't think so. otherwise, i would have wipe out long ago also.

right now i have a cut loss (drawdown) limit of just 10% of my margin account (use to be 10% of portfolio value). if it touches, i'm out totally.

Fat88Trader said...

My friend is very discipline trader who cut his losses fast or else he wouldn't last that long as a trader. But unfortunately his cost is high to maintain a comfortable lifestyle for his family plus high trading cost exert tremendous pressure on him to perform.

His refusal to change and adapt to the new trading environment lead him to take higher risk trades and start taking easy credit from the banks.

It's important for all traders to take note that savings is important when they make money. Keep some aside for rainy days. I forced myself to contribute CPF, as well as those of my wife and insure ourselves just in case.

Fat88Trader said...

Our gift as parents to our children is giving them the best education they can attain, teaching them to fish. Teach them values. That's our duty.

Of course we always think of giving some money to our children when we leave this world, giving them a lift in life, no matter what, they are still our blood.

coconut said...

i can't agree more, the first thing a trader can cut cost (i call losses) is his living expenses.

that is the only portion that a trader can have complete control in his trading!

for that i deem your friend does not really good in cutting losses, he simply "move" his losses from one place to another.

when a trader makes money, his equity also increases, it should form part of that equity and never use for any other things. he should use it to adjust his trading and gives more protection or whatever reason and not use in other things not relates to trading.

coconut said...

trading, as far as i'm concerned is not a business, its more than a business, its a way of (my) life.

you nay be very fast in cutting losses in trades, can you also cut losses (costs) in your way of living, fast?

Fat88Trader said...

Yes, you need to do that as well.

When my friend approach me for help, the first thing I told him is to sell away his car, put up his dog for adoption and rent out the spare room for some income to supplement the monthly bills.

Action need to be taken as soon as possible, don't delay and keep hoping the situation will turn around and be frank with the family. Can't afford the luxury anymore.

As usual, it's not easy to let go and accept the change, face matter too. In the end the situation went from bad to worst.

coconut said...

funny how peoples mind can be so confusing, cut cold hard losses can, but cut house, cars, dogs, cats, cannot (people not included)!

aren't they all quite the same?

you can fool yourself and others but you can't fool the market. he will dick you out right from the cord haha.

coconut said...

well actually its not funny, i had a hard time adjusting also and i'm a very quick action kind of guy.

i can't immagin others lagging behind me, how are they going to deal with it.

coconut said...

and the big words - flexibility, does not only applies to trading but in life as well.

Fat88Trader said...

Yes, confused is the word, that's my friend state of mind during that time. He couldn't accept the hard fact.

Change, Adapt and Adjust.

It's never easy, that's life!

coconut said...

lets deviate the topic a little, lets "dance with the market".

how can we dance with the market and not fight with the market, anyone??

coconut said...

http://www.bigfatpurse.com/secrets-of-singapore-trading-gurus-exclusive-video-interviews-patrick-lee/

coconut said...

http://www.bigfatpurse.com/secrets-of-singapore-trading-gurus-exclusive-video-interviews-tom-yuen/

coconut said...

i think i can stop talking already, he say almost everything i want to say haha, like this guy.

Fat88Trader said...

Your contribution is from another angle though I try to figure out what I can learn from you, hahaha.

coconut said...

fat i listen carefully what you had said, frankly all the ingredents are there already.

in fact i learned (from you) that i had to tideten further my drawdown or cut lost point. i may get hit sooner but what the hack, i can always get back or put out my position again, its not that hard as i thought.

if i really want to increase my profit, i can control from increase the size a little rather than expand the drawdown limit.

coconut said...

in my hamble hamble opinion, there is no way you can trade electronically without carrying any losses, no way!

i think it is something you have to be mentally prepare. if you worry and cut losses too soon, then a lot of good trades will end up as bad trades and you would not know your actual potential.

ofcos we need home run too once in a while, you know they make a big different in overall P/L.

Fat88Trader said...

Yes, home run is important but that can only come with a longer term view or unexpected events.

coconut said...

trading to you are chicken feet, you knows all the technic there is. its only your perception that need to tune a little bit.

25 years of continue winning and rarely get beat up by the market, no wonder haha. ya its tough on you.

coconut said...

i think you need someone to throw you in the water and i guarantee you not only can swim to survive (again) but can hunt for prey in no time haha.

coconut said...

but mind you its open sea and not your usual crocadle pond where you have your territory (that one dry up already).

in an open sea, you can't claim territory, you got to eat (grow) faster than someone eating you before they eaten you all up.

Fat88Trader said...

Yes you are dead right!

Here is a song that I don't think you have heard it before, from one of the market wizard.

http://www.tradergav.com/2008/04/15/the-whipsaw-song-by-ed-seykota/

coconut said...

thats ed seykota, ofcos i know. he is a trend follower and i got influence by him a lot.

i'm a contrarian, and he "show" me that if i can follow him to follow trend, even just a little (ofcos i hope more), i can make money (while still keep my contrarain way of trading).

coconut said...

i can even tell from the signals generated from my system, a "contrarain" signal or a "trend following" signal.

60-70% (roughly) are contrarain and the rest are "trend following signals.

coconut said...

you may ask, why not 50-50?

if you execute an order, its should generate a profit and a cut loss signal, a "contrarain" and a "trend follow" signal.

cos i have 2 or more systems overlapping each other.

daniel said...

BTW, the property is not owned by Dolphin, it is owned by the investor under a trustee with the first charged to the building.

John Luddell said...

So, my question would be: why do you think this is a scam? Because they offer high interest rates? 10%? In reality developers make 20-30% profit, and they might have decided that it's better to collect money this way, in addition to bank loans? Perhaps if they issue bonds, they have their capital tied up for a long time (5 years), while with this form of investment they have it righted up only for the time they need it.

And how do you know they only have 40 employees? And ever heard of sub-contracting? Why would they have (for example) their own plumbers, when they can sub-contract that to others? That's what I would do, if I had a construction company (I don't!).

I don't know, but you seem to dismiss it as a scam, without much research, just because they offer a high interest rate.

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