our net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones. - Benjamin Franklin]
Before we get started I want to quickly clear up another word here.
What is a “promoter”? Somebody who raises money for a financial or commercial undertaking.
Promoters of investments come in all shapes and sizes. They can be good friends with some inside track, licensed brokers, businessmen or women raising money for their company, a friend of a friend of a friend who knows a sure thing, accountants, lawyers, brothers and sisters, moms and dads. They may or may not know what they are talking about. In any case, you will feel you can trust them because they seem so sure they do know what they are talking about.
They may or may not be getting compensation for bringing you into the fold. One thing is often certain; they need your money to survive.
I have been promised things by promoters that were absolute lies and based on nonsense. They simply didn’t know the truth, never really did the homework and were just passing on what they were told because they were already in neck deep. In some cases, it is purely driven by greed. This is highly irresponsible and it is up to you to figure it out by asking too many questions. If the promoter of the said investment gets irritated, can’t answer simple questions, or brushes off all your questions with “don’t worry about that now”, that is a blatant warning sign for you.
Here’s another great example: Last year there was a huge push from a young “promoter” to buy the Iraqi currency known as the “Dinar.” This was the next guaranteed 20-1 play. As the story went, the Dinar was about to be revalued “any day.” I was getting hit by client after client to jump in. I “couldn’t lose” it’s “ 20-1”! The promoter of this “investment” had absolutely no experience in the currency field. But he was known to be a good guy and sold the idea to a couple of very knowledgeable investors who had well-known reputations and he co-opted them into the story. That made it appear legitimate to many people. He wasn’t making money himself on the deal, just trying to help all his friends get rich. That lent a touching air to the story.
I looked over the “research” and shared the data with other professionals. We all came to the same conclusion: there was absolutely nothing there. It was all wild speculation based on a few good rumors. I managed to keep most clients out of it, but one did go for a small piece. We are trying to sell his brick (yes, literally a brick of Dinar paper money) because he needs the cash. Oops – the guy who sold it to him is no longer buying Dinar back. It’s currently down about 10% – if we could sell it.
Promoters will tell you anything and insist it’s the truth whether they have done any research or not. The research they do is often just enough to prove they are right. That’s all the proof they need. Hey, keep the dream alive!
I drank Kool-Aid myself on a deal many years ago. I hyped it, pushed it, sold it and then struggled with it for years as it slowly sank with me and the other investors on board. I paid dearly with my own hard-earned money for years to make many of the investors whole again. I was responsible for the research I did and, more to the point, the research I didn’t do.
It was the research I didn’t do that would have kept me out of trouble had I done it.
Next up! We finally made it. Let’s go over how to actually do due diligence. Subscribe to our blog by going to www.wiseman-burke.com. You’ll get an email when a new blog is posted.
Subscribe & Follow