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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (37881)	8/14/2005 12:01:23 PM
From: redfish	Read Replies (2) \| Respond to of 306849

Guaranteeing 10% per year should raise warning flags, as the fund is certain to go bankrupt in time. Many funds exceed 10% a year on average, but to be able to pay 10% out to investors each and every year is impossible in the long term ... combined with no disclosure about the risk and it is a guaranteed scam. The 504 things looks very scammish. "permits private companies to exchange large volumes of their own stock for an equal amount of highly diversified stock from a hedge fund" There is no market for the stock of a private company, you have to discount the value of its stock for lack of liquidity and lack of control. So an equal exchange makes no sense economics-wise. Next, what the hell is "highly diversified stock from a hedge fund"? Which hedge fund? What kind of stock? "The companies in the fund can then offer interested investors collateral against an investment in the form of diversified hedge fund stock." Again, what is "diversified hedge fund stock"???? My guess is that they are talking about trading stock of one private company for stock in a pool of private companies. While this does provide diversification, the stocks you are diversifying with no more have a market than the stock you began with ... you have traded your stock, over which you have total control, for minority interests in a bunch of private companies over which you have no control. The idea is you then use your interest in the pooled fund as collateral to raise funds ... but imo its value as collateral would have to be heavily discounted as there is no cash market for it.