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Archive for the ‘Rip offs’ Category

“Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm’s hallmark.”

— Text on the now modified website of investment firm, Bernard L. Madoff Investment Securities LLC. owned by former chairman of the Nasdaq Stock Exchange Bernard Madoff.

If his business dealings indeed were of High Ethical Standards, I’d HATE to see business being done based on LOW Ethical Standards!

(Bernard Madoff was arrested last Thursday and charged with a single count of securities fraud. The Securities and Exchange Commission immediately filed separate civil charges against Madoff. The fraud is possibly one of the biggest in history. The alleged loss of investors’ money is estimated at 50 billion dollar! Yes, boys and girls, that’s FIFTY THOUSAND MILLION DOLLARS! All removed from their owners by ‘fair-dealing’ while observing the Highest Ethical Standards!)

Assume you’re in the market for a new car. You have picked your car: a ‘Standard’ model from car maker XYZ.
Your new car has everything you need. And the price is right: say $30,000.
The model you chose also comes in a ‘Pro’ version.
It’s basically the same car, but it has some additional gadgets like a sunroof, GPS and leather seats.
Some of these extra gadgets are really nice, and you may even use some of them once or twice in the car’s lifetime.
You briefly contemplate this ‘Pro’ model, until you see its price tag: $80,000.
Hiding your astonishment about this strange pricing strategy you stick to your ‘Standard’ model.
Then you learn something else:
If you have owned a car before, then, for some reason, you get a $10,000 discount!
That’s a cool deal. Too bad this is your first car.
But wait!
There is more!
XYZ has a stripped down version of your ‘Standard’ model available as test car!
As I said, it’s heavily stripped down, bare bones, but it gets you from A to B.
You can test drive it for as long as you want for FREE! No cost! Gratis. All you pay is the gas.
Now .. if you DO borrow that car, then THAT counts towards this ‘had-car-previously’-discount!
So you drive that loaner for a day or two, and now you can buy your ‘Standard’ for $20,000.
But wait … you THEN find out that if you DON’T buy directly from XYZ, but order it through Amazon.com, they knock off yet another $2,000!

You secretly wonder if the guy who came up with these somewhat odd pricing schemes will still have a job tomorrow.

Strange story, you say?
Well, this actually happened to me yesterday!

No, not with buying a car from XYZ through Amazon.

It happened with buying software from Microsoft.

I needed Visual Studio 2008.
It’s not for enterprise or development groups purposes, so I basically have the choice between Visual Studio 2008 ‘Standard’ and ‘Professional’.
Standard costs $300.
Professional, which is Standard + gadgets, costs $800.
If you ‘upgrade’ from a previous version, Standard only costs $200.
“Previous versions” INCLUDE non-Microsoft, Open Source (free) Eclipse software  AND Microsoft’s own FREE Visual Studio 2008 Express software!
I double checked the price with Amazon, since I have free 2-day shipping with them, and they listed Visual Studio 2008 Standard Upgrade for $179.99.

Who on earth would ever pay $300 for the full Standard version? (Probably the people who didn’t read the upgrade policy!)
And how would they feel if they learn, that they could have had it for $120 less, LEGITEMATELY! By first installing (I doubt you actually need to do that) either the free Eclipse software or the free Visual Studio Express version?

They would probably be as pissed off as I was when, after buying a full version of Windows XP, I found out I could have gotten it for half the price by first simply ‘borrowing’ it, and then fessing up to Microsoft that I ‘borrowed’ it and want to pay for it afterall.  Granted, this is not QUITE the same, because in this scheme there IS some illegality involved. NOT so in the Visual Studio case! (For this XP story, see: link)

Bizarre!

The reason I used a picture of Jim Cramer (Mad Money) with my previous ‘Stock tip’ post was that I totally agree with Jim’s vision on ‘stock tips’: Tips are for waiters.

Back to Mark Skousen’s recommendation at the Freedom Fest.

When I heard him give this old style barber shop ‘tip’ (he didn’t even care to call it an ‘investment idea’), I was puzzled. That’s not a thing you expect from a serious professional Ph.D. Economist Investor Big Wig who rubs shoulders with Presidents of the United States. And a man who organizes conventions where there are actually numerous speakers, themselves highly successful investors, who will spend their entire alotted time to warn you to stay away from people who give out (more ususally ‘sell’) ‘stock tips’. (More on some of these speakers in a later post)

It got worse. People asked Mark questions about the business. Smart questions. And while happily babbling on and on for minutes after each question, it became painfully obvious that he had no clue whatsoever about the company. Or if he did, he wasn’t sharing it with us. He rattled off some ratios like the company’s P/E, which is of course, without proper context, completely meaningless. And this was an investment guru with numerous highly praised investment books on his name?

Of course, one has to understand that this man is not in the business of managing money. His business, plain and simple, is selling subscriptions. Subscriptions to his extremely expensive investment news letters. And we all know how these work: you ‘predict’ a boat load of winners. The ones that turn out a loser you forget, the ones who do VERY well, you use to prove how good you are and sell more subscriptions. You only have to go to the man’s website to see what I mean. To not-too-naive people these are huge warning signs: completely ignore these folks. Although I’m not suggesting that Mark Skousen belongs to them, you will also find a lot of operators of the infamous ‘pump and dump’ schemes in this arena. (Although, I admit, I was wondering how a man, who, according to his website -which I will not link to – has made such astonishing predictions, can still tout a company like Luminent, while total lay-men like myself are already quite familiar with the huge problems in the sub-prime lender business and the (then) looming credit crunch)

So, while I left that presentation with the distinct resolution not to touch that stock with a ten feet pole, I DID decide to follow it… so as to gleefully rub my hands when its price would go where I expected it to go.

This stock, which was ‘sold’ to us as being a steal at ten dollar, however, did NOT go where I expected it to go. Within a couple of weeks it would go WAY beyond that! It bottomed out at 36 cents! Yes, thirty six cents. This is where I realized (or hoped, rather) that the market was overreacting: sure this company had some serious issues suddenly (margin calls), but it was not an Enron, so from 10 bucks to 36 cents was, IMHO, just plain ridiculous. So I put some money in it, and sold it a few days later when it was back at $1.39. Sure, I still think it can recover much more, but then, it can also go bankrupt. And I don’t invest in situations this dubious and uncertain. Yes, I may speculate in special situations like these, a quick in and out with a limited amount of money, but that’s it. Sure, I could have put everything I had in this: I would have been a millionaire by now. But I also could have been broke. I fully understood, going in, that I was trying what was tantamount to, what is called, grabbing a falling dagger. So, in the end, I think I did well.

Which probably can’t be said of all those newsletter buyers and stock tip followers who started loading up when LUM went from 10 bucks to 9.

For centuries countless people have searched for the holy grail of physics: The perpetuum mobile: A device that would go on and on forever, without the need for external energy. Or even more interestingly: a device that would actually produce more energy than what is put into it. Wouldn’t that be nice? Free energy!

So far, however, such devices have never been constructed and shown to work as promised.

And there is a very plausible reason for that unfortunate failure: such a device would have to violate one or both of two VERY basic laws of nature. It would either break the first law of thermodynamics (conservation of energy), the second law of thermodynamics (entropy never decreases) or both.

It’s not my intention to go into the physics side of all this. Nor will I go over the long history of failed attempts. I just like to focus on the latest folks who are making claims of being able to produce free energy.

And I also will make a prediction or two.

The folks I’m referring to is the company Steorn (link), their ‘free (and clean and continuous) energy’ technology is called ‘Orbo’, they are based in Ireland and their spokesman and CEO is Sean McCarthy.

How are these folks different from all those that have claimed the same and failed miserably?

Quite frankly: Not that much.

The only obvious difference I can see, is that these folks seem to be very good at marketing! They have a very professional web site, have some ‘convincing’ (well…) stories to tell, they REALLY seem to be serious about getting ‘name and brand recognition’, are engaging in discussions in forums, engage the scientific community and generally seem very eager to tell everyone in this world about their ‘claim’: their name is all over the Internet.

All of which will probably raise a bunch of red flags and trigger some alarm bells for folks who have been following the ‘free energy’ clubs around the world: the “Investment Scam’ light will flash as a warning and reminder of previous claims.

Then what are the similarities with previous claims?

Quite a few, but just let me mention the single most obvious one:

THEY CAN’T DEMONSTRATE A WORKING DEVICE!

Another one would be their claim: “BUT WE WILL HAVE A WORKING DEVICE REAL SOON NOW!”

Think about it! You have this great idea! You discovered something that all physicists, to this day, have overlooked (the temporal variance of of magnetic viscosity, in Steorn’s case) and you realize you could build a ‘free energy’ machine with it. What would you do? Would you withdraw in your garage and build a proof of concept and then take this working prototype to investors to help you turn this into a commercial success? Or would you go to investors FIRST, telling them you WILL BE able to build this, but first you need a bunch of money? I can tell you what would I would do, and I can also tell you how I would react as an inversor if you tried to get some money out of me with this ‘device’.

But anyway, Steorn is going to demonstrate this device .. *drum roll* .. this July!

This world will never be the same!

Unless, … some of my predictions come true!

The simplest prediction of course is “No demonstration of a working ‘free energy’ device will take place in July 2007”.

Of course, as Sean McCarthy already has admitted: “.. It is simply a question of money ..” (link), not showing anything wouldn’t be good for those streams of investor money.

So they already came up with the obvious cop-out:

Q: What progress do you have with the continuous motion testing?
A: We have made huge progress on this – we expect to be demoing this version in July. …I would say 80-90% of the way.

80-90%? 

Let me give an example here: Suppose I claim to have a ‘free energy’ device. Let me be VERY modest here, and claim 101% efficiency. The device will demostrate this by dropping a ball from 10 feet. Without any added energy from outside, you will see the bouncing ball reach a height of 10.01 feet!

However, I’m still working on refinements and I’m not quite there yet (I need more money!). So I’ll demonstrate to you (in July 2007) my device as it is now. I will already announce that what you will see is that the dropped ball will bounce to 80 – 90% of its original height! Impressive right? I’m REALLY getting there.. ALMOST there, just a few more percentage points! Please hand me your money.. I really need to finish this! And hey, you just SAW I’m ALMOST there…

Needless to say that a device that ALMOST produces free energy, is NOT a ‘free energy’ device. There are of course cases where ‘almost’ can be impressive or desireable (I wish I ALMOST was a billionaire!), but this is a case where ‘almost’ doesn’t get any points.

It’s probably not easy to find investors for this: most of those interested have their money tied up in premium swamp land in Florida and the Brooklyn Bridge!

Here’s another prediction: I will make this company’s claim known to James Randi, whose JREF organization (link) offers ONE MILLION BUCKS to anyone who can … well … put simply … break laws of nature. I’m sure he’ll agree these folks qualify …

My prediction: The JREF will get to keep their money!

And yet another prediction: before too long this device will show up in the Museum of Unworkable Devices (link)!

Notes:

1. Thanks to my dear friend Leo W. for bringing this to me attention.

2. “A device that would go on and on forever, without the need for external energy”: Of course, ANYTHING goes on and on forever when in motion and no other force acts on it! (Newton made that very clear!): I’m talking here about a machine whose internal ‘motions’ keep going on without addition of energy from outside!

3. This site lists quite a few attempts by folks who didn’t let their thinking be clouded by knowledge of the laws of nature: link.

4. And here’s an interesting link in case you yourself think you can get rich off of the free energy craze: link.

5. Steorn’s announcement: See Sean McCarthy explain (?) it all: link.

You buy a new DVD player (one that ‘upconverts’ to 1080i HD, to your, also newly, acquired HD TV). It has (wow) Digital Output through ‘Digital Coax Out’. And even though the manual says you can use a regular RCA cable ($2.15) for that, you run to your local Radio Shack and happily pay $25 for a REAL Coax Digital Audio cable. After all, you want GREAT sound. That’s why you paid BIG money for those THICK speaker cables from ‘Monster Cable’. The ones that assured you of that DEEP VIBRANT Bass that you always wanted.

I’m an immoral person. I admit it. Especially in the context of this post: if I see an opportunity to get rich off of snobs, I go after it .. that’s why I looked if I can invest in Monster Cable.

I can’t. It’s a private company. Too bad.

Why is this company so successful?

Because it played out a stereotype! Ask someone to describe a singer who sings bass! He/She will undoubtedly describe him as BIG… as LARGE … as FAT. Nobody would ever suspect my bluddy Rob of being a bass!

So people fall for the fallacy: “With this HUGE BIG FAT cable… you get an incredible bass sound from you speakers, especially your subwoofer”.

Nonsense of course! That ‘Bass’ sound comes from the quantity of air moved by the speaker. The ‘wire’ is only there to provide the ‘sound information’ (I’m now speaking of powered sub-woofers). You can actually make that wire VERY thin, and not notice a difference (since there is none). Okay, if you make it TOO thin, it CAN actually melt .. but it will do that before you notice any loss of ‘bass’. I have preached this (in vain!) for many years, but last week I ran into something similar. VIDEO cables.

We purchased an HDTV, and I needed to connect it through video cables .. so called ‘Component’ cables. I also needed (well.. wanted!) a new ‘upconverting’ DVD player, for which I paid $42. Because HD video players are still well over $500, and I’m a cheap skate!. Turned out, the cables were MORE expensive than the video player, with all its electronics, firmware (!), moving parts, laser, remote control (batteries included!), manual, shipment from China, etc etc…

INSANE!

So I looked around for cables….

I found them. On BOTH sides of the spectrum. Here they are … see the links… remember… there is NO WAY IN HELL (or heaven) that ANYONE, for simple reasons, can actually ‘SEE’ a difference in picture quality between these cables.

The ‘not-so-cheap’ ones: link

The ‘cheaper’ ones: link

Yes! That’s $5.95 for common sense ($3.89 if you buy a 1oo of them, at which price they STILL make a hefty profit!), to $299 for easy-to-fall-for-hype.

(As for the not-so-cheap ones… I have actually found a cable for $399, but granted, that was quite ‘lengthy’ (not sure who needs 150 Ft of this crap anyway!)