NEVER ever take a Cash Advance or a Pay Day Loan

Getting into debt around Christmas is incredibly easy.  It is easy to fall into the spending trap and to feel obligated to spend large amounts of money.  The constant bombardment of advertising at this time of year was what prompted me to write my article providing 5 tips on saving money this Christmas.

However this year I noticed another worrying trend when it came to advertising: the number of payday loan companies that started to advertise on the radio, internet and on television.  "Strapped for cash...stop the worrying and say yes" type advertising  that most of us should ignore.

If you thought credit cards were bad...wait until you see cash advance loans

I have talked about how the best way to get ahead is to avoid credit card debt (where the interest becomes payable).  The interest rates on credit cards run at 19 - 22% p.a. which is outrageous...at least I thought so until I saw the types of rates being charged on cash advances.

The first site I clicked on charged 24% for a 30 day loan...24%...that's not a per annum rate.  That is the rate over the 30 days.  That is a 966% interest rate per year (compounded).

I was going to do a full summary of payday lending but this video encapsulates everything I wanted to say:

The more I research this issue the more saddened, outraged and worried I am for the financial health of some of the most vulnerable people in society.  However for an explanation which is far more complete than mine could ever be check out this brilliant video by John Oliver

But what if you need the cash right now?  Should I take a pay day loan?

No!  There is almost no situation I can think of where you should take a pay day loan.

When you're desperate, you're desperate right?  What if

My 4 Rules for entering gaming venues

I don't often go to Casino's.  It's not that I have a particular moral objection to them - I just prefer not to play a game where the odds are mathematically tilted against me.  However I went to a casino recently (context to come later) and after doing so I now have new rules for myself about gabling generally.

My rules for entering gaming establishments

1. I will never spend more than 2 hours in a gaming establishment
2. I will never gamble more than $50 in a night
3. I will never use a card of any sort in a gaming establishment (credit or debit)
4. I will never enter a gaming establishment after drinking

...and now it's time for some context...

How did my personal rules for gambling come about?

I was at a bucks night recently (getting married seems to be the thing to do amongst my friends at the moment) which ended up at a casino after several hours of drinking.  We left the casino to go elsewhere however ended up back at the casino later in the night.

Before I go into what I saw and experienced that night let me just say upfront that I did not lose thousands of dollars and this is not a post of regret.  I bet $20, at one point in the night I was up $100 and I ended up down $10 at the end of the night.

When I looked around I was staggered at the amount being bet...and lost

I love people watching however people watching in a casino is one of the most depressing things I have ever done.  I was just on the regular gaming floor (on the cheap tables I may add) but the amount of money being bet was still staggering.

I saw one man playing

I invested in a fraudulent company and lost my money...here is what I learned

Things don't always go to plan when you invest in individual stocks.  Some stocks will make you money and others will lose you money.  This post will cover an investment I made two years ago (and which I wrote about on this blog) which went sour and where I lost my whole investment.  I will cover why I made the investment, why it went south and most importantly what I learned from the whole process.

What was the stock and why did I invest in it?

Almost exactly two years ago I invested in a company called Kinghero.  It was a German listed, Chinese manufacturer and fashion retailer aimed at the growing Chinese middle class.  I invested in it for several reasons:

1. The industry was appealing
• Getting exposure to the

Learn to ignore the distractions on your financial journey

Like many of you, I am on a journey to achieve financial independence.  I slip up from time to time but for the most part I am disciplined and have a strategy to achieve my goals.  There are plenty of distractions along the way and some of them come from unexpected sources.

This post will cover one of the distractions that I received recently...and my tips for ignoring these impediments to achieving your financial goals.

My bank offered me a credit card...by trying to guilt me about not spending 'on myself'

Recently I received the most outrageous letter from a bank.  In fact I honestly thought that banks were more responsible than this.  I have my home loan with a different bank to the one which has my transaction and credit card account.  In order to try and get more business from me, my home loan account bank constantly sends me letters offering me all kinds of products (including credit cards).  That is fine...that is the business they are in.  

However recently I received the letter below (along with a pre-filled credit card application form).  It was so outrageous I actually decided to copy the relevant sections

It is truly incredible that a bank would actually tell people to 'get in touch with their impulsive side'.  That they would discourage savings and people acting sensibly truly

Avoid these traps when looking for a new mechanic

Are you getting ripped off when you take your car in for servicing?  How do you know?  How do you find a good mechanic when you move into a new area?  These are all questions that most of us ask and very few people have the right answers to.

Finding a mechanic is hard because we don't generally know if we are being lied to or being overcharged

The fact is that most people (including myself) have no idea how cars actually work.  Generally a mechanic will call you before doing a series of repairs and will list all the problems with the car.  If most of us are going to be honest we'd have to admit that:

1. We don't know whether the problems they are telling us about are actual problems
2. Most of the time we don't really understand what parts they are actually talking about; and
3. We have no idea whether they are quoting us an acceptable price or whether we are being ripped off

We also have no idea if our car is being 'over serviced'

I think most people are able to tell when their car is running 'better' but the biggest 'rip offs' come from over servicing.  That is when unnecessary repairs are done in order to inflate your servicing bill.  It is not that they don't do the work at all or do a shoddy job...it is just doing too much work and then charging you for it.

'Fixed quote servicing' doesn't fix the problem either

Superannuation Funds - How important are fee differences?

All working Australians will have some form of super.  Most of us do not have the time, skills or savings balance necessary for a Self Managed Superannuation Fund so we just go into our employer chosen superannuation fund or another fund of our choice.  These are generally split into retail and industry superannuation funds and all of us would have seen the advertisements on television advocating the superior returns offered by industry funds over retail funds.

Choosing your super fund is not exactly like choosing a managed fund

Super funds most often operate as a fund of funds.  Although some of them are starting to build out their own internal investment capability, most of them actually just outsource the investment task.  That is they pay fund managers (the same people who offer managed products) to invest for them.  Because they are placing such large amounts they can generally do this for quite a low cost.

I have no real preference for superannuation funds which manage the money themselves versus those which outsource the task.  There are pros and cons for both which I will go into in a post next week but they are quite different to evaluate.

If you invest in a superannuation fund that manages money themselves then you will be assessing them in the same way you would assess an ordinary managed fund provider

1. What is the investment process?
2. Who are the people running the fund, how long have they been there and what has their track record been?
3. How stable is the investment team?
4. What sort of alpha are they aiming for?
5. What are the fees they are charging to achieve this alpha (out performance)?

If you are investing in a superannuation fund that uses external fund managers then this is not what you are thinking about.  Fund of fund providers are notoriously

You should NOT pay more to invest in Ethical Funds

Like many people I know, although I am primarily self interested (i.e. I'm trying to improve my life and financial well being), I am also concerned with how my actions impact those around me as well as the environment.  I think there are very few truly selfish or truly selfless people.  I think everyone falls somewhere between those two extremes.

Although we all try and make a difference, sometimes it is hard to see how "doing our little part" makes a difference when there are such big entities and companies out there who swamp any effort we may have to make a difference.  One of the ways that has become more popular in the last few years is the idea that money talks.  That if you (and a significant number of others) are concerned enough about society then you will direct your savings and investments towards those enterprises which are actually doing good and avoid those which are damaging society or our planet.

It is a fairly simple concept which is incredibly hard to implement for one single reason: We all have different ideas and tolerances for what is good and right. Having said that - if we find a company that we like and believe is doing good then this is where we should put our money.

The Ethical Funds management industry has grown around this concept

A whole industry has grown up around the concept that our investments should reflect our desire to make the world a better place.  The good funds generally provide

Are crowd sourced product reviews really that helpful?

Several of my posts recently have been about setting up my new apartment.  This is the first time that I have lived on my own (and not in a share house) and so I am going through the joys of getting basic services set up such as gas, electricity, internet, contents insurance etc.  I have written a series of posts on how you should always shop around and that you can save significant amounts of money if you search for better deals on things like your power bills and your car insurance.

Getting the cheapest price is not the only consideration...you also need to consider service quality

There is normally a price / quality trade off.  Customer service is often significantly over rated but you really do want good dispute resolution practices and a company that is prompt in responding to your concerns or issues.  The ideal situation therefore is to find a company which is reasonably priced but which provides an adequate service and deals with you in a fair manner.

We often look to 'unbiased' crowd sourced reviews on the internet before purchasing

The internet allows any one of us to express our views about both the good and bad about anything we buy and use.  It also provides you an opportunity to find out about the service level offered by different companies before you sign a long contract.  This is definitely a good thing as it allows us as consumers to make more informed choices about what we buy.

However...there is a natural bias when it comes to 'real' reviews which most people ignore

I only realised that there was a natural bias when it came to reviews when I came to sign up with an energy provider.  I found one (Red Energy) which appeared to give me the cheapest price and then I went online to look at what other customers were saying about them.

I was aghast at some of the things that their customers had to say...how could one company be so bad.  No wonder they were so cheap!  I was relieved that I had stopped myself in time and I then went to look at the next cheapest company and was dismayed to find that they too had a litany of complaints about them.  And so it went on...every company I checked out had complaints.  I went to the expensive 'premium' service providers and they too had pages and pages of negative reviews.

That was when I realised that crowd sourced reviews have a natural bias

Don't get ripped off when converting currency

I recently returned from my overseas holiday and realised that although people shop around a lot to reduce the costs for their flights and accommodation we rarely ever really shop around for a good deal on the currency that we exchange.  We normally go for safety and convenience, which are undoubtedly important, but given the amount that you are likely to spend in cash on your travels (from trinkets and souvenirs to meals, drinks and transport) it is always worth remembering that you can save a lot by shopping around for a good exchange rate

You can never change cash for anything like the actual exchange rate

I think we are all used to the idea that we are going to get screwed when we exchange cash.  Anywhere that retail punters typically go, there is a large spread between the buy and the sell rate with the actual exchange rate somewhere in the middle.  The first time it happened to me I was outraged but then I (like most people) got used to the idea of being screwed.

On my recent overseas holiday though I was once again reminded how badly you could get screwed.  I am going to call out one company which was particularly bad: Travelex.  They were offering to convert my currency at 20% less than the official exchange rate. 

Even by the regular standards of exchange rate rip offs - this one seemed particularly bad.  What was even worse was that this was their rate when I was looking to change a rather large amount of cash.  On top of this outrageous rate they were going to charge me a 'transaction fee'...normally this is built into the spread but Travelex believed that they could convince me that this was their charge.

Always shop around for a better rate...you may even do better next door

Obviously I wasn't going to exchange cash at this rate...I walked less than 10 meters to the ANZ branch that was right next to them at the airport and I got a rate that was only a 10% discount to the official exchange rate (with no transaction charge).  I wanted some cash for when I landed at my destination so I exchanged a bit at this (still exorbitant rate).

You can often get a better rate if you wait until you get to your destination

I'm not sure if it is only Australia which rips people off so badly when it comes to exchange rates but I always seem to get a better rate when I exchange cash at my destination rather than before I travel.  I exchanged more cash when I got to my destination airport at a

Beware travel medications: You can get ripped off

I am used to losing cash pointlessly when I travel - in fact when I am going to the third world I expect to pay 5 times what I should because I have no idea what the cost of something is meant to be.  But when it happens at home it really irks me.  This is a warning for all those who simply assume a doctor is going to prescribe the cheapest medication because it's the right thing to do: they aren't and you can get stung for hundreds of dollars.

I was travelling and left my medical appointment to the last minute...

I am going on holiday to a part of the world where you really need malaria medication and I had completely forgotten about it.  With 2 days to go before I leave (don't worry - the posts will keep coming - I learned my lesson from the last time I travelled) I scrambled to make an appointment with the doctor.

I have been going to the same doctor for as long as I could remember however he retired earlier this year and this is the first time I've needed to go to one.  I went to one in the CBD next to work.  I knew it was going to be expensive...but $70 for an appointment which took exactly 6 minutes seemed a little excessive to me.  I'll get a bit back on Medicare but it is still ridiculous.

I was actually going to post about this - about trying to find a doctor who bulk billed because it could save you a lot of money if you went several times in a year - but then I got stung really badly.

I had a doctor who was not interested in providing me the full information

The doctor I got stuck with did not bother to provide me with the information I needed.  I went in and asked for a prescription for malaria medication.  I have travelled overseas a fair bit and I know what I usually take: Doxycycline.  I mentioned to him that I have a real sensitivity to light when I take it (a common side effect) and asked whether it was the only medication out there.

He said there was - it was just as good and then he prescribed me Malarone which seemed like a magical drug when he described it - you don't need to take it as often as Doxycycline, you don't need to take it for as long and it works just as well which sounded like a miracle replacement...

However when I went to the chemist...10 days worth cost me $150!

Doxycylcine costs ~$30 for a 10 day trip...I was out of pocket more than $120 to solve a problem that I had been dealing with for years.  The doctor I had a relationship with never bothered to prescribe this other drug for me because he knew it was super expensive.

I know I should have asked about the cost.  I know that it was on me to get the right prescription...but when a doctor doesn't mention to you that the cost is significantly higher...and the only way you can get another prescription is to pay another $70 then it does feel like a bit of a rort.

The moral of the story is...don't trust that a doctor is prescribing you the most cost effective medication

If it is not life and death it is worth asking them about the relative cost and benefit.  For me the difference between the two drugs was a sensitivity to light but they worked to stop malaria just as well as each other...I would have taken the cheaper drug.

If you don't have a relationship with a doctor that you trust to do the right thing by you it is worth asking the questions.  It is sad that you have to but you could get stung like I did. It pays to question what you are being told (whether it is by financial professionals, lawyers, accountants - or as it turns out here...medical professionals).

You May Also Be Interested In
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Travelling overseas: Credit Cards vs Travel Cards
How to get great value fully tailored suits...and a free holiday

How to avoid getting caught in a financial scam: Ask yourself "why me?"

People get sucked in by scams all the time.  From thinking that they are going to make it rich by funnelling cash through their bank account for someone trapped in the third world to allowing someone who says they are from Microsoft to take control of their computer and steal their identity.  Some of these are so obvious that we wonder "How could they possibly fall for that?"...however people seem to fall for scams and dodgy investments all the time.

This will be a rather short post which will encourage you to ask one of the most important questions when trying to work out whether something is legitimate or not.  It is will deal with financial related scams and dodgy investments (but will not save you from the tech scams like the Microsoft one mentioned above).

Always ask..."why me" before investing in a 'great deal'

Financial scams are almost always pitched as a once in a lifetime opportunity that is being offered to you so that you can make a lot of money in a short time.  Always take a step back and ask yourself 'if this is such a great deal why am I being offered it?'

Very few people (and certainly not a stranger on the street, or someone that is part of a social club or church congregation) will give you something for free. Even if you know what they are getting out of it...you need to ask yourself why you are being offered the deal of a lifetime or the great deal that not everyone has access to.

I have written about this before but if something seems to be too good to be true then it usually is.  But even if you get sucked in at this point and think that it may actually be a good deal then think about this...why is it being offered to you...Mr or Ms Ordinary Investor.  I work in the investment world and trust me when I say that these sort of 'super return' investments do not exist in our world...why?  Because we know how the game is played and fraudsters are not going to make money off us.

If something is guaranteed to make a huge or abnormal amount of money, especially in the short term then ask yourself why they are selling it to you and not mortgaging their house to invest in whatever they are trying to sell you.

Ignore them when they say that they are investing alongside you...and don't ask them why you've been chosen

The thing about investment scams and confidence scams

Notice to Charities: You can't take more money without my consent

Writing this post gave me pause for a few reasons but mainly because I am writing a post against a charity which I support and greatly admire.  I have been a supporter of Catholic Mission for years because I think they do really good work and bring aid to people in remote communities around the world where few others are willing to go.

However when I opened a letter from them last week I found something which put me off them significantly.  Last week week I opened another one of those 'please increase your support letters' which every charity seems to send to their supporters.  I am not against such letters and I occasionally do increase my support when I am able to.

What was different about this letter?

This letter didn't seem different to most of the letters that I usually get from them and the other charities I support.  Normally I would glance at it and then get back to what I was doing.  However I had a bit of spare time so I decided to read the letter.  On the second page it informed me that they were increasing my monthly donation by 10% and if I didn't want it increased I should contact them...

They were increasing my donation by a significant amount and I had to opt out of the increase.  This is not how charity and donations or any other form of product work.  You cant tell me that I'm increasing the amount I'm going to give.

Why was I so angry at it?

I was angry at this tactic for several reasons:

1. The increase, although clearly stated, was not disclosed until the second page
• I'm guessing most people that would have received this letter would have missed it unless they had some time to spare like me
• If you're going to increase a persons donation and require them to opt out then this should be up front - the first thing the person reads
• This is actually the only reason I am writing this post - because some people may have missed it and you should be informed
2. By requiring people to opt out of the increase you make them feel guilty for not giving more
• In many ways I am a realist - I know that the whole charitable industry works on guilt.  Charities get more money by showing starving kids on television because we feel guilty for not doing more in the world so we donate to make other people's lives better...there is nothing wrong with this
• However this guilt should cause people to want to give.  Use it to cause people to increase their donations.  Don't make them feel bad about having to call up and say they can't or don't want to give any more
3. Why didn't you just ask?
• By not asking you're going to

Express Convenience Stores...A rip off by any other name

As I posted about previously, a few months ago I moved out of home.  One of the things I have to do now therefore, which I never had to do is shop for myself.  I actually find this a lot less unpleasant than I thought it would be and I'm rather organised about it - I make a list, stick to it and pick up goodies which are on special.

I generally do my shopping on a Monday night because it's the night I'm least likely to have any social activities on however as I was down with the flu last week I couldn't do my shopping.  I was then rather busy at work and so had even less time so I thought I would go to one of the convenience / express stores in the city near the office to pick up some essentials (such as bread, milk, cheese etc) to try and save some time.

I could not believe what a rip off convenience stores were

You always hear about how milk bars and corner stores are more expensive but that makes sense - they are unable to buy in bulk and thus they have a higher cost of product and you pay for the higher cost because it is convenient.

I made the assumption that it would not be as bad if I went to a 'brand name' store.  The store I went to was an IGA Express store.  The whole purpose of the IGA stores is that they have bulk buying.  I therefore expected to pay around the same price as if I went to a regular IGA or Coles supermarket....how wrong I was...

The prices in the convenience store were 2x - 3x what you would pay in normal stores

Instead of bread being $1 a loaf it was $3 for the home brand.  A small block of cheese was $7 instead of the $3 I usually pay for the same item.  This was true for almost all of the items that I was looking for.  I ended up buying just what I needed for that day and then doing a proper shop later in the week at a major store.

You are paying for the 'convenience'...

This is the ultimate form of price discrimination.  I have written about charging people different prices based on their ability to pay before.  Convenience stores take this

Be careful about what you post in investment forums: lawsuits bite!

Most of us who are interested in finance and investing find ourselves in discussions about investing with our friends family and colleagues.  Naturally part of this discussion centres around venting when things do not go our way or when we feel we have been cheated or when corporate executives or directors of companies we have invested in undertake actions that we feel are not in our best interests.

Given the important of the internet in modern communications, more and more of these communications are happening online through investment forums (such as HotCopper) or through people expressing views on their own blogs (such as I do on this one) or by commenting on other people's blogs. As readers of this blog would know I have frequently criticised companies - both listed (such as FKP over their rights issue) and small er companies(though less so the small companies - only when I think they are real scams).

However...keep in mind that speech is not free and that you can be sued for defamation

When you post something on the internet it never goes away - we all know that.  It's the reason we are all so careful about our Facebook and other privacy settings.  However we seem to forget this when we are on investment forums talking to other 'hard done by' investors.  What you always need to keep in mind, however, is that you can be sued for these comments.

Although the story seems to have died down somewhat now, this issue got a fair bit of publicity when Susanne Deveraux, a retired nurse from Queensland, was sued by Empire Oil and Gas for defamation in

Yellow Brick Road's 1.15% discount is good...but not a game changer

There as a splash recently in both the financial and regular press about a 'fifth pillar' entering the Australian banking system.  The press lauded the entry of this competitor as great for consumers and finally providing some competition to the big four Australian banks.

Who is this new competitor?

The new competitor was Yellow Brick Road, a financial services company with 130 retail stores across Australia, which had recently struck a deal with Macquarie, an Australian based investment bank to use it's balance sheet to provide funding for Australians looking for home loans.  Their headline rate seems staggering - they are offering a 1.15% discount to the standard variable rate which is a discount rate almost unheard of in the Australian banking environment.

Yellow Brick Road is a company founded by Mark Bouris, the host of Australian's version of The Apprentice.  He was also the founder of Wizard Home Loans, a mortgage provider he later sold to GE Money for A$500 million.  With Macquarie's balance sheet backing him this venture is unlikely to be a 'here today, gone tomorrow' type operation so it should be something that those looking for a loan should consider.

However there are risks of a new competitor like this which you need to consider BEFORE you refinance you loan with them

Although the deal seems great, there are actually several draw backs and 'false' comparisons which many hyping this product have failed to point out.  These include

• The 1.15% discount is for the first year only.  This then reverts to a 0.86% discount.
• Generally promotional or 'sweet heart' rates are targeted at those who only look at the first year and do not consider what rate they are likely to be paying later on.  Given that home loans last for 20 to 30 years, it is the 'normalised' rate that you should be considering - not the sweetheart rate
• To be fair to Yellow Brick Road - they do provide what the rate will be over the life of the loan on their comparison table
  
• The comparison table is flawed - ALL banks offer significant discounts if you ask for it
• The standard discount on a loan of more than $250,000 is 0.70%.  This table does not take into account this discount
• For example they have the NAB rate at 6.08% however I am only paying 5.91% on my loan (which is not very different to the 5.79% offered by YBR)
  
• Although you get a discount to the Standard Variable Rate (SVR), you do not know whether YBR will reprice their SVR to a rate higher than the other major banks
• There is no 'standard SVR' - banks can make this whatever they like
• Over time you can see that the major banks track their SVR's relatively close to each other however there is no such proof for a new competitor.  If they want to increase their profits they can increase this SVR to a point where they are actually charging you more than the major banks even if your discount is larger
  
• There are no ongoing fees BUT this is a very basic product so you do not get many of the bells and whistles that are standard on other banking products
• Banks often charge a 'package fee' for the loan that they provide.  Mine is $120 p.a. and for that I get an offset account linked to me loan, fee-free credit cards and discounts on significant other products
• The YBR does not charge the fee but you have NO option to have an offset account, they do not offer fee free credit cards or any of the other benefits that come with having a 'package deal'
• For me, the offset account is one of the most critical tools that I have in managing my finances so personally this is what killed the idea for me straight away
  
• As this is a basic product you should compare apples with apples
• As mentioned above YBR's comparison table compares it against the major banks and their standard home loans.  
• However this is a

No guaranteed 9% return, some major draw backs...but not as bad as originally imagined

In a previous post I had questioned the validity of a 9% guaranteed return being offered by Collins & Kent International (CKI) for an investment in art.  From their advertising and after trawling their site quite thoroughly I could not work out how this investment worked - this is never a good sign.

I had received several questions about this investment for several months after I uploaded my original post but it was only a recently that a reader sent me the relevant contracts which set out how the arrangements actually work.  Those documents very clearly outlined how the arrangement worked and I am happy to say that this investment is not as bad as it first seemed - but the advertising is still misleading and there is no way they are guaranteeing a 9% return

So how does it work?

The investment proposition is actually rather simple:

1. You either buy a piece of artwork from CKI (or presumably you can bring along a collection of your own - I did not see anything in the contracts restricting this to art works sold by CKI)
2. They assign the artwork a value
3. You get a fixed percentage return on this initial valuation for the life of the agreement
4. CKI then loans this asset to their clients making a spread on the rate they lend it out at

It is actually just a simple rental / loan type agreement where you are providing the asset and in turn you are being compensated for this (much the same as a return on a rental property).  

Why do I think the advertising is misleading?

The original advertisement that I had seen had, as the most prominent part of the advertisement a guaranteed 9% return.  In reality what you are getting from this arrangement is a rate of interest on a predetermined art work for a predetermined period of time with.

What is wrong with this?

• As an investor in art (or indeed any other type of investment) the rental yield is not your only form of return.  Indeed in property and art it is typically not your primary form of return.
• The primary form of return is the change in capital value associated with the asset
• There is no guarantee in this arrangement as to capital value and so the investor is not getting a 9% rate of return on their investment - in fact it is almost guaranteed NOT to be 9%
• This is because if the value of the investment moves your effective yield is moving; and
• This capital value movement forms part of your return

What are the other drawbacks?

There are several other drawbacks from this type of investment (and also from the contracts that I had a look at)

1. There is always a risk that you overpay for an asset when you are buying it as part of a 'bundled' return 
• There is a risk (although I am not saying they do this) that CKI offers the high rate of return on an inflated price in order to 'prove' the value of the original price they sell the asset for
• I do not know if art dealers typically do this however it is quite common in commercial real estate where you are buying a piece of property from a party that is going to be your tenant for a specified period of time - there is a risk that you capitalise too high a number
• Again I have no insight into how objective their valuation and pricing process is so this is just outlining a risk
  
2. For someone inexperienced in art - their forgery provisions seem quite onerous
• I know nothing about art and I would be trusting that an art gallery was selling me the real deal when I was investing with them
• However when you buy a piece of art from CKI you have less than a month to get it evaluated by two separate independent experts to see whether it is a forgery to get a refund from CKI
• I have no idea whether this is industry standard or not but from an outsiders point of view it seemed quite onerous
  
3. It does not de-risk art investment - but some may assume that it does
• The biggest risks around art investment is around paying too much for something that is in vogue which then loses capital value
• CKI provides no protection against this so their scheme is not for 'beginners' investing in art
  
4. No rent escalation clauses
• The rent is not linked in any way to the capital value so in the event that your artwork's value shoots through the roof you are not getting an appropriate rental for it - the original rent stays the same for the life of the agreement

However - this scheme CAN be handy for those who were looking to invest in art ANYWAY

The more I thought about this investment proposition I realised that it would be very useful for those who

Businessprofiles.com: Unethical...but probably legal

Whereas some of the previous sites that I have covered through my scam series could have just been businesses that were run badly (e.g. Publicity Monster) or businesses which did not accurately represent what their offering was (e.g. Collins & Kent International), there are some businesses out there that can be actually be bad for you and your business and you can do very little about it.

I believe that businessprofiles.com falls within the category of a business that does business unethically but stays within the letter of the law.  Very simply it is a business that

• Uses computer programmes to scan government business registers
• Creates a directory of this register on it's own site
• It does not seek permission from any organisation to use this data
• It does not seek permission from the businesses it effectively represents on it's sites

There are many reasons that I think that businessprofiles.com is a bad business but core amongst them are

• It does not create any value
• It is taking data from a registry that already exists (and can be searched) and lists this on it's site (i.e. they do nothing themselves)
• Businesses cannot remove their own business from the site without an onerous process
• The process for removing your business is a joke
• You have to fill out a business removal form and then email to them a signed identity validation form
• If you have signed up for a service then I completely understand this - you do not want people removing your details from directories
• However given they never asked for your permission to put it up there - requesting a form with your pertinent details is ridiculous
• Further you are required to give your contact details (phone number, business address) even though this is what you are trying to remove in the first place
• I am more than happy to give these details to a service I signed up to but refuse to do it for an unethical business who ripped my details off another site
• Because they add no value and appear to be a computer crawling site - they cannot update your site details - they tell you to get the government agency to do so
• If a business directory is going to list your details you should be entitled to change them
• However because businessprofiles.com is such an bad concept and operator they have no ability to edit your details but rather require you to get the government agency to change your details and then their computer crawler will eventually update it
• There are reports that they have requested payment to remove listings
• This is the one thing that makes me think it is a scam. 

A Monster Load of bad publicity for Publicity Monster

As you would have seen from my collectible coin scam and questionable art investment with a guaranteed return post is that I actually quite enjoy busting what I think are questionable or downright dodgy business practices.  When I was reading the newspaper last week I came across a journalist who looked like he had done the same thing.  While I get 3000 - 4000 page views a month on this site (as at August 2012) this journalist wrote for Fairfax Media, one of the biggest publishing houses in Australia and the expose was therefore that much bigger.

The company that was being called out for it's business practices was Publicity Monster, an Australian company which offers search engine optimisation (SEO) services to businesses in Australia.  I will say up front that I have never had any dealings with this company - everything I write here I have sourced from information posted on the Internet by other providers and I will be linking to those sites.  I do not know whether this company is a bad operator but I would recommend reading the independent reviews of them on the Internet before doing business with them.

I first came across this company when I was reading this article ).  This article claims that Publicity Monster

• Does not deliver on the promises they make
• Threatens customers who complain with legal action
• [Edit]: For the removal of doubt I mean that the article suggests that they threaten, with legal action, customers who complain online
• Does not honour its money back guarantee
• [Edit]: I have since been informed that they do honour the money back guarantee but that the opportunity to apply for such the refund only exists within a very narrow timeframe (90 - 100 days)
• Harasses customers demanding payment
• Threatened to sue Fairfax Media for printing the article about them

Now I honestly thought that this had to be an exaggeration - a journalist who was trying to make a name for himself by doing a hatchet job on a company...no company could be THAT bad.  But then I made it to the Whirlpool forum where LOTS of customers had voiced their dissatisfaction with Publicity Monster - see the link here. It really is worth reading those posts to see the stuff that the people on that forum have dug up on this company (which includes using pictures of missing persons to give false reviews - note once again that these are again claims made by Whirlpool posters - but they provide plenty of evidence to back up many of their claims)

For a company that is all about publicity - Publicity Monster seems to be getting an awful lot of bad publicity.  Actually I found it a little bit suspect that traditional 'ratings sites' such as True Local had either reviews with half a star or ones with five stars.  I've never seen a discrepancy like that unless someone is playing games with the ratings site.

Lessons for those (like me) who are looking to start an only business

Guaranteed 9% return? Something doesnt smell right...

[Note to readers 8 Nov 12: It took me several months but I have finally tracked down how this investment works.  You can see a post on it here] 

I have received lots of positive messages on my post which looked into a scam related to collectible coins.  Another pretty bad / misleading advertising campaign I saw was related to  an advertisement I received from hotcopper.  Upfront I will say that this case does not appear as bad as the Macquarie Mint collectible coins case.

The email from hotcopper offered a 'guaranteed income of 9% per annum' through a company called Collins & Kent International.  You can see the advertisement here.

The advertisement set of several warning lights including:

• The word 'guaranteed' plastered all over advertisements are never a good thing.  The first and most basic issue is is who is guaranteeing the return?  If  it is the company offering you the services then the guarantee is only as good as their credit rating.  I will go through this point in more detail later on



• Ambiguous and misleading language
• The advertisement has a section that says  "Fact.  Over 10 years a CKI Investment into art can significantly outperform the ASX"
• This is misleading because it uses the word 'fact' and then gives a nothing statement.  Obviously it can outperform the ASX over any given period.  Cash under your mattress can outperform the ASX as can interest in a bank account and investments in pork belly futures
• Also they offer a $500 Collins & Kent International Fine Art Investment Voucher.  I have never heard of an investment voucher.  The concept of one doesn't make a whole lot of sense - are they giving you money to invest in the fund? Or are they giving you a voucher which allows you to buy informational products they sell?


• Claims that art is a 'recognised' element of a successful portfolio
• While I have no doubt that there are some authors who claim that art can be a good diversification tool (like precious metals and other collectibles) I wonder about their use of the phrase 'recognised element'.  If you claimed that about mainstream investments such as stocks, bonds and property I would have no problem accepting this but I would not put art in the same category.


• Also claims that it 'enriches' your portfolio. 
• That is honestly the first time I have seen the word 'enriches' used to describe an asset going into your portfolio.  More common words and phrases used are diversifies, diversification benefits, provides growth options and potential.  Perhaps enriches is trying to capture something of the 'art' nature of this investment


• Limited information on how the scheme actually works
• I actually spent a fair while searching for how the investment actually worked.  Legitimate investments generally have all the information up front so investors can decide if this is a product that is good for them.  I still don't have a clear idea after searching for ~2 - 3 hours (honestly the longest time I've ever spent researching one particular post)
• This is the information they give on how it works:
• That is nowhere near sufficient to provide an investor certainty around the way in which the scheme works.  It does make the investment seem like the first option below though (a simple loan to the company)


• Provides useless information and leaves out important information: 
• Useless information provided about the company is that Collins & Kent International deals in works relating to the Masters such as Picasso, Chagall, Miro and Rembrandt.  It makes you think you are actually buying the paintings.
• Useful information about the company you are lending to would say that they are primarily an art leasing business (from what I could find) and they lease artworks to businesses for a cost (presumably the rent you are getting)

So what are you actually investing in?

As I said above I had real trouble working out this question.  There are several possibilities which would have been nice for them to set out

• Most likely - you are lending money to them so they can buy artwork:  It is therefore just a simple fixed interest security instrument with little to do with art (other than this is the underlying nature of the business).  9% is a pretty high return for a fixed instrument but not so high when you consider you are lending to a private organisation that may have debt holders higher than you in the pecking order. 
• You may  get some security over the artwork but if you don't then you are in real trouble - if they should fail then there is nothing 'guaranteeing' your income each year. 
• If this is the investment this means that Collins & Kent International would need to earn a greater than 9% return on their art leasing business just to pay you your 'guaranteed' return. 
• The concept of 'guaranteeing income' is still troubling me - banks don't guarantee your income when you lend to them.  They just promise to pay and you are taking the risk that they fail.  The word guarantee is misleading 


• Another option - you are buying into an art fund:  It may be that they are trying to set up an 'art fund' where you buy into a collection of works and then receive income from the customers they rent the art to.  You get the capital appreciation of the art and the guaranteed income. 
• If this is the case they really should just say it as it.  Given their emphasis is on the income return I don't think this is the case however this page  sends a completely different signal.
• Note that I have massive issues with that page as well.  Those are paintings that have been offered for sale by Collins & Kent International but they do not say whether this was  regular auction process or whether this was to investors in a presumed fund. 
• Also they talk about the returns on those assets between the 1970s and the early 2000s.  It cannot be Collins & Kent International who got those returns because they were only founded in 1999 (see here)
• However in a case like this I don't understand how they can guarantee an income return.  Further given they are talking about being specialists in Masters' works - I don't know how many organisations can afford to rent a Master at 9% of the cost
• Also how does Collins & Kent International make their return? 
• Do they do it through fees?  If so are the fees reasonable? 
• Are they selling you work they have in their collection?  If so are they independently valued or are you getting an overpriced investment

Other things don't add up

There are other things that don't really make sense

• They talk about selling artwork through Collins & Kent International (see link above) however I could not find a recent gallery of theirs online.  I found old art news online relating to a gallery they used to have in Sydney.  This could just be bad advertising and their office on Collins Street in Melbourne may have a gallery
• Their rentals business is the one most prominently displayed on their website but even that seems weird
• Their main page here says "Rent the finest European artworks" and "prices start from less than US$3 per day".  I'm pretty sure that those to are uncorrelated statements but I'm happy to rent a Picasso for $1,000 a year if anyone is offering?
• It also made me wonder how you can get a 9% return of art being rented for $3 per day (because if you think about it Collins & Kent International need to make their return on top of this)

Summary
This case was one where there were a whole bunch of problems that did not add up.  I am not saying they are doing anything dodgy - they could just be terrible marketers of a great idea BUT I am not going to spend the time coaxing this idea out of them and the lack of clarity and ambiguous statements right through their advertising really put me off.

Did you consider investing in this?  Has anyone spoken to them - I would love to hear about it.

[Note to readers: 8 Nov 12: If you have read this far you have seen my criticisms and guesses as to what this investment entails.  Several months after posting it I finally discovered it - see the post here]

Mail order scams: Collectible coins

I found myself the recipient (though thankfully not sucker) of what I considered to be a mail order scam. While the situation outlined below may not be illegal I consider it to be unethical and have given it the title 'scam' for that reason.

I received a letter in the mail from 'Macquarie Mint' (see their website) offering me the chance to buy a $10 coin for only $10 which celebrated all Australian soldiers and the sacrifices they had made for Australia. When I first glanced at it - it seemed like a great deal - I had collected coins when I was younger and I knew that when you buy coins from a mint they are almost always at a premium to the face value. Then I realised that I'd never actually heard of the 'Macquarie Mint'. There are only 2 mints in Australia that are allowed to produce legal tender - the Royal Australian Mint and the Perth Mint so I was immediately suspicious.

I looked at the offer document more carefully and realised that it had many of the classic signs of a scam:

• Created the illusion of scarcity: 'Only 150,000 would be available to households with only one per household sold'

• Incorporated information that, while not false, gives the wrong impression: The document had a graph of the silver price over the last few years and said that the coin was silver. On the website as at 28 March 2012 it provides that the coin is 10g of '50% fine silver'. This implies a silver content of 5g (0.176369oz). At the silver price on 28 March 2012 of US$32.57oz (A$31.173/oz) this implies an intrinsic value of the coin of ~$5.50. On silver content this is therefore a terrible investment so putting a graph of the silver price is a moot point.

• Put the relevant information in tiny font while emphasising the useless: Macquarie mint says that the coin they are producing is legal tender in Kiribati. I admit that I had never heard of Kiribati so decided to look them up - apparently it is a small pacific island which uses the Australian dollar as their currency. So either a) they are lying about it being official currency because the AUD is their currency or they have done some deal with the government or Kiribati to send a commission per coin back to them. You may think that this means it isn't really a 'scam' because they disclose this fact. I would argue that given it has Australian soldiers on the coin that this is a point advertised much more loudly than the fact that it is from Kiribati that it is very misleading and designed to dupe people. Actually there is a larger argument around the official legal tender point.

• If this is in fact legal tender in Kiribati and the Kiribati dollar is tied to the Australian dollar on a parity basis then there is the potential to make money by waiting for the 'exchange period' to end (see below) buy the coin for the silver content (A$5.50 - see above) and then exchange it in Kiribati for Australian dollars. While this is theoretically possible, it is premised on the fact that this coin is actually official legal tender and the Kiribati government will continue to recognise it as such past the redemption date.

• The coin is 'worth A$10': I was actually wondering how they could support this particular claim as 'collectible' coins like this rarely ever are 'worth' what they are sold for. In fact they came up with a rather ingenious solution: 'Macqurie Mint' will buy the coin back off you (as long as you have the receipt) for $10 for the next 3 years. After this point the coin is (presumably) worth nothing more than it's silver content as I tried having a look but couldn't find a great market for Kiribati coin collectors.

Ok there are several more points that I would like to cover but I'll leave them for another time. The basic premise of this post is that this 'deal' is misleading to prospective purchasers and therefore I consider it a scam. I decided to try and find out who was behind it (not expecting much luck) but I was pleasantly surprised:

• On the Macquarie Mint website their ABN (Australian Business Number) was: 46 097 060 663. If you go to the ABR website you can look this company up: It comes up as Downie's Coins Pty Ltd trading as Downie's & Sherwood
• Further if you do a whois domain search on Macquarie mint the you (strangely enough) come up with exactly the same result.
• Downies Coins is a coin dealer with several offices around Australia (http://www.downies.com/) and surprise surprise the head office is in the same suburb (Abbotsford) as the return envelope address for Macquarie Mint
• I also went into the Downie's coin dealer closest to me and asked about the coin and the man behind the counter somewhat reluctantly admitted that Macquarie Mint was a 'sister company to Downie's but operated only as a mail order business'

Anyway this whole thing smelled fishy to me so I reported it to the ACCC's scamwatch. They probably wont do anything about it given the loss per person is relatively low and the offer letter is worded in such a way that it is correct and legal (although misleading and in my opinion unethical). If you would like to object too please report it to scamwatch and hopefully something will be done.

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