It's still true that one cannot find a scheme to get something for absolutely nothing

By DAVID MOON, Moon Capital Management
December 8, 2002

Old sayings usually survive because they contain at least a kernel of truth or wisdom. Until recently, I always assumed you really can't 'get something for nothing.' That's what my grandmother told me. And my grandmother was always right. I suspect her grandmother was always right, too ' just like millions of grandmothers before her.

I have now come to the shocking realization that either my grandmother was wrong - or a bunch of people think she was wrong.

A friend of mine recently received a letter from 'a top official of the Nigerian government.' This very official-looking letter asked if the Nigerian National Petroleum Corporation could use my friend's US bank account to hold $21.4 million for seven days. After the seven days, my friend could keep $4 million as a gratuity for his trouble. The Nigerians were willing to pay such a huge sum because using the US account would enable the Nigerian government to 'free up' the remaining $17 million for its own use. Apparently, there was some custody problem with the assets. The only small catch was that the Nigerians needed my friend to post a $10,000 bond to insure he wouldn't withdraw $21 million out of his account during the week it was on deposit. Compared to the 'risk free' payout of $4 million, this bond would be a minor point.

My friend shared my grandmother's philosophy and chose not to participate. Not everyone does, however. According to the US Secret Service, Americans have lost more than $100 million in this Nigerian Scam.

Some people believe these scams. Otherwise, why would crooks continue to spend the time and effort to pitch their crazy schemes? As Yogi Berra said, 'if people don't want to come to the ball park, no one can stop them.' Protecting your money is just like going to the ball park.

I recently received a very nice invitation to a seminar promising to teach me how to make money with stocks even if stocks go to zero. As an added bonus, I could learn how to increase my monthly income by $9,100.78. (I love when promoters promise such nice round numbers.) Hand written in blue ink at the top of the invitation was a personal note to 'David,' noting that the event was already sold out, but because I had been personally referred, the host was willing to make a special exception for me. (I actually received three invitations at my office and two at home, each with a similar personal note. One of the personal notes was addressed to 'Wheeler.' Another was addressed to 'W, CFA.') I passed on the seminar.

Do you think these examples are an extreme? The something-for-nothing mindset can be found in things as innocuous as a newspaper headline. On November 24, the Real Estate section of this newspaper published a syndicated article titled 'Four Options for Avoiding Foreclosure.' The article suggested ideas such as seeking your lender's approval to skip a few payments or trying to refinance the loan. My first suggestion on avoiding foreclosure is a bit simpler: pay your bill. Instead, the author, the financial editor of, suggested several ways for borrowers to absolve themselves of an obligation. That is, how to get something for nothing.

Too often, investors look for risk-free ways to make a quick buck. These schemes don't exist. As Warren Buffett once said, 'you can't make a baby in one month by getting nine women pregnant.' Some things just take time.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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