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