Tell me about infomercial "get rich quick" scams.

Factual Questions
1

Not too long ago latenight/overnight television was full of infomercials about how to get rich quick in real estate (Carlton Sheets, Robert Allen etc.). I haven’t seen too many of these recently (and apparently some of the hucksters may have done some jail time on fraud charges) but a different kind of infomercial seems to be turning up everywhere.

Right now I’m watching a promotion for the “cash flow industry,” the basic premise of which seems to be that you find a business that needs cash in a hurry, you buy their receivables at a discount, and then collect the full value from the debtor when you can. Questions like what kind of business would get into this circumstance, or why such a business would go to a private party instead of a bank or some other established financial institution, don’t seem to be answered.

Another enterprise claims to use specialized software (which they will be happy to sell you) to predict stock movements, and identifies stocks with a red or green light. When the light at a particular stock is green, you buy, and when it turns red, you sell. No thought, let alone research or long-term planning, seems to be required. Somehow I don’t think Warren Buffett works like this.

There seem to be other software-based investment schemes, althought I don’t recall the details at the moment.

What do people know about these operations? I’m smart enough to know that if these plans had any validity, the hucksters would be busy using them for themselves instead of selling infokits. But I don’t know enought to be able to point to specifics and say “This is wrong, and here’s why.” Anybody had any close encounters with these guys?

2

I was curious about the Russ Dalby Cash Flow Network nonsense, and did some Googling and hunting around a few months ago.

What is boils down to is that there are people out there who are holding things like real estate notes. For example, I sell my house to you, but since you can’t get a mortgage for the whole thing, I agree to hold the remainder, and you execute a note to me setting out the repayment terms. Now, I’d rather have my cash now, of course, so if I could find some investor to take this note off my hands (at a discount to its face price, of course), I might go for it.

Russ Dalby wants you to sign up for his course, buy his materials, buy a website from him, etc., etc., so that you can go out, find the people who are holding paper, hook them up with people who want to buy paper, and collect your fat, juicy commissions.

If you read some of the message board postings about this scam, however, it becomes apparent, very quickly, that Russ is very, very good at incrementally draining your wallet, and not much else. Finding note holders is difficult, and finding note buyers is even more difficult. One reviewer commented that it appeared that a lot of Russ Dalby clients end up simply buying notes from each other, so it’s all just a house of cards.

3

I’m surprised by the previous post. Here, these “cash flow” deals are quite common, not particularily in real estate, but generally in businesses. Of course, they’re not bought or sold by your average jacques (I assume that most “average jacques” don’t know about them, actually), but by banks, other companies, etc… Since it seems to be an useful and commonly used tool, I would be surprised if it wasn’t in the US. It’s not like the nature and needs of businesses are essentially different on both side of the Atlantic.
Of course, I don’t think for an instant that a random unknowledgeable guy could become a specialist in this activity overnight and “get rich quick” anymore than he could in real estate or anything else.

4

After intensive research, I am now able to reveal the magic of the Russ Dalby Cash Flow System:

#1 Get some cash.

#2 Flow it to Russ

5

Ah, but you forgot:

#3 Profit!

6

As for “predicting” the stock market, you can’t do it by graph analysis. History does not, on the micro scale, repeat itself, and the stock market is comprised of discrete reactions to hundreds of thousands of events. So when you look at a graph and predict a 10% rise “just like back in August” or whenever, you’re actually predicting that a series of equally fortuitous events will come to light. But let’s go over a few of the many thousands of reasons why stocks move:

  • the market as a whole moved
  • strong investors reveal they are/are not buying/holding/selling your stock
  • your company scores a major win or loss against its competitors
  • your company announces a change in earnings prediction
  • your company is mentioned for good or ill in the Wall Street Journal
  • your company is mentioned for good or ill in an AP wire story (much bigger!)

A slow news day can be the difference between the last two; say that you win a major contract and announce higher earnings on the same day that the market as a whole drops. It’s a fast news day, so only the WSJ covers your story. The market is reacting badly to a Presidential speech. Does your stock move up or down? Clearly we can deduce the interaction of such complicated phenomena from analysis of a two-dimensional plot… :dubious:

Anyone who sells you software to “time” the markets is probably making their money by either

(a) collecting profits from software sales,
(b) moonlighting as a broker who collects a commission on each trade his software urges you to make, or
© working with a piece of “Master” software that tells him when all of his sheep are going to artificially inflate the price of a particular stock.

…or all three. Probably illegal, but definitely profitable!

7

With regard to any kind of ‘get rich quick’ or ‘easy money’ scheme, there are only a couple of things to know.

#1. If the thing actually worked, the peson selling it wouldn’t need any customers. He wouldn’t need the hassle of preparing sales ads, running his ad campaign, dealing with orders, processing orders and so on. (I run an online business and believe me, the hassle of running a business and processing orders isn’t something you take on if you can possibly avoid it.) If the secret ‘get rich quick’ system worked, the guy hyping it up could just stay at home quietly using his own scheme to make all the money he wants. This is inescapably true.

Most people running these scams simply don’t address this issue. The few that do address it offer lame crap along the lines of “I’ve made my pile and now I feel I can safely release my secret knowledge (of whatever kind) so that others can benefit.” Yeah, right, thanks for the magnanimous gift to humanity. If you want to be that magnanimous, either give me your secret for free or at least give the money to a good cause other than your own bank account.

#2. Corollary to the above. Most ‘get rich quick’ schemes that actually DO generate any money boil down to this: make money by advertising ‘how to make money’ packages. So, let’s suppose I run an energetic internet ad campaign, saying that for $50 I’ll send you an ‘information pack’ about how to make lots of money on the internet. You get reeled in, you send me your 50 bucks. I send you basic info pack telling you how to run a ritzy-dink online ad campaign promising ‘how to make money’. If you object, and say I’m some sort of con artist, I can turn round and say, ‘Hey, it worked on YOU didn’t it? I’ve got YOUR fifty, which proves it works, so now you can go ahead and emulate my success!’.

There is a player in this field who has made quite a bit of money out of internet marketing and who certainly knows how to play the hype game. I won’t name him lest I get the Dope into trouble, but the chances are that if you’re into this kind of thing, you will have heard of him and/or had one or more of his sales pitches hurled at you. Well, I have never bought any any of his products, but I have enjoyed some fun corresponondence with his organization. I put it to them that they don’t really have anything to offer except how to make money by promising to send people info about how to make money. They didn’t have much to say by way of reply except a few weaselly and evasive responses, suggesting that they don’t like to acknowledge the truth.

A friend of mine actually stumped up the money to go to this guy’s seminar when he came to London, and you know what? I was right. The whole thing can be boiled down to this: if you are prepared to work hard, setting up websites, buying and using name lists to deploy the slightly more ‘respectable’ kinds of spam (i.e. with fair opt-out riders), running online marketing campaigns, getting your name and offers out there in front of millions, playing the numbers game and only expecting a 0.01% response to all your efforts, then yes, you too can make lots of money by selling promises of information about how to make money. My friend hasn’t made a dime out of this information, and never will.

As a third and final point, a good way to assess a lot of things in life is just to ask yourself (a) what is being hyped and (b) how many people you know personally who are living proof that it works? This isn’t a perfect science, but it’s a good way to form an intelligent initial response. For instance, I’ve been seeing ‘baldness cures’ advertised all my life. But baldness isn’t an illness or a disease, and is in fact something that can happen to perfectly normal, healthy guys. So it can’t be ‘cured’ as such. And you know what? All the guys I’ve ever known who have lost their hair (perhaps somewhat more early in life than they would have liked) are still balding or bald. This is because there is no effective cure or treatment for baldness. Heck, Elton John has more money than God and even he can’t manage anything better than a very laughable, unflattering and obvious wig.

So - how many people do YOU know who got rich quick? Or sent off for some special internet info pack and ended up wealthy? I bet none. Because these things are just scams.

8

I think a faulty argument used against evolution applies here: if get rick quick schemes were easy for everyone there would be no more poor people.

9

Buying receivables at a discount is a perfectly legitimate business. It was part of my first wife’s job when she worked for a major financial institution.

Of course, if you, an ordinary person, happen to spend all the money you have to buy receivables at a 20% discount, you have to collect from enough people to make a profit. And you, an ordinary person, probably don’t have a huge, full-time collection staff at your disposal, as my first wife’s employer did.

I managed to get my hands on the complete training materials for one of those “make a billion in real estate and don’t use your own money” scams.

  1. Find a motivated seller who’s willing to sell his property below market value.

  2. Go to a bank and borrow as much money as you can.

  3. “Convince the seller” seller to give you a second mortgage for the rest.

“Convince the seller” – that’s all the course said. No information on what to do to convince a seller who’s probably willing to sell below market value only because he needs quick cash.

I suspect most of these scams tend to gloss over tiny details like that.

10

Most of the schemescams work if YOU work night and day.
The promoters make their money selling you their system so you can keep on buying add-on tips, newsletter, etc. etc.

If it sounds too good, or too easy to be true it is.

Recently saw an offer to buy up a privately held mortgage for about $.80 on the dollar. Any one holding a private mortgage has good reason for doing so and isn’t about to be scammed out of the long term future value of the mortgage for 80% of face value.

11

There are ads that have been running in the backs of magazines for decades. I’ve got one of these ads in front of me now.

The headline is “GET PAID MAILING LETTERS” followed by “At Home in Your Spare Time”.

Variations of this ad have been running practically forever, at least as far as my lifetime is concerned.

“Results guaranteed. FREE postage. FREE envelopes.”

“For details, send SASE and $2 p/h to:”

I won’t bother with the address.

If you send the SASE and $2, you’ll get a copy of the ad and a letter telling you to run the same ad in other magazines. That free psotage and free envelope? You sent it to them.

I just saved you the $2.

If you want to show your appreciatiion, send $1 to…

12

Would this player happen to be the star of many a late-night infomercial in which he cheerfully and relentlessly tells you absolutely NOTHING about the way this thing works, but encourages you to send in your $32 to get his money-making secrets in colorful, glossy booklet form?

If so, I was a victim of his scam (and my own laziness and greed) about 10 years ago. Sent in my $32 after watching far too many late-night infomercials and was appalled by what I got back…basically two booklets detailing the whole “put this ad in the papers” scam and a list of major American newspaper classified ad addresses.

13

The term for what the OP intially addresses is “factoring.” It is indeed legitimate and works as described. What’s really surprising is that there are some really large companies (names of which escape me right now) that enter into factoring agreements to get cash.

Nothing wrong with #1 and #2 is legal so long as the relationship between manufacturer and broker is disclosed to the consumer. In fact, the most-used technical analysis software has a brokerage account bundled into it so you can have your trading system automatically make trades.

I imagine that #3 is only illegal if he is manipulating the signals to operate the stock in question. There are trading systems that work on this principle and thousands of floor (and other) traders have been doing just this for as long as there have been markets - it’s called “fading.”

14

If everybody’s rich then nobody’s rich; people would probably still hold the same economic class in relation to each other that they did when they were poor.

If everybody is naked, then nobody is naked.

15

And it ain’t just for TV anymore. Welcome to the wonderful world of spam! (Is this a Python-free zone, I hope?)

http://www.channelone.com/news/2004/10/27/ap_spam/

In the first felony case of its kind, 3 folks are going on trial in VA for spamming millions of AOL customers in an attempt to sell “work at home” schemes and stock picking software.

The defense claims that the state will not be able to prove that they masked their real address, or that 7.7 million people did not actually request this information.

Btw, the prototypical get-rich-quick-by-telling-others-how-to-get-rich-quick product is the “Lazy Man’s Way to Riches” by Joe Karbo.

16

Yes they are.

17

A quick google on Joe Karbo brings up this interesting essay on common characteristics in the advertising of most get-rich-quick schemes:

http://www.alternative-doctor.com/wealth_stuff/karbowarning.htm

18

My favorite line from an infomercial was one for Tom Vu that I saw probably 15 years ago. He was there on his yacht with gorgeous bikini-clad babes, and said, in his vietnamese accent, “People ask me, ‘is this get rich quick scheme?’ - I say of course it is - who want to get rich slow?”