Cash Plus

It looks like those who have loaned Cash Plus money in exchange for the 10-18% monthly return they were supposed to be getting are going to be unlucky as the FSC has issued a cease and desist order, according to the Observer and Gleaner.

The rule of thumb I use whenever I hear about these kinds of "earnings" is that any company that produces mega-returns on that level must result in either:
- headlines in the Wall Street Journal and Financial Times lauding their genius
or
- complete collapse at some point, with someone left losing their investment because it is essentially a pyramid scheme

I say this without knowing anything about the companies that are offering these high returns, because the world is such that one does not need to know the inner workings of a company that offers these returns to be able to predict one outcome or the other.

It's a little like being able to predict that a lead ball will fall if it's released in mid-air.

Some 18 years ago, I remember a conversation I had with a colleague of mine who had just signed up with NuSkin, a network marketing company.

We were all employees of AT&T Bells Labs which back then was the premier R&D lab of its kind in the world. I had the opportunity to rub shoulders with some brilliant people, many of whom had PhD's, and a few (who I never actually worked with in person) that even had Nobel Prizes.

We sat down for several hours to figure out that what this NuSkin thing was all about, and where it was headed.

We arrived at the conclusion that ALL networking marketing companies must experience one of two outcomes if it's based on bringing in more people in order to grow:
1. A LOT of people lose their investment slowly
OR
2. It fails quickly because too much success eventually leads to a shortage of new recruits, which creates a domino effect that causes the company to collapse

It didn't matter that there was a product being sold, as long as hyper-growth was dependent on bringing in more people.

Not that this was a problem per se -- except that apparently neither the new recruits nor the owners of network marketing companies seemed to recognize this dynamic. It IS a very difficult dynamic to distinguish. It took a bunch of highly trained engineering types several hours to arrive at this conclusion.

Whenever I have spoken to someone in a network marketing company I have never been able to explain what we discovered, unfortunately.

Which brings me to Cash Plus. There is no company that has ever produced the returns that Cash Plus did each month without an element of it being a pyramid scheme. There is no company that has beaten the DJIA's annual return on an ongoing basis many times over without that element being present.

Cash Plus' difficulties at the moment are typical of this kind of scheme.

The question I have is whether or not the other investment schemes are also falling into the same trap. The owners don't need to be malicious people to make this grave error in judgement that ends up costing people their savings. They don't need to be convicted felons. They can even be quite smart.

To the other companies that are providing 10%+ monthly returns in their investment clubs or other schemes, I'd recommend that they bring in an independent forensic team to verify that there is no pyramid element hidden in the structure of the organization. This critical step would assist everyone in clearing up the mystery, and help the owner/operators prevent a catastrophe for themselves and their investors.

It would dissipate some of the thunder-clouds that are growing around these companies.