Wednesday, March 26, 2008

Multi Level Marketing Opportunities and Pyramid Schemes.


My mother maintains a vendor booth at an indoor swap meet and farmers market in her city. She is keeping it mainly to promote her cheesecake business by handing out samples and business cards. She also likes to go to meet new people and has made friends there.
She called the other day and was a little vexed about a man that befriended her there. She said he was really charming and before long had pulled up a chair inside of her booth and had just kind of moved in-- talking about how he was recently widowed, etc, etc. Then all of a sudden he started pressuring her into some business deal where she would invest $1,500 dollars and she could make loads of money in return. He handed her some glossy pamphlets that looked professional. My mom responded to his gesture with, "aren't you just running a pyramid scam?"
"Oh no--that would be illegal. Just invest $1,000."
"I'm not giving you a $1,000!"
"Just five hundred then...you can write me a check."

So then, to get rid of the guy, my mom says,"My daughter Penny handles all of my business and finances." So she gives him my name, phone number and address! So, I have that to look foreword to--a call or visit from Ralph--you would think that being a con-man and all he would change his name to Alfonse or Jonathon or something wholly more attractive and affluent sounding. I am looking foreword to it...almost salivating at the thought...oh yeah...it's on Ralph!, it's on like Donkey Kong!
Multi level marketing is in many business opportunities a legitimate form of selling products. The difference between a legitimate multi level marketing business and that of a pyramid scam is easy to spot. The legitimate multi level marketing company places an emphasis on selling a product where the pyramid scam places an emphasis on recruiting people or asking for investments and in some cases like gifting clubs they will ask for donations where you in turn will recruit people below you to ask for donations or investments. The gifting clubs will sometimes use religious "feel good" terms or names like Renewal Celebrations or Jacobs ladder and might come as a special invitation from a church member.
A pyramid scheme is set up so that there is a hierarchy where people are recruited below those who have been previously recruited. Those who have been recruited make payments to the people above them in the hope of making their money back by recruiting others and gaining payment from them. In pyramids, most of the sales are made to the recruits and not the general public. The nutritional supplements or what ever they have going only serves as way to make the scheme look legitimate.
  1. Never feel pressured into joining a multi level marketing group.
  2. Never feel pressured into signing or investing in something that you aren't sure of.
  3. Take the time to investigate any business opportunity.
  4. Check the business out on the Better Business Bureau website at http://welcome.bbb.org/
  5. Never make investments at the swap meet!
Always keep in mind, that it's a felony in the United States to participate in a pyramid scheme and is punishable by fines and time in jail. People participating in the scam are viewed as engaging in illegal activities rather than being a victim.

Thursday, March 6, 2008

Satellite Radio as an Investment


Long ago and oh so far away

I fell in love with you before the second show

your guitar, it sounds so sweet and clear

but your not really here

it's just the radio.......


I heard a remake of this classic beat Superstar by The Carpenters not too long ago on my favorite XM satellite channel Ethel. It had a new edgy techno feel that was both hauntingly beautiful and familiar. I started to blink away tears when I heard it. On Ethel I know that I can find the edgy and the alternative that my heart craves. It's music like this that keeps me tuned into my XM channels, that, the superior sound and the lack of commercials (on 69 0f the 170 channels). Really, It was love at first sound! To me it's worth the annual subscription price of $143.00.


"If you love it so much, why don't you marry it?"

"O.K., I will."


I decided to look into Satellite Radio as a stock pick and was slightly shocked at what I found. The analysts opinions on XM Satellite Radio Holdings, symbol XMSR, were all over the place with most of them being in a neutral position not really recommending it but, not actually dissing it either. Today, they are leaning toward a buy position.

There is a friendly merger between Sirius Satellite and XM satellite that has been going on for over a year and it has been held up by the Department of Justice and the Federal Communications Commission. They need to approve the merger. The Federal agencies have a fear that combining the two companies will create a monopoly in the medium and hurt competition for consumers. I don't believe so. You can easily switch over to FM/AM, your CD player, your Ipod, your DVD player etc,etc...... I am optimistic that it will go through eventually. In my opinion, they need to merge for both to survive and thrive at all.

In the event of a merger you want to look at the company that is being bought, this is the stock that will rise--if it's a good fit and can benefit the company acquiring it. In this case XM is the one being bought.
I took a look at the financial statements and ratios of both companies and understand why the analyst opinions are so varied. Presently XMSR stock is at $11.35 a share with a beta of 1.2 which makes the stock slightly riskier than most. It has increasing annual Revenue which is good but, their Expenses are so high that it entirely wipes their Net Income. It might just be the nature of the satellite radio medium though--Sirius had similar results. XM has no P/E ratio or dividend, which isn't uncommon for a fairly young company. I would classify it as a highly speculative stock investment.

I ended up picking up fifteen shares of XM but, they say that love is blind.


O.K. so, I did marry it but, there was a shotgun involved and I might get an annulment by the end of the year--but, at least I was wearing underwear!