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I’ve been in precious metal investment for quite a while, and I am retailing physical silver bullion to investors. Often there are investors who previously invested or are investing in a Gold Guaranteed Investment Scheme, come to me and ask who silver investment works. After they know how we invest in silver, they insist that silver isn’t profitable as it gives no cashflow. They still think that investing in the Gold Guaranteed Investment Scheme is safe and it’s the best move ever. I will often reply, “Go Ahead”.

I feel bad for my friends who have been brainwashed and joined the scheme and they simply cannot understand how the real precious metal investment works. There is no free lunch in this world. The scheme, paying 2% to 3% per month just makes no sense at all. Imagine investors are making 36% per year and agents get 1.5%per month, which is 18% per year. The company has to produce a 54% of annual return just to satisfy the promise to its investors and agents. What about other costs and expenses?

If 54% is legit, Warren Buffet should sell all his stocks and migrate to Malaysia and Singapore and get an ROI of 54% per year. That’s ridiculous.

Weeks ago, the company was being sued in Singapore, and the news were all over the country.

Another newspaper article from The Straits Times, Singapore.

That time I was thinking, when it will happen in Malaysia. And it happens YESTERDAY. Check out this news: Authorities in Malaysia, Singapore raid gold trader Genneva’s offices

After blacklisting for few years, our authorities finally took some action.

Special Thanks Daniel Foo of Silver In Malaysia for the photos

Hopefully this can serve as a lesson for those who are being attracted by the cashflow offered. There is no free lunch in this world. Often, greed drives us to losses, because it affects our decision making process. When we want to put money into any investment, we have to make sure we understand how the investment works, as well as other issues such as legitimacy, reliability, risk, possible taxes and so on.

This is just an wake up call for those who jump into investment schemes without prior knowledge and understanding about the investment itself. To understand how gold & silver investment works, you can always visit Silver4u Malaysia’s Official Website to find out more information.

Lately, because precious metal investment has been very popular among Malaysians, some companies are coming out with some investment schemes that provide guaranteed return.

Wait a minute.

If you understand the fundamentals of gold and silver investment, you will know that investing in physical precious metal is just so-called “buy low sell high”. There will be no cash flow in between. However, there are companies that do so.

It doesn’t make sense when I keep an ounce of gold at my home, and it springs out cash flow every month! It simply violates the rule of investing in gold and silver. We invest in precious metal and get capital gain or loss, and no dividend yield or cash flow in between.

If a company is offering gold and silver investment with cash flow earnings plus “Guaranteed Return”, beware of it! It might me the greatest scam that people are being trapped!

The worst thing is, those companies are saying that they’re scheduled institutions with Bank Negara Malaysia to solicit investments from the public. Recently, Bank Negara has received enquiries from members of the public in relation to these companies.

Check out this news to find out more: Misuse of Acknowledgment Letters Issued by Bank Negara Malaysia to Scheduled Institutions

A lot of companies are misusing of the acknowledgement letter by our Bank Negara. All they want to do is fishing investors to this trap!!!

Gold and silver investment is easy as buying groceries in the supermarket. Imagine that a company sell you some gold or silver and they’re able to provide you cash flow income. It simply means that there are some problems in between. Is the company charging a high premium from you? Or, the company just simply wants to gather capital and do some risky trading at the other end so that they can provide you the cash flow?

No matter what’s in between, but all the risks at the end will be associated with investors who do not understand the whole scheme well. I would say, such a scheme which looks too good to be true are actually a lot riskier than investing physical gold and silver without those schemes.

Last but not least, here is a list of companies which are not authorised nor approved under the relevant laws and regulations administered by Bank Negara Malaysia:

http://www.bnm.gov.my/documents/2012/Financial_Consumer_Alert_listEN.pdf

Beware of these companies. Do not be the next victim!

Recently, a lot of people mentioned about depreciation of Malaysian Ringgit, and many people shared photos about this matter. This drives me to do some simple researches.

To find out whether a currency is depreciating, we can only determine my comparing against other currencies. In general, all paper currencies are fiat currencies and by nature, they’re always falling in value because of federal reserves printing. The only thing we can do is comparing the exchange rate and determine how much other currencies you can buy with your country’s currency.

First of all, let us look at USD.

Starting from March 2012, our currency is depreciating against USD. Despite what are happening in US such as the massive currencies printing, MYR seems depreciating more than USD does.

The next one would be GBP.

Since March 2012 too, MYR was depreciating against GBP but recently because of the crisis happening in Eurozone, the GBP currency is affected and depreciated more as compared with MYR. However, right now, in average, we still buy less of their currencies compare with years before.

EUR is one of the currency that depreciated against MYR, due to the debt crisis in Eurozone.

MYR is appreciating against EUR and it’s believed that the Euro Dollar is going to continue falling. Several news have mentioned that Greece is likely yo quit Eurozone. The economic downturn of the whole Eurozone will affect countries which export goods and services to them.

Have a look at AUD.

MYR is appreciating against AUD during February to May but depreciating against AUD since May 2012.

What about MYR to SGD?

It’s pretty obvious. Malaysian Ringgit is depreciating against most of the currencies. However, what is the main reason that caused MYR to depreciate? Is it because our currency is devaluing more than other currencies do? In certain extents, I believe this is one of the major reasons. Another factor would be the economic growth of Malaysia is slower than countries such as Singapore.

There are also news publication mentioning that Malaysian Ringgit’s depreciation has hit the 14 years lowest.

In my opinion, the next global economic crisis is definitely a currency crisis, whereby people will no longer demand paper fiat currencies because its value is coming all the way down. This will cause deflation because the paper currencies circulating in the market fall tremendously, and we can see the federal reserves will start printing paper currencies and push the market (this is happening is Japan right now!), causing hyperinflation!

Robert Kiyosaki spoke in National Achiever Congress and predicting that there will be a currency collapse in 2016. Right now he’s investing a lot in silver and oil. I always believe that commodities such as gold, silver and oil are good asset class to invest because every time when the value of currencies go down causing inflation, the price of commodities will go up.

I’ve founded Silver4u Malaysia that provide financial education and retailing of physical silver. Investors can now buy and invest silver in Malaysia with us and get prepared for the upcoming currency crisis and hyperinflation!

When gold investment is being concerned in Malaysia, many people always come across an investment scheme - Genneva Gold Investment Scheme. It has been a very hot topic for years in several forums. Everyone is giving comments about this investment scheme.

About Genneva Gold Investment Scheme

In this scheme, you aren’t only the owner of the gold. You are also receiving 1.8-2.5% cash return (which is known as “Hibah”) every month for 3 months under Genneva’s Syariah principle-based product plan. At times, they do offer 3% Hibah per month.

The scheme works similar like Fixed Deposit (FD). You can sell back the gold with the price you buy from them after the contract ends. Hence, your capital is 100% protected, yet with an annual return rate of 21.6-30.0%.

How it works

To begin a contract, investors purchase the gold with a sales and purchase agreement, letter of Hibah, certificate of ownership and the physical gold. After that, investors can enjoy the “Hibah” until the contract ends.

When the contract ends, investors have 3 options:

• Keep the physical gold
• Sell to third party
• Sell back to Genneva with the SAME price investors purchase

It sounds extremely fantastic for most of the people. It seems like “the best investment ever” whereby your initial capital is fully protected and the “Hibah” is guaranteed! FD will only yield around 3% to 4% per year, while Genneva is guaranteeing investors the high return. In addition, there are 3 exit strategies for investors.

But wait……

Everything seems too good to be true. As an investor, we always need to be aware of investment schemes which are offering extremely high return with little or no risk.

I decided to dig things out by researching about this investment scheme. Besides, I also attended one of their seminars last year. There are several agendas that I’m going to shared in this post.

1. High Premium

I saw many people are saying this in forums and I personally believe it. When I attended the seminar, the spot price of gold per gram was around RM168, gold smiths are trading at around RM200 to RM220 that time and Genneva was quoting us at about RM220 to RM230. The mark-up is way to high from what I expect. People are also mentioning that the gold bullions offered by Genneva is at the price of gold jewellery that gold smiths are trading at, and sometime even higher.

A very general advice that Genneva gold bullion investors and their consultants say is to keep the gold bullion bars if the sport price goes up after the contract ends and sell them to the gold smiths to earn a better return. Genneva will never hope investors to sell back the gold back to them.

After several research, I find that doesn’t make sense. Genneva is selling gold bullion at an average of 20% to 25% extra premium (Around 40-50% above spot price). This means that you can only break-even if the price of gold goes up by 20% to 25% if you want to sell them to any third party!  Investors got to keep the gold for long term before that can actually sell them and make a gain.

Genneva consultants claim that we can always sell the gold to gold smiths at the same premium rate and this never happen. In fact, many Genneva investors say that the gold will always be sold to third party (include gold smiths) at an average of 40% loss.

However, many optimistic investors aren’t claiming that this is the risk because they can always sell back to the company. My question is, what if the gold is lost during the delivery (for those investors who are staying in the place where Genneva’s office isn’t setup, such as Miri)? The minimum and maximum loss will be 100% of your capital, and this happened before.

2. Hibah

The attractive return that Genneva offers is always something frequently questionable. Again we heard many Genneva investors say that “as long as I’m receiving Hibah, why do  need to care where does the Hibah come from?”

As a careful investor, we shall always analyse and look at the whole scheme. The answer is pretty obvious. Investors who do not sell the Hibah back to Genneva, they’re paying the Hibah themselves! As mentioned above, the mark-up is as high as 20% to 25%. Giving 1.8-2.5% per month to the investors is extremely affordable for the company. As mentioned, Genneva always doesn’t hope investors to sell back the gold bullion and their consultants mentioned to me that usually investors won’t sell back because they’re positive with the growth of gold price.

Even if investors return the gold and get the capital back, Genneva will not make a loss. If you’re good in investing, you will know that with such a large money on  your hand, you can do a lot of things to get the similar return. Genneva will do the same to offset the Hibah that they’re giving out.

As an investor perspective, you shall buy the gold and get the Hibah and sell back to Genneva after the contract and your net profit will be the 5.4-7.5% of Hibah per 3-month contract, provided there are no other risks.

3. Buy Back Guarantee

I believe this is another risk for investors. Genneva does offer buy back guarantee and during the seminar, those consultants are saying that they will always buy back the gold and return 100% of your capital.

However, buy back guarantee is something that they do NOT include in their policies. And, Genneva even claims that in newspaper.

Buy Back Guarantee is just something they practise, but they do not actually guarantee. You’re exposed to that risk if you’re hoping to get the Hibah only and sell back the gold bullion after the end of every contract!

4. Investigation of BNM

Until today, Genneva Sdn Bhd is still under the investigation of Bank Negara Malaysia (click here for reference). As a careful investor, would you risk your money in a company which is still under investigation since 2009 until today?

5. Turn Around Time

This is what I know from many investors. They don’t get the physical gold bullion right after they pay. Normally investors have to wait for at least 2 to 3 days before they can get the gold. For investors whose stay in a place where Genneva’s office isn’t available? They’ve to wait for the gold bullion for a longer period of time, as delivery takes time. There are several cases that investors receive the gold bullion few days before the contract ends!

The main concern is, who is going to be responsible for anything happen during that turn around time?

6. Shaky Business Model

There are too much things to be discussed and it isn’t possible to be mentioned here on by one. There are still a lot of things which are questionable. According to some Genneva ex-agent, the company keeps on changing policies which eventually make agents feel insecure and not comfortable. For me, the business model is relatively unstable.

And I always wonder one thing. If everyone is investing in Genneva Gold Investment Scheme just because of the Hibah and sell back the the gold bullion after every contract ends? It simply means that Genneva has to find ways to make money that yields minimum approximately 40% per year! By using your logic, do you think it’s possible?  It may be.

Not forgetting that each agent is getting 0.5% commission and an extra 0.3% commission after their sales volume exceed RM3.5 million. Assuming that every agent is performing and getting 0.8% commission and every investor is investing vast sum of gold and get 2.5% of Hibah per month and sell back after contracts are expired, Genneva needs to find a business or investment that yields at least 39.6% in order to cover all these costs!

What about their operating expenses? Office rent, utility bills?

If investors start to sell off their properties, use credit card loans and go crazy with leverage and invest into Genneva Gold Investment Scheme that gives them 30% per year, can this business model sustain? This is possible because 30% of return is way too profitable if we compare with the rent received, and it’s for sure that the return can cover interest of any loans.

If everyone goes crazy in leveraging, is the business model sustainable?  If there are 1,000 investors borrow money and invest RM1 million in this scheme, how will Genneva makes the RM400 million profit out of the RM1 billion, just to BREAK-EVEN?

If it’s not sustainable, how will this music stop if the day comes?

Advice for Investors

Investments always come with certain amount of risk. There are people who make good return without any problem with Genneva Gold Investment Scheme for the past few years. However, there are also a lot of people got deceived by the scheme.

The general and also the best advice for any investment is to invest only the amount that you are afford to lose. Another advice is do not borrow money and invest. If things go wrong, you will instantly carrying a huge amount of debt that you aren’t able to pay off.

Furthermore, if you’re really showing interest in gold and silver investment, I would highly recommend you to invest in physical gold and silver. Remember: If you don’t hold it, you don’t own it.