Every Friday, Chuck Jaffe at CBS Marketwatch posts an article about a shady investment opportunity, aptly named the Stupid Investment of the Week (this week’s article).
I first ran across this column while researching an ad I saw in the local newspapers Business section, advertising 8% to 11% annual returns on unsecured “investment notes”, by a company called ABFS, or American Business Financial Services (ABFIQ.PK). Chuck’s timely column helped me (and probably many unsuspecting others) realize that this company was bad, bad news (sub-prime housing lending. Can you imagine the rates they were charging if you were even getting 10%??) . See the article here (7/04).
Of course there were plenty of people happy with ABFS for a while. I mean, while Capital One 360 was giving out 1.8%, they were getting 8% on a short 6-month note. That is, until the got de-listed from the NASDAQ. And filed for Chapter 11 bankruptcy. See follow-up article here (3/05).
I like how Chuck goes into the details of exactly how these companies are trying to screw you over. This company obviously was targetting the relatively uneducated consumer who looks mostly at the rates, especially those who are wary of stocks after the last bust. This is why I think that, along with offering 401ks, companies should really offer some basic personal finance classes so people 1) actually participate, and 2) don’t bail out when stocks go down, as they simply do.