give investors a vote , page-37

Mr Kop1000, not sure what the wow is about. I aint a rocket scientist but could see the gain from such schemes and the pain as well. What MFS, CNP etc have done is no different to what Bond corpoaration, Rothwells etc did in the 80s. this time it was masked in 'financial engineering' which gave it some creditability. together with a supply of cheap and easy money people such as King etc took advantsage of it.

My only regret was not to be able to be a part of the scam. All i needed was some land that a bought for $10m (80% borrowed through my mortgage fund), got a valuation done, after getting some approvals etc, showing it was worth $20m. sold it to my fund, which then became part of my funds management business, for the $20m, this time issuing $10m in units and borrowing the rest. i get $20m of which $8m is used to pay off the mortgage - morthgage holders are happy tell their friends how good i was. Now I have $12m is cash. So to back up the confidence I have in my fund I invest $10m in the fund to purchase another asset, borrowing another $10m. So the fund has 40m under management - I get fees, 50% gearing sounds good. This is were it get tricky. I have assets worth $12m ($2m cash and $10m in units). I then use these assets as colleteral to purchase another property worth $50m, yielding 8%, borrow $50m at 7%, and all of a sudden I have an income stream of $500,000, plus fee revenue of $400,000 assuming 1% charge of funds under management. So capitalising this income stream the company is worth $9-10, plus $12m in cash and units, worth at least $21m. I them float my company based on current assets of $21m making the company worth $42m. Then i go to Tricom who then provides me with a margin loan on my shares. But in the mean time I announce a few more deals and the shares start to go up and say they get to $84m on the hype. I decide that I like the company so much I put in another $25m from the margin loan. so all of a sudden the company has $48m in cash (2+21+25) and we go out to get a whale of a deal, giving shares and cash. At this stage you can see it is borrowing on borrowing and use the borrowed cash as security for another borrowing. Gurantees here and there and every where.

This was simply example, and nothing unusual has haapened. But its the whale of a deal, combined with a credit crunch due to a sub-prime crisis that causes the valuations placed to become meaningless, recoveries from asset sales upon which borrowings occurred are not achieved, and therefore the losses multiplied, resulting in total loss, particular when short term loans are used.