Da financial industry (2)

There was a description of another Ponzi investment scheme in the Times today...time for another imaginary lesson from my Grandpa Harry...


Mr. Cook was telling potential investors that he was producing monthly returns of one-half to 1 percent, month after month, without a loss, over a period that included one of the worst investment markets in modern times. (Stevie, something's wrong there. Your Uncle Meyer and I can do that, but, uhhhh, we're in a different type of business.) Mr. Cook claimed to be generating those profits by performing so-called carry trades that allowed him to game the differences on currency yields in various countries. (Ha Ha, Stevie! That's funny! When I was your age, we used to get a loan in rubles, and pay it back in zloty...that's childrens's games...we even used Hanukkah gelt!) Next, he said, he used interest-free loans (Stevie, listen, this very important, When Grandpa lends money, everybody pays him back, and the interest shows what a mensch he was to lend you the money...the vig, I mean interest, is very important!) to set up a mirror-image trading position, creating a perfectly hedged transaction that, he said, produced guaranteed profits (...smoke and mirror-images....nothing, Stevie...Grandpa was just talking to himself). The free money, he said, came from a bank in Jordan, which, because of Shariah Islamic law, was not allowed to charge interest. (Don't play with those Ayyrab kids down the hall! Stevie, did Mr. Cook take your money? That's OK, Grandpa Harry will make everything right. Uhhhh, Stevie, did you put your baseball bat away in the closet like Grandma Ida said? I'll be back before dinner...sure, we'll play chess!)