About this #Karatbars #gold thing

Please note: this is not intended to be investment advice. For that, you should see a professional. This is intended to be a comment on hard sell and misleading information.

If you go to an event like this, for any scheme at all, it’s obvious that you should not enter into any legal obligation at the time, even if you are offered an incentive to do so. Go away, think about it, and research the offer extensively, including — especially — any warnings about or criticism of the deal. This applies to any similar scheme, not only Karatbars.

I went along with a friend to a meeting in London presented by (or on behalf of) a company called Karatbars. Karatbars sells small quantities of gold to the public, from 0.1 to 5 grams, in fancy packaging that looks like credit cards, medallions or polymer banknotes. These were presented at the meeting as an investment. In addition, the company offers a range of ‘affiliate’ schemes, in which members of the public can make money by introducing others who buy the products. My friend asked me to give feedback on what I heard, so here it is.

The main speaker had, apparently, flown from Northern Ireland specially for the meeting in south London. He was a skilled and entertaining, not to say hyperactive, speaker and clearly knew how to engage with his audience. But it’s what he said that I shall comment on. And what he said was seriously misleading, even if there was nothing that could actually be called a lie. That’s how hard sell works.

First, he went through a spiel about how gold is ‘real’ money and cash and notes (not backed up by gold*) are not ‘real’ money. This is bunkum: if anything is ‘real money’ it is the legal tender of your country. This is what you have to pay your taxes in, and if someone owes you a debt, then you are entitled to insist they pay it you in legal tender. They may offer to pay you in gold (or coal or duck feathers or tickles) but you are entitled to refuse, and they cannot insist that you take anything but the legal tender.

Second, before coming to the real sell, he tried to make out that gold is much better than cash because gold increases in value while currency depreciates. There was a lot misleading in this, and I shall come to this later.

Third, the real sell was to get you to recruit other people to sell the gold on the company’s behalf, and here again the speaker was not honest with the audience..

Now here is the question you should ask yourself: if gold is better than the legal currency, why is the company trying to sell you gold in exchange for currency? Wouldn’t it be better for it to just hang on to the gold? After all, companies exist to make profits and their bosses usually want to get rich. The company, clearly, does not believe its own message.

So, let’s look at some of the points the speaker made, and the points he (significantly) didn’t make.

The Karatbars product is small amounts of gold in fancy packaging. Reportedly, this is much more expensive per gram than sales of gold bullion. There are a number of reasons  for this. There are the higher overheads of selling small amounts (this applies to any commodity), the fancy packaging costs money, and the company’s selling methods and commission schemes will also be a big overhead. So, if you are thinking of the gold as a profitable investment, then the price of gold has to go up a lot before you even begin to think of making a profit.

It may well be that a certain amount of gold is a suitable part of an investment strategy (this is not advice, remember). But gold is used by rich people as a hedge, and its price fluctuates by huge amounts. It’s likely that you will have to wait many years before you see a profit. In the meantime you will have the cost and worry of storing it and protecting it from theft and the danger of being mislaid. At least, as the speaker, claimed, it will survive a fire — if you can find the tiny amount in the debris of your house.

The speaker implied (flicking one of Karatbars’ banknote-looking products) that you could use it to settle a purchase. No, you can’t (in general). As I pointed out they aren’t legal tender, and the small print on the item is a disclaimer that makes it clear it is not legal tender. One of the problems of using gold as cash — why it’s better to use currency — is that it is difficult to establish the price of the gold at the point of sale. The ‘spot’ prices you see online are guide prices based on large transactions of gold bullion (including settlements of debts between sovereign states), and are not a good guide to the price at which you can sell a few grams or a fraction of a gram. (I see that Karatbars has a network of businesses who will accept the gold ‘banknotes’, but it’s a reasonable guess they will not be the cheapest vendors.)

The speaker missed out a very important point. He compared the value of currency after inflation with the rise of the price of gold over (say) 30 years. But that is VERY misleading. If you have any sense you would not keep your money in a sock for 30 years, you would invest it in a scheme such as a pension fund, ISA or something similar (after, I hope, taking advice).

I am told by an independent financial adviser that at present, even in these times of low interest rates, a realistic rate of return on a stocks and shares ISA is 4% per annum (your own experience may vary). Assuming that rate over 30 years, a fund of £100 would be £324 now. Looking at the gold prices over the last 30 years, using the price at the time of writing, £100 of gold would now be worth around £280, although you would probably not get as much as that if you sold it. Remember the price of gold is likely to fluctuate daily as well as over the long term. If you sold the £100 of gold in 2012 it might have been worth about £400, but if you had bought it in 2012 and sold it at the time I’m writing this, you’d have lost about a third of the value.

That is not taking account of other factors, such as possibly having to pay tax on your gains in gold and special tax exemptions for savings in ISAs and pension funds.

So taking all the above into account, it doesn’t look likely you will get rich on investments in Karatbars gold. But they know that, that’s why they don’t just try to sell you gold, they try to recruit you as an ‘affiliate’.

Many affiliate schemes are entirely legitimate, of course, and the speaker compared the Karatbars scheme to those of companies like Amazon, where you can get commission by advertising that results in sales. No problem with that.

But the Karatbars scheme goes a lot further. Unfortunately I didn’t get a picture of the screen, but the speaker’s schtick included a calculation that showed you could be earning thousands of pounds per week from recruiting a couple of people who would each recruit a couple of people, and getting commission from the sales made by the recruits. There was, of course, some small print that the speaker didn’t draw attention to. So, if you do this, you are not simply making money from gold, but from the packages that each recruit has to buy to join the scheme (although there is apparently also an income stream from commission on the gold they buy.). This is called ‘multi-level marketing’ or ‘pyramid selling’.

But there’s a serious problem with this scheme. In order to join any of the affiliate plans, you have to pay up front for a package. In the example, the speaker supposed that in  the first week you recruit two people, and you get a share of the cost of the package each one buys. Then in the second week each of these recruits two people, in the third week each of those four recruits two (8 in total) and so on. So the scheme means in the fourth week 16 in all have to be recruited to keep up the flow. Each time this happens, you get a commission.

In the 13th week, in order to match the model the speaker showed, you have to have 18,192 people in the scheme, all paying you commission. In half a year, to continue as before, the number of people in the pyramid below you will have to be more than the entire population of the UK.

So that’s not going to work. Of course, if you are an assiduous salesperson, you may well recruit lots of people, and make a decent income for a while. But eventually, the people at the bottom of the pyramid will pay out money but fail to recoup it. The people higher up have recovered their costs but their income dries up. The people at the top are laughing all the way to the bank – and it’s your money they are laughing over, not gold.

There is another disturbing aspect to this whole thing. The speaker showed a slide with a whole lot of different affiliate schemes, which were not individually explained. I suspect (but do not know) that these are used to lure people into putting more money in when they fail to make money at first: “it’s because you didn’t invest enough first time round, buy this more expensive package and you’re sure to make a fortune”, appealing to the addiction of gamblers.

I am not saying you should not buy Karatbars, it is a decision for you to make, but I am pointing out that there is a lot you should consider before making that decision, and a salesman will not give you all that information. One claim of Karatbars is that its gold comes with a guarantee of purity, and you should verify that to your own satisfaction.

Disclaimer: I have not looked in detail at Karatbars the company or its offerings; this article is based on the sales talk of a particular salesman on one particular occasion in August 2017. I note that the presentation of the company’s products on its website makes it look as if they are novelties, collectibles, gifts or give-away items for business promotion, and you might well choose to buy them for these purposes rather than regarding them as investments. That’s up to you.


* Up to the early 20th century, in many countries, all currency issued had to be an (empty) promise by the government to give you an equivalent amount of gold if you asked for it. Some people still think we should go back to that system. It would be pretty pointless though, because overwhelmingly most of the money in the country – what you have in your bank account or savings – is created not by the government, but by banks when they make loans.


Letter to MPs from a Remain voter: a plea for realism, tolerance and honesty

This is the text of a letter written by Richard Bronk, a Visiting Fellow at the European Institute of the London School of Economics, to two Conservative MPs, one a friend, with whom he was in correspondence. The letter (which has been anonymised) was written to foster a better understanding of how many of the 48% who voted Remain are thinking and feeling following the vote – and thereby contribute to efforts to bridge the dangerous chasm opening up between most of the UK’s great cities, universities and the young, on the one hand, and the new Brexit government on the other. 

Source: Letter to MPs from a Remain voter: a plea for realism, tolerance and honesty

Does my dream desktop exist?

For years now, I’ve been looking (on and off) for a GUI/shell/operating system/database/CMS/what-have-you that would suit my preferred way of working on the desktop, regardless of the operating system. So far, I have found little that even approaches it.

So I’m posting this short specification here in the off-chance that some developer may find this, who knows about these things and might be able to tell me where I can find what I want, or be inspired to create something along these lines, or tell me why the idea is impractical so I don’t waste any more time thinking about it.

If anyone is interested in this idea, please get in touch. If it could ever be developed into anything, I’d be more than happy to help write the full spec.

1.Regardless of what follows, the user is still able to run conventional applications for the OS in their conventional ways. However, this may  enable a different way of writing applications.

2.Everything in the environment that is user-accessible in any way, whether software, hardware, on the computer or in the cloud, is an object that can be exposed to the user on the desktop (and there will be multiple desktops to expose them on). By everything, I mean everything. For example:

  • Files, including documents, spreadsheets and so on
  • System devices and configurations
  • Programs and scripts
  • Web pages, emails and other communications
  • databases and database objects

3.Every object in the above (where it is meaningful) has a class object that can also be exposed on the desktop and used to create new instances of the objects above.

4.The desktop has method(s) (for example, right-click menus) that enable the user to bring any of the existing objects or classes on to the desktop, or to create new objects or classes where this is feasible.

5.Every object has a set of methods that represent things that the user can do with this object, for example, read, edit, play and so on. This set of methods is accessed (say) by a right-click on the object on the desktop. The user can create a new method where this is feasible (if necessary by programming a new use of that object). (This is not all that different from what you can do on the Windows desktop already.)

6.Every object can have an indefinite number of independent associations with any other objects in the environment, where these are meaningful. These associations can be represented and defined graphically. Some of these associations may be built-in, others are user-definable. For example:

  • The underlying file system is a built-in association between objects
  • A user might be able to define a notebook, and then associate a variety of objects with a page of that notebook, say a few documents, some emails, some web pages and a program all related to a particular subject
  • The user could look up the emails, above, together with a number of other files all associated through having been received from or written by a particular person
  • Some objects could be defined as personal, others related with different aspects of work

7.An association is, itself, an object.

8.Methods can be put together in sequences of execution, macro fashion. Such a macro might  itself be an object.

9.Export and import can be to and from XML files.