Business
Lyceum
e-Letter
Practical Instruction in the Arts and Sciences of Making
Money
DECEMBER 1999
Greetings & Salutations:
This last month, one of the Business Lyceum Attendees ... who wishes to
remain anonymous ... wrote to ask:
"In your e-Letter, you say you have been involved in Offshore
Banking. So, where can I buy a Letter of Credit to use as collateral for
a loan?"
YES ... I was, indeed, involved in Offshore Banking at one time.
Built the Bank up to over $21 Million in assets in less than 9 years - but -
that's another story, for another time. -- In response to your question, lemme
tell ya all about ...
LETTERS OF CREDIT
Although the term "Letter of Credit" (or "L/C") has a specific meaning, the
term has been so abused and misused by con-men and assorted fools even some
bankers don't know what a Letter of Credit is.
A TRUE STORY -- only the names have been withheld to protect
the guilty:
In the early 1970s, I was able to set-up a deal to buy frozen seafood
(lobster & shrimp) overseas at a very attractive price. -- I, in turn,
offered to sell that seafood to a buyer in Florida at a nice profit; saving
the buyer money as well.
The buyer went to his bank and had a Letter of Credit issued to my company
in the amount of $120,000 for the first monthly shipment of seafood.
Fearing loss in the mail, the buyer's bank asked for the name of my bank,
so they could transmit the Letter of Credit by courier to my banker.
Upon receipt, my banker was to do nothing more than turn the Letter of Credit
over to me, so I could proceed with arranging the delivery of the seafoods to
the buyer.
Upon receipt of the Letter of Credit by courier, my banker REFUSED to turn
the Letter of Credit over to me. -- His comment was, "I can't turn this
over to you until you deposit $120,000 with our bank."
At that time, I was banking with the 'oldest' bank in the State;
established before the Civil War (notice I didn't tell you what State).
And, the banker who made the comment and held my Letter of Credit was the
President of the bank; well over 60 years of age; with nearly 40 years
experience in banking.
It took 5 lawyers and 10 days for the banker to turn the Letter of Credit
over to me ... and ... I had to publicly apologize to the banker for what I
had called him in front of his personnel.
By the way, although that happened a good many years ago, I find even today
many bankers still don't really know what a Letter of Credit is. That's
why you scare them to death when you ask them to issue a Letter of Credit for
you.
If you think the misunderstanding on the part of some bankers is
ridiculous, consider this. -- All too many otherwise intelligent people
envision a Letter of Credit as some mystical piece of paper; writ in Old
English form, that magically opens the door to the international financial
markets. And, they honestly believe that Letters of Credit can be
bought, like any other commodity, on the open market for any intended use.
Anyone who offers to 'sell' you a Letter of Credit is a con-man or worse
(unless, of course, they are selling "banker's acceptances;" which is a
completely different financial game).
So ...
What is a Letter of Credit?
To best answer that question, it will be easier to break that question down
into two other questions. -- What is a letter? ... and ... What is Credit?
A 'Letter' is a piece of written correspondence from one party to
another. -- 'Credit' is confidence in the ability of a person to
fulfill financial obligations.
Therefore, a Letter of Credit is a 'letter' from one party to another
expressing confidence in (giving 'credit' to) a person to fulfill a financial
obligation.
Although there are a wide variety of generally accepted forms of Letters of
Credit used in the banking industry, a Letter of Credit can take any form; as
long as it is a written document (letter) expressing confidence in someone to
faithfully fulfill a financial obligation.
You could write a Letter of Credit yourself, for someone else. A very
simple form might be:
"TO WHOM IT MAY CONCERN: I know John Doe. He's a good old
boy. I trust him. You can sell him up to $1,000 worth of goods
on credit. If he doesn't pay you, I will."
That is a Letter of Credit.
Now, John Doe has a Letter of Credit. But, if the merchant doesn't
know you, John Doe still won't be able to buy anything on credit from the
merchant.
On the other hand, if the merchant knows you and trusts you to pay the
bill, John Doe will be able to buy up to $1,000 worth of goods from the
merchant against your reputation (credit).
When a bank (or other financial institution) issues a Letter of Credit for
you, it is exactly the same as your simple Letter of Credit for John Doe. --
The bank is saying that, under the terms and conditions expressed in their
letter, they will guarantee that you will fulfill your financial obligation to
some third party; or they will fulfill that obligation for you to some third
party.
Since all of the banks in the world are connected (directly or indirectly)
through their various corresponding relationships, the bank issuing the Letter
of Credit is replacing your credit (because the receiving bank doesn't know
you) with the bank's credit which is known in the industry. But, if the
bank issuing the Letter of Credit isn't known to the receiving bank, it may be
necessary for the receiving bank to 'confirm' the credit of the issuing bank
through another bank (or banks) who does business with both the issuing and
receiving banks.
Now ...
How do you get a Letter of Credit to use as collateral for your
Loan?
Simple. -- Let's say, you are trying to get a Letter of Credit for
$1,000,000. --All you have to do is prove to some bank that YOU can be trusted
$1,000,000 worth. But, since the issuing bank will be putting their
credit on the line for you, you will have to provide the issuing bank with at
least $1,000,000 worth of collateral. That means YOU have to have
$1,000,000 worth of collateral to pledge to the bank, so that bank can issue a
Letter of Credit for $1,000,000 as collateral for your loan from another
bank.
There ... ain't that simple?
It appears quite obvious (to me anyway), that the Attendee asking the
question is probably involved in some kind of Self-Liquidating Loan deal ...
anywho, 'buying' a Letter of Credit is usually part and parcel of such
confidence games. -- As a matter of fact, the above is an excerpt from my
book, "Self-Liquidating (Arbitrage) Loans" ... which has been
used by a number of state's Attorneys General in the conviction of
Self-Liquidating Loan confidence men.
Besides explaining Letters of Credit, in "Self-Liquidating
(Arbitrage) Loans," I also explain Collateral Houses, Certificates of
Deposit, Prime Bank Notes, and all the other financial instruments and
applications used in Self-Liquidating Loans. -- I even have a picture of a
Prime Bank Note in the book and tell you where you can get them.
You can get your personal copy of "Self-Liquidating (Arbitrage)
Loans" at: Self-Liquidating Loans
-- Are YOU Stupid? --
Thankfully, almost no one is stupid about everything. But,
unfortunately, almost everyone is stupid about some things.
Do you ASK questions about the things you want to know about? Or, do
you just accept whatever answers you can find on your own ... not wanting to
appear to be stupid?
When you are asked a question, do you respond by quoting, almost word for
word, the answer given by some authority figure (or, worse yet, the
party-line), without thinking?
Do you ever question the answers you already think you know? -- I do, all
the time.
When faced with two answers to the same question, do you ASK yourself
"why?" there are two answers? Do you ever ASK yourself whether or not
the person giving you an answer has an ulterior motive?
Fortunately ...
Stupidity Can Be Cured!
All you have to do is ASK!
Every condition in your life has it's cause. -- Poor people are poor,
because they have never asked themselves, "why am I poor?" -- They just accept
the condition and pass it along to their offspring.
Unless YOU learn to ASK for what you want from life, you will be
stupid. But, you have to keep on asking, and Asking, and ASKING until
you get the answers that will, finally and lastingly, lead you to a full
understanding of success in business and in life.
Rudyard Kipling said it best:
I keep six honest serving-men
[They taught me all I
knew];
Their names are What and Why and When
And How
and Where and Who
ASK, and you will receive. -- It is better to appear to be stupid in
the eyes of really stupid people than to NOT ASK and really be stupid
yourself.
-- An Answer To Yet Another Enigma --
Throughout my life in the business community, I have pondered not only the
tried and proven methods of success but also the reasons why people can not,
or do not, succeed.
One of the enigmas I have long pondered is the fact that almost all of the
"opportunities" that guarantee success (to anyone who participates) have the
highest failure rates (i.e., over 90% of the participants in Multi-Level
Marketing programs fail).
A resolution to that enigma became apparent when I came across this
quotation:
"There is no use whatever trying to help people who do not help
themselves. You cannot push anyone up a ladder unless he be willing to climb
himself." -- Andrew Carnegie
The reason most people fail in those "guaranteed success" opportunities
is because people are not invited into the opportunity to 'help
themselves.' They are invited into the opportunity with the promise that
they will not be required to help themselves.
As the wee Scotsman observed, they cannot be pushed up the ladder.
Note: It also fully explains why the Government's "War
On Poverty" has been, and will remain, a gross failure.
Which ties in perfectly with our ...
Thought For The Month!
In 1948, in his book, "The Magic of Believing," Claude
M. Bristol said:
"I am cognizant of the fact that there are powerful forces at work in this
country that would dominate us, substituting a kind of regimentation for the
competitive system which has made America great among nations. They
would attempt to destroy individual thinking and initiative, cherished ever
since our Pilgrim Fathers established this country in defiance of the Old
World tyranny. I believe that we must continue to retain the wealth of spirit
of our forefathers, for if we don't we shall find ourselves dominated in
everything we do by a mighty few and shall become serfs in fact if not in
name."
That observation was made over 50 years ago. -- Today, it is a
fact.
Can you stump the old master? -- Betcha can't!
Over the past 40 years (man and boy), I have made bundles of money in
direct selling, service contracting, wholesale merchandising, entertainment (I
was a professional Trumpet player, vocalist & Radio Announcer), freight
forwarding, import/export, retail merchandising, warehousing, real estate,
electronics manufacturing, finder's fees, closeout merchandising, financial
brokerage, business consulting, steel fabrication, gold and coal mining,
offshore banking, mailorder, writing, and publishing. -- That being the case
...
No matter what business you're in ... whether you're just starting, well on
your way, or at the top of the heap ... I've probably been where you are, done
what you are doing. -- So ...
Anytime you have a question about 'how' to do something in your
business - or - if you have any comments about anything I've said in
issues of this e-Letter; or if you want to add your 2 cents worth ... just
"ask" me or "tell" me.
Send your Questions, Comments or 2 Cents Worth to ...
eletter@businesslyceum.com
with "Question" - "Comment" - or, "2 Cents Worth" in the
SUBJECT.
If I, personally, don't have an answer to any question you may ask, I will
contact some of the professionals in your field of endeavor (I will probably
know one or more personally) to get the real 'skinny' for you.
Well ... that's it for this month. -- In order to make every issue
responsive to YOUR needs, please send me your questions; or tell me what
sources or resources you need to build your business; or give me any thoughts
you want to share with your fellow members.
Believe it or don't ... I ain't a mind-reader. -- If'n you doesn't tell me
what you need, I may never touch upon the information, sources or resources
you need.
This is your publication for you to use to your benefit ... I am just your
moderator.
Until next month, keep well ...
J.F. (Jim) Straw
X-Offshore Banker
An Old Friend Has a Goodie For You!
Maybe you've heard of Dean F. V. Du Vall, Sr. (I've been knowing him for 30
odd years.) Anywho, ol'Dean has published about a zillion books,
newsletters, courses, cassette tape programs and such for nearly 40 years now.
Currently, he's probably best known for the publication, PERSONAL
SUCCESS(tm) - THE NEWSLETTER. That's a print publication which is
extremely popular and reaches countless ambitious wealth-seekers the world
over every month.
Now though, Du Vall has come up with an electronic WEEKLY publication
called DAX MONEY-MAKER(r) CONFIDENTIAL NEWSLETTER which is a modern-day
version of one of the oldest and most popular money-making periodicals of the
20th century - which, by the way, was the precursor of PERSONAL
SUCCESS(tm). Anyway, you can get yourself a free subscription to the new
weekly just by sending your request to: mailto:DAXMoneyMaker@aol.com?Subject=SubscribeDAXMoneyMaker
Making Money is FUN & EASY when you know how! Learning "how" is Fun & Easy too -- when you use the
... FREE Reports ... FREE Resources ... FREE Newsletter ... available from the "Business Lyceum."
Jim Straw's Business Lyceum