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Old 09-12-2020, 02:13 PM
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While I respect the OP as he is a financial advisor, and I think that in general, he has very sounds investment advice, I think the concept here is a bad idea for most folks. I also saw a similar article on SCD here: Link. When I first saw these articles, I was thinking this is one of the factors that is causing such a spike in the market recently for marquee cards. It's like another buyer's group out there, scooping up cards for this purpose.


The immediate red flags that I see are:

(1) 90 day lockup before you can sell your shares

(2) Owner retains 60% shares of the card

(3) Unknown liquidity of shares

(4) As far as I know, the cards are not stored by some objective 3rd party in case the cards need to be sold to pay out shareholders.

These issues will lead to potential for abuse. If the card values goes up, everyone wins. If the card value goes down, only the original owner of the card and the app will win. There are too many questions. Who's the market maker? Can your shares get diluted? Can the lockup be extended? Who sets the price of the shares? Instead of dealing with all of these complexities, just buy the entire card yourself or buy yourself a few shares of Apple stock, where the investment potential is known.


I remember a few years ago when the price of oil was sky high, and I thought that I was being a market genius by buying this ETF called USOIL, which seemingly would track oil prices that way. However, the strange thing was when oil prices went up, the ETF price barely moved. I thought I should have been making a killing, but ended up losing money instead. The excuse some something like there were a lot of complexities in the ETF like fees, the way they bought oil futures, etc that didn't translate into a 1:1 correlation of the price of oil and the ETF price. The point here is, if the investment is a black box where you have no clue the pricing structure, etc, it is best to avoid it before you lose your shirt on that investment.
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