Garth Rattray

Some years ago a friend casually asked me if I wanted to make some passive income. He had found a way of investing that would generate enough funds to sustain him comfortably. I exhibited no curiosity in his offer because I was one of the unfortunate victims of the collapse of one of our prime insurance companies. My disinterest signalled him to change the topic of our little repartee and it was only recently that I realised that he has been making quite a fortune in foreign exchange trading.

Although I watched my savings diminish in value as the inflation rate shot skywards, I remained extremely gun-shy about investing in non-traditional entities. However, the recent conflagration over unregulated investment clubs caught my interest. Like many other Jamaicans, I've been receiving one-sided information about non-traditional investment entities from organisations that called them 'schemes' (with all the attendant negative imagery) and placed them in a rather bad light.

My pursuit of balance led me to a group of people that are part of an investment club involved in foreign exchange trading (otherwise called ForEx trading or FX trading). This particular group is about four years old. Its members do not personally participate in FX trading but they focus on traders. They have been making a net percentage profit of between 8-20per cent per month and explained that good traders never offer fixed rates of return. They went to great pains to refute the conclusion of the recently publicised Caribbean Policy Research Institute (CaPRI) paper that FX traders were (at least in part) participating in pyramiding. They emphasised that, unlike Ponzi schemes, they had real earnings from trades with brokers.

The group disagreed with the CaPRI statement that "there is a high degree of probability that many, if not most of the informal investment schemes operating in Jamaica are unsustainable, making their eventual collapse inevitable".

Most won't fail

They explained that some clubs may fail, but certainly not most. They also challenged the CaPRI assertion that the (greater than 200 per cent per annum) returns realised by FX traders were "unprecedented and therefore highly improbable". It was explained to me that sometimes FX traders make over 100 per cent gains with one single trade. They also cited supermarkets that could realise a 40 percent profit in one month and the selling of phonecards (one of Cash Plus' stated investments) that also provided high returns.

I was told that several FX-trading groups are setting up their businesses overseas because they see trading as a question of investor choice. FX trading (a trillion-dollar industry) has outstripped the stock market for years. They explained that a certain prestigious German car company has been making more money through FX trading than through the sales of its high-end cars. Several traditional finance institutions are reputed to be seasoned FX traders that have been earning large profits on our monies for years.

The group believes in transparency and wants to be registered here in Jamaica but it needs the Finance Services Commission to "understand, facilitate and enable FX traders to make a positive contribution to the economy". Whereas FX trading formerly took many hours, it is now performed instantaneously with cutting-edge computer technology using trend-recognition software, leverage, pips, stop orders, limit orders and other stuff that stretch my understanding. In summary, the group explained that FX traders want fair, up-to-date exchange control legislation so that people can make informed investment decisions without being 'manhandled' by the authorities. That way, people can see the other (investment) side of their dollar.