Too good to be true? Remember Friday's column about managed futures -- a fancy name for writing put and call options. I published the company's alleged returns on their investors' monies:

2004 + 32%
2003 + 66%
2002 + 71%
2001 +102%

I kept my comments low key. I wondered how many readers would email me the obvious: "The returns are too good to be true." Sure, enough a bunch of you did.

The first step in looking at any potential "perfect" investment, is to ask yourself "Are the returns too high?" And then ask yourself, "Are they high for a reason?" -- like to suck you in.

Personally I've had my fill of alleged high returns. In the end, high, unusual, unreal returns turn out to be exactly that -- unusual and unreal. And, worse, you often lose all your savings.

The Ponzi Scheme: Con Man for the Ages. Roger Lowenstein wrote the brilliant book "When Genius Failed: The Rise and Fall of Long-Term Capital Management." In Friday's Wall Street Journal he wrote a review of a new book called Ponzi's Scheme.

I always wondered how the original Ponzi scheme worked. Here's Lowenstein's wonderful explanation:

The same cannot be said of Charles Ponzi, the turn-of-the-century Italian immigrant who gave this genre of fraud a name. Mitchell Zuckoff's biography of this charming rogue, "Ponzi's Scheme: The True Story of a Financial Legend" (Random House, 390 pages, $25.95), provokes our wonder precisely because his subject is so brazen -- and yet so naively captive to his own delusions.

Landing in Boston in 1903, Ponzi dreams of gold but fails at job after job and twice lands in jail (once for forgery). In time, he graduates from manual labor to white-collar work, where the scent of finance arouses him. In 1920, and with only the barest outline of a business in mind, the 37-year-old drifter launches the Securities Exchange Co. For financing, he offers to borrow money on a signed note, payable in 45 days at the fantastic interest rate of 50%. Compounded over a year, sums would increase 2,500%.
[Ponzi's Scheme]

It is unclear whether he intended for his financing vehicle to dwarf his presumptive trading business, but it quickly did. The prospect of spectacular returns spread by word of mouth, first among Boston's Italian neighborhoods, then more generally in the Hub, then to more than a dozen satellite cities where Ponzi opened branches.

In February 1920 he sold $5,000 worth of notes; by June, the total had soared to $2.5 million. Such growth ensured that early investors could be paid in full (though many chose to reinvest), and as word of their "profits" circulated, more investors took the plunge. By summer, it was common to see School Street, outside Ponzi's office, jammed with workers bearing their small but hard-won savings, soon to be handed over. Mr. Zuckoff does a good job of portraying (and often, naming) these people: bricklayers, waiters, grocers, trolley drivers.

What possessed them to invest? Ponzi's scheme had a slender thread of plausibility, based on an obscure niche in the world's postal network. By international agreement, nations issued a common stamp, known as International Reply Coupons, which could be redeemed for postage in any country. (This was useful for international trade.) Ponzi, who had clerked for an import-export business, realized that the prices of these coupons did not reflect the huge currency devaluations that had followed World War I. Thus $100 translated into lire could buy much more postage in Rome than the same $100 could buy in New York. Ponzi explained to investors, always with sufficient vagueness, that his fabulous returns stemmed from buying coupons in bulk overseas.

However lucrative the idea might be in theory, Ponzi quickly learned that there was no practical way to buy and transport large quantities of coupons. Nor was there any way of turning them into cash (and Ponzi could hardly hope to pay off his investors in stamps). In fact, there was no evidence that Ponzi actually traded in coupons. Investors hardly cared. As Mr. Zuckoff observes: "Like a magician who focuses his audience's attention on one hand while performing feats of prestidigitation with the other, Ponzi knew the details of the transactions were less interesting than the promised results."

A master of the soft sell, he sent cards to investors in advance of their notes coming due, reminding them to come in and collect -- thus reinforcing his image as a man concerned with his investors' welfare. Even the police detectives sent to keep tabs on this financial whiz ended up investing with him.

Latent class resentment in tribal Boston bolstered his appeal. A diminutive, ambitious outsider, Ponzi had found the doors to the Anglo-Saxon establishment shut. When he began to rake in millions, he had the exquisite pleasure of taking control of a bank, Hanover Trust, that had coldly rejected his loan application less than a year before. Mr. Zuckoff notes that Ponzi's investors may not have known for certain whether Ponzi was on the level, "but they were rooting for him."

With his dapper Palm Beach suits, silk handkerchiefs and snazzy cars, he exuded confidence. Even when the tide began to turn, and lines of anxious sellers formed outside his office, Ponzi refused to run. Rather, he calmly served hot dogs and doughnuts to the people waiting for their money, as if to confirm his (wholly fallacious) claim to solvency.

Mr. Zuckoff puts us on the trail with the investigators and journalists who track Ponzi down. (Clarence Barron, owner of this newspaper, was an early doubter.) He tells the story of the Boston Post, which makes a crusade of catching Ponzi, and recounts, unnecessarily, the career of James Michael Curley, Boston's colorful and corrupt mayor. Perhaps the author has in mind a broader social narrative, but this is a story with only one star.

Indeed, Ponzi's downfall was brought about chiefly by the man himself. He has the opportunity to flee with a bundle but dreams of vindicating the faith of his investors and of Rose, his modest and loyal-to-a-fault wife. So he desperately searches for some new enterprise -- banking perhaps? international shipping? -- that will deliver the gains he owes, allowing him to get off the treadmill and go legit. But in the meantime, to redeem his notes, Ponzi has to keep writing new ones. In July 1920, the Securities Exchange Co. takes in an astonishing $6 million. Of course, this means that another $9 million in obligations will soon come due.

By November (less than a year after it had all begun), the debonair financier has pleaded guilty to mail fraud. We are left to wonder, as with the modern, Enron-era crooks, what it is that makes such people think that they can get away with it all. Perhaps it is in their genes. Released in 1924, Ponzi made for Florida just in time for the land boom. He set up a real-estate venture and offered investors profits of 200%. He returned to jail, was eventually deported and died broke."

How dumb can you be? The chief executive of the Boeing Company, Harry C. Stonecipher, who was brought out of retirement 15 months ago to clean up the company's tarnished image and restore its credibility, was forced to resign yesterday after admitting an affair with a female Boeing executive. Mr. Stonecipher, married and with grown children, was forced out for having violated an internal code of conduct that he had imposed on all Boeing employees as he tried to improve the company's actions and image.

This is Harry C. Stonecipher, a sex symbol for somebody inside Boeing. It must be the puppy-dog wrinkles. I'm practicing the expression. I suspect my wife will say, "You look silly, not sexy."

Sulphur at Whole Foods: They're opening another Whole Foods store in New York. My local store has 9,000 customers on average a day! I tried to get Whole Foods to carry Dole raisins, which are the best. But Whole Foods rejected the Dole raisins because they contained sulphur. A Whole Foods rep wrote me, "That is just one of the requirements vendors have to live with to do business with Whole Foods. If the chemical involved is not naturally occurring in the product it cannot be introduced in any subsequent processing." Meantime, the stock continues to rise:

Offending another group
Last week it was the Polish. Today's it's Jewish mothers. I figure I can't possibly be offensive if I insult every group.

Jewish mothers have no problem figuring when life begins. It's simple. The fetus is not considered viable until it graduates from medical school or law school.

Q: Why don't Jewish mothers drink?
A: Alcohol interferes with their suffering .

Q: Have you seen the newest Jewish-American-Princess horror movie?
A: It's called "Debbie Does Dishes."

Q: Why do Jewish mothers make great parole officers?
A: They never let anyone finish a sentence .

When the doctor called Mrs. Liebenbaum to tell her that her check came back, she replied, "So did my arthritis."

A Jewish boy comes home from school and tells his mother he has a part in the play.
She asks, "What part is it?
The boy says, "I play the part of the Jewish husband."
The mother scowls and says, "Go back and tell the teacher you want a speaking part."

Q: Where does a Jewish husband hide money from his wife?
A: Under the vacuum cleaner .

Q: How many Jewish mothers does it take to change a light bulb?
A: (Sigh) Don't bother. I'll sit in the dark. I don't want to be a nuisance to anybody.

Did you hear about the bum who walked up to a Jewish mother on the street and said, "Lady I haven't eaten in three days."
She replied, "So, force yourself."

Q: What's the difference between a Rottweiler and a Jewish mother?
A: Eventually, the Rottweiler lets go.

Q: Why are Jewish Men circumcised?
A: Because Jewish women don't like anything that isn't 20% off.

StopCarly.com is gaining momentum: More and more readers are posting comments on why the incompetent Carly Fiorina should not be made president of The World Bank. Tell your friends about StopCarly.com. Tell them to tell their friends. This is really important.

Harry Newton

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads. Thus I cannot endorse any, though some look mighty interesting. If you click on a link, Google may send me money. That money will help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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