The 100% Guaranteed Stock Tip: He's Always Right, and It's Still a Scam

×
man computer pirate caucasian in studio isolated on white background
Alamy
Recently, I got a phone call from a very nice gentleman who suggested that I buy a certain stock that was guaranteed to go up in price. In fact, his exact words were "This stock is going to be moving up soon, 100 percent guaranteed." Although I didn't buy that particular stock from him, it did go up, and he called me back a week later with another stock pick, once again, "100 percent guaranteed" to go up.

This went on for another three weeks; he would call with a new stock, sometimes saying it would move up and should be bought, and sometime saying it was going to move down and should be shorted. And sure enough, every stock he suggested moved in the direction he said it would. And I have no doubt that if his picks continue to work, I'll continue to get a call each week with another sure winner.

The question you might be asking yourself right now is: How can this be? How can someone, even in a strong market, consistently pick winners week after week, 100 percent guaranteed?! Is he some undiscovered market genius, destined to one day be managing billions of dollars for the mega-rich?

Probably not.

Is he a rogue, trading on insider information, destined to go from rags to riches, only to lose it all and have Leonardo DiCaprio portray him in a movie based on his life?

Doubtful.

Is he a mini-Madoff, working a Ponzi scheme out of some East Coast boiler room? Now you're getting warm ...

You Can Fool Half of the People, All of the Time

One of the unfortunate side effects of a strong bull market -- like the one we're currently in -- is that it creates the perfect climate for a certain type of, shall we say, ethically challenged person, to crawl out of the Wall Street sewers and take advantage of the unsuspecting public.

With every new day, there seems to be another story about the Dow or S&P 500 hitting record highs, which attracts new -- and sometimes unsophisticated -- market participants, who can often be easy pickings for scam artists.

In my case, the man calling me with the spotless win record is orchestrating a variation of a famous con that I call the "A/B scam." Here's how it works:

The company running the scam starts by buying a massive list of phone leads. For their purposes, certain types of leads are better than others. For example, women tend to sniff out financial scams faster than men -- sorry, guys; our egos tend to get in the way -- so the scammers try to limit their lists to men. They also want a certain socioeconomic demographic: those with enough wealth to be able to afford stocks, but not enough to indicate that they might be "sophisticated" in the markets.

Once their list is set, they allocate a certain number of leads to each broker in their call center and give them stocks to push. Brokers then divide their lists in half and starts dialing for dollars.

For half of their calls, they'll tell the customer: "XYZ is going to go down next week and should be shorted. 100 percent percent guaranteed." For the other half of the list, their rap goes like this: "XYZ is going to move up soon and should be bought. 100 percent guaranteed."

The following week, if XYZ is up, they take the list of people from the previous week whom they told XYZ was a "buy" and divide it in half. Then they call those customers, do a bit of "I told you so," and proceed to give half of them the new stock's "buy" spiel, and the other half the same stock's "short" pitch. They repeat this process each week, always following up only with the half of the list that previously got the correct "100 percent guaranteed" advice.

The "A/B" name comes from the the fact that by dividing the previous week's "winners" list in half and making a new set of dual predictions, one group, A or B, will always get a winning pick each week -- 100 percent guaranteed.

After a few weeks of this, many of the customers start to believe, based on the consistent winning picks, that the solicitor is on to something, and they bite, placing an order with the broker's firm. The broker will, of course, push the customer for as big of an order as possible -- I mean, hey, he's been right week after week -- and continue to do so until the point that one of his "100 percent guaranteed" picks blows up.

This, of course, is just one of the many scams that surface when the markets are hot, so be sure to protect yourself by avoiding those who contact you unsolicited, and always remember that no matter how good something is, in the markets, and in life, there's no such thing as a free lunch.

No man is an island, or even a peninsula, so I encourage you to give me your feedback in the comments below. I also want to hear what else you'd like me to write about, so please let me know either by connecting with me on Twitter, or via email.

Increase your money and finance knowledge from home

What are Penny Stocks

The lucrative and dangerous world of penny stocks.

View Course »

Investment Strategies

What's your investing game plan?

View Course »

Add a Comment

*0 / 3000 Character Maximum

3 Comments

Filter by:
ayo770

Investors in stock should carry out adequate search on the stock and broker they want to invest in because there are too much fraud and fake information out there. I believe that one of the brokers you can very well trust is http://bit.ly/1gPeMRg. I have been using their system for quite a while and I have not regrestted it. They just are not fake and do not lie about their abilities and profitabilities. they have been there for a while. There are probably some other ones out there that you may know of. Please let me know. I just believe the time has come for everyone to start sharing the truth... My own is http://bit.ly/1gPeMRg and they are real.

January 16 2014 at 6:33 AM Report abuse rate up rate down Reply
ayo770

Whatever the case may be the poor and the informed and the hasty will always fall victim of all these frauds. Investors should carry out due diligence before letting go of their hard earned money. Find out what people are saying about any investment, check their ratings with the appropriate bodies. Google it! It costs nothing to do that. I have been using only one stock broker for a long time. That is of course after falling victim to many in the past. However, this one has proven to be true and fair. You too can try them out at http://goo.gl/RCihCv and if you are not interested please labour enough to check through the internet for any and all the information concerning a broker and or a listed stock. Again it is http://goo.gl/RCihCv

January 16 2014 at 6:11 AM Report abuse rate up rate down Reply
alfredschrader

There's an even bigger scam going only it's well hidden. Three major components of the New York Stock Exchange (NYSE) have already done this. Here's how it works. They start a corporation and sell all of the shares for millions. Then they siphon and squander the millions until nothing is left, then they cancel the shares making them worthless, and they re-issue new shares with the exact same company name and sell millions of dollars worth of those to new suckers. Everything is exactly the same - buldings, equipment, employees, inventory.
Winn Dixie Stores and Delta Airlines have already done this.
How do I know ? I have a worthless Winn Dixie stock certificate I can use for wall paper.

Until the regulators fix this loophole, I wouldn't put any serious money into the markets.

January 16 2014 at 5:31 AM Report abuse rate up rate down Reply
Colcolough

What you may not know is this "very nice gentleman" (as you call him) has 99 other people that he has called. The first 33 he says stock "ABC" will go up, the next 33, he recommends stock "XYZ" will go up and the final 33 and you, he recommends "DEF." After the first two recommendations go miserably south for 66 of the investors, he throws those investors away and never calls them back. However, you and the next 33 are divided into three new groups and each group gets a new recommendation on stocks either "GHI" "JKL" and "JKL." After two of those three stocks fail, 22 investors are cast away however 11 of these investors think this "very nice gentleman" hangs the moon on picking stocks.

The reality is that 89 investors of 100 think he is what he really is: a loser who can't pick a stock to save his life. The remaining 11 gladly hand over their wealth the he proceeds to wipe them out with his 89% failure rate. It's a little known Wall Street firm "numbers game" that only builds trust for 11% of the investors until they are also wiped out. Wall Street has one primary agenda: do the things that help Wall Street only. Your suitability and financial well being are the furthest thing from their minds. Why else is the entire country been hurting over the last 2 - 6 years and beyond however Wall Street firms are continually reporting banner years. Wall Street takes care of Wall Street, self serving capitalism.

Just my 2 cents. Take what you want the leave the rest.

January 15 2014 at 6:50 PM Report abuse rate up rate down Reply
jimmy_branch

But you can trust Wall Street Right?

Gimme a break Nuke Wall Street while the Communists are in it.

January 15 2014 at 4:29 PM Report abuse +4 rate up rate down Reply
Valerie

Anyone, who would fall for this cold calling scheme, probably also buys stocks based on "hot tips" gotten from internet chat rooms. LOL

Really --- if this guy is such a hotshot stock picker, why isn't he a multi-millionaire, lounging around on the beach in front of his luxurious waterfront home in Hawaii. (Instead, he's working his tail off in a boiler room, calling potential suckers.)

January 15 2014 at 3:16 PM Report abuse +4 rate up rate down Reply
1 reply to Valerie's comment
ayo770

You are very correct. Whatever the case may be the poor and the informed and the hasty will always fall victim of all these frauds. Investors should carry out due diligence before letting go of their hard earned money. Find out what people are saying about any investment, check their ratings with the appropriate bodies. Google it! It costs nothing to do that. I have been using only one stock broker for a long time. That is of course after falling victim to many in the past. However, this one has proven to be true and fair. You too can try them out at http://goo.gl/RCihCv and if you are not interested please labour enough to check through the internet for any and all the information concerning a broker and or a listed stock. Again it is http://goo.gl/RCihCv

January 16 2014 at 6:10 AM Report abuse rate up rate down Reply