Thursday, April 22, 1999

Hype and Mirrors


Today I must say I actually made a thousand dollars by not losing it. About a year ago I got a call from a full service broker offering me some stock picks that could return on the order to 50% to 100% within three months. And how Foolish of me not to act on it right away, right? (Newbies please read on. Veterans be pleased. My dad was.)

Double my money every year or so, I thought... even after accounting for a mistake or two. And what was the catch? "No catches," he said. Double my money every year or so, I thought... In 10 years, I will have a thousand times what I have today. $10,000 will be worth $10,000,000. Can you spell F I N A N C I A L F R E E D O M?

The old maxim, "If it sounds too good to be true, it probably is" kept passing through my head. However, I went ahead and gave him some information about my salary and so on. He probably thought, "Single, naive, software engineer... the pickings, the pickings." I said I'd like to read a bit about the company before investing (thanks to the influence of my younger brother and Dad). He left me with his recommendations.

A couple of months passed. I saw a spike in the stock price and cursed myself. So what if I did not understand the company. He did. He would have made me money. Another couple of months passed. The stock price went through the floor. Two months later the next stock did the same thing. He called me back and I asked how I could ask the company for investment information. He gave me a number and they never sent me any info. To that, he said, "These stocks do not get valued on their balance sheets but on promotion and hype." Hey, at least he was honest. I was uncomfortable. I told him so. He replied, "It is not illegal to make money." I thought, it is if you are lying to someone to make it.

He called me back today. "So what have you decided?"

I said, "I am not really comfortable investing in these stocks."

"So you chickened out on me again?"

Chickened out! Chickened out! The nerve of the Wise. "No I did not. I decided not to invest in it."

In his smooth, paternal tone he said, "What can I do so that you are not scared?"

"I am not scared. I made an ethical decision not to steal from vulnerable uninformed people. Thank you for your time."

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