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Back in my Army days, I used to participate in a couple of weekly football pools. It was a simple, pick-the-winners operation, nothing like the sophisticated, cover-the-spread wagering available online now. As a pre-Internet, pre-Xerox operation, it was pretty low-tech, requiring just one person with access to a mimeograph machine (ask your parents) to print up the brackets. None of us was an expert (and we had absolutely no information on any of the teams, since our only newspaper, Stars and Stripes, was a small weekly).
But I knew that there were people who took sports gambling much more seriously than I did and wagered more than just their lunch money on it. And one way I knew this was that I used to see little ads in the back of magazines advertising the services of skilled professionals who offered lists of college and NFL game predictions that were "guaranteed to make you money ... or your money back!"
I remember thinking that the guys doing the advertising must be really good, otherwise they'd never make any money. Then I found out that it was all a scam. The tipsters would get the money from big betters and send out their lists of picks. But the picks weren't all the same! The tipsters would mix their predictions up, keep the money from the subscribers whose picks worked and send back the money from the ones that didn't. Their real skill wasn't so much in picking games as it was in calculating how many messages should have the close games picked one way and how many the other. The successful bettors would send in their money again the next week and the ads would bring in new suckers. They couldn't lose.
I learned two lessons from having this flim-flam explained to me. First, you have to remember that not all of the smart people in the world are on the side of justice and fair play. You may have an impression that criminals, as a group, are stupid. But this impression contains a built-in sampling error. The correctly stated principle should read: "The criminals that get caught, as a group, are stupid." Some of the smart ones are so good at what they do that you never feel the wallet leave your pocket.
The second lesson is that scammers stay in business. We've all received pleas from the sons or wives of deceased African leaders offering us millions of dollars in return for our help in transferring funds out of somewhere or other. Ditto for messages from "eBay," "CitiGroup," and others sternly instructing us about the need to "verify your account information." They're so ridiculous (and frequently in such bad English) that I don't take them seriously. But some people must.
The Internet makes it possible to send these messages to so many people, that there will always be a few who come across. Often it's the elderly, who have lost their protective coat of skepticism, or the young who haven't developed it yet. Frequently the victims are people whose greed gets the better of their judgment.
When my wife and I recently visited Paris, we were warned against pickpockets (which is a universal warning given to anyone visiting a town anywhere in the world larger than Dubuque, Iowa). But we also experienced first-hand a couple of scams that are particularly popular in Paris right now.
The first scam was the "jumping the taxi line" con. In this one, while we were herding our baggage toward the official taxi line just outside the station where the Chunnel train had just arrived, a polite young man approached us and offered to help us with our bags toward a taxi that was not at the regulated taxi pickup point. We fell in with him, at first, appreciating the help. Fortunately, smelling a rat, I asked how much the trip to our hotel would cost and received an estimate of the equivalent of $95. So my wife and I returned to the authorized taxi line and got a cab that got us to our hotel for about $22. Lesson learned.
The second scam was a ring-drop in which a young woman appeared to find a gold man's wedding ring on the ground just beside us. She showed us the ring, inquiring as to whether it was ours. Fortunately, having been forewarned, we just waved her away. But if we had played along, she would have offered to give us the ring, then asked for something in return. And since the ring was just polished brass, anything we gave her would have been pure profit.
I don't have any huge point to make here. I just have a grudging admiration for con artists, three-card monte operators, wallet-drop specialists and all the other low-lifes who work their wiles on the gullible. They have a special place in the ecology of humanity and their ingenuity and efficiency at fleecing marks (for whom I also have a grudging sympathy) is a rewarding area of study (as long as I'm not the mark). Mark Twain used to say "believe none of what you hear and only half of what you see." It's good advice.
If you're new in any town, especially if the "town" is the stock market, I would recommend finding a trustworthy source of good advice to keep your assets safe. Even if there isn't an individual scammer plotting to rip you off, the market itself is always trying to part you from your money.
Cabot's 44 years of experience make us a good source for the kind of market wisdom that can save you a bundle, warning you about market moves and pointing you toward investment choices that have a seal of approval.
Right now, my Cabot China & Emerging Markets Report is in the top 10 for 2014 in total returns, as measured by Hulbert Financial Digest. I'd be happy to show you around.
In this week's Stock Market Video, Mike Cintolo talks about the state of the market. He mentions that leadership is spread around relatively few sectors and many stocks have been taking breaks recently, consolidating gains and building bases for fresh advances. It's a good time to do a little judicious buying, but not for a headlong rush into big positions. Mike shows some interesting charts to help you build your watch list. Click below to watch the video.
Tim's Comment: E. Joseph Cossman was an entrepreneur/marketer who used direct mail and space ads to sell ant farms, spud guns, green army men and more in the decades after World War II. Knowing that, his statement is less about memory and more about optimism, which he clearly had in abundance-and which, in proper proportion, is also a great ally of the long-term investor.
Paul's Comment: Cossman's little maxim is essentially an earlier version of "Don't sweat the small stuff; and it's all small stuff." I've always hated that saying! It's not all small stuff. True, much of it is, but not all. What I like about Cossman's way of putting it is that looking at what you were worried about last year can help you learn to tell the small stuff from the important stuff. And that's an ability worth having.
In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
Tim Lutts, Chief Analyst for Cabot Stock of the Month, writes in this issue about the usefulness of setting goals-even quirky ones, why Cabot doesn't accept advertising and a unique Chinese retail stock. Stock discussed: Vipshop Holdings (VIPS).
I write in this issue about why emerging markets ETFs can't match the performance of a selected group of individual emerging markets stocks, with charts to illustrate the point. I also bemoan possible shortages of chocolate and bourbon. Stock discussed: Alibaba (BABA).
Mike Cintolo, the brains behind Cabot Market Letter and Cabot Top Ten Trader, writes about the value of charts in stock analysis and gives six very practical tips for improving your stock trading results. Stock discussed: Allison Transmission (ALSN).
Chief Analyst of Cabot China & Emerging Markets Report
And Cabot Wealth Advisory