The get rich quick scam in your inbox
These share tips are a surefire way to lose your shirt from the comfort of your computer.
Back in the dim, dark ages – even before the coming of the brick-sized mobile phone and certainly decades before email – it was not hard to get share tips if you worked around the City.
You just walked into a pub and asked for Mr G or perhaps Johnny Boy, or sometimes you could find out which company was likely to be a takeover target by working through the waste bins outside of brokers, bankers and lawyers. The concept of confidential waste had yet to arrive.
Once you found Mr G, you would buy him a few drinks and he'd tell you what was moving. It was usually a very small company you had never heard of. Everyone knew that, to quote the City saying, “Where there's a tip, there's a tap” (translated as no one promotes a share without having a prior interest in it).
So you could bet your last 50p coin – enough to buy two pints in those days – that Mr G would already own the stock he was tipping so he would profit if the price went up. But you didn't mind too much – a cardinal City rule was spread the wealth around (at least to your mates) and not to be greedy. Mr G would assure you that there would be plenty of others to take the shares off your hands at an even higher price before someone was left with an investment that no one else wanted at that price.
That was the early 1970s. Since then we've had regulation and laws against insider trading. People sometimes go to prison – and sadly, the suited, booted and bowler-hatted Mr G has ascended to the great stock market in the sky.
You've got mail
These days, getting a tip is actually easier. You don't need to buy anyone a drink in a smoky City bar. It's there on your email. I receive a constant stream of share advice, ostensibly from the US, urging me to buy shares I have never heard of – mostly the same sort of sky high promise and gross over-valuation stuff that boiler rooms push as well.
This sort of thing is illegal in the UK but the niceties of UK law have never proved an impediment to the world wide web.
Here's how they do it. Start off with a tiny company with a “bright” idea. It could be something no one has ever thought of – such as GPS tracking to prevent tuk-tuk taxi theft in Asia. Or a new angle on something that takes an established item and presents an improvement – perhaps a magic screen that turns your old television into 3D.
Those behind the tip then print one billion shares with a face value of 0.1 American cents. Then the real fun starts. The tipping site starts off with a teaser or two. “The big one. It's coming! It'll blow your mind and boost your bank balance” – that sort of thing. It will thank you for containing your excitement for this company with huge upside potential. But it will also offer early “premium-grade” access to the tip – for a membership fee, usually $1,000 a year.
Finally, the stock is announced, invariably with a “it has already doubled so get in quick” message. Then the pace gets more hectic as each day brings yet another email recording big gains and urging readers to buy, buy, buy. The stock goes up to 10, 20, 30 or even 50 cents, although it is hard to follow as it is not quoted on any recognised market. You have to accept the email is truthful.
Then suddenly, it's bye, bye, bye. You'll never hear about the company again – you can only conclude that tuk-tuk taxi owners have other ways of protecting their property or that no one believes you can create 3D with a plastic screen overlay.
A week or two later, the whole process starts again with yet another unlikely stock. It's what the FSA calls “pump 'n' dump” and where the only winners are the original promoters.
Those who get caught in one of these share-pushing scams believe they are getting real tips. Pity they don't ever read the small print that all these sites feature. This can be hard to find but it would show that the emails are not genuine advice – and there are UK regulated publications that offer tips – but simply paid for adverts.
The small print and the very small print
So we get “never invest in any stock featured here unless you can afford to lose all your money”, which is a great recommendation. And “we are involved in the business of advertising and marketing stocks for monetary compensation” – most typically $10,000 worth of stock at the original 0.1 cent price in return for two month's worth of promotion. Any increase from that low value goes to the website's owners, invariably domiciled in a tax haven well out of the reach of regulators and law enforcement officers.
The very small print can run to thousands of words. But to summarise, they say you would have to be an idiot to believe any of this nonsense and invest real money. Yet many do, otherwise these emails would not exist.
Back in the innocent days decades ago, you at least knew Mr G would come up with some profits. In the days when the Krays and their associates had such power on the eastern boundaries of the Square Mile, City punters knew where to find him.
Have a happy and scam-free Christmas!!!