Junk Mail Exposed

I keep "junk mail" and read it when I have time. It's good to keep a pulse on what's being mailed... and especially on what's being mailed more than once.

But just this week I received a letter that is a perfect example of how NOT to do direct mail. What's more, this letter is the kind that gives direct mail a bad name. It is trash, and the company that mailed it has exposed their own irresponsibility.

Why am I so angry about this letter? Because its sole purpose is to raise the price of a certain company's stock by tricking unsuspecting individuals into thinking they've received a "hot tip" about a stock that's about to soar sky high.

On the first page alone, the stock symbol is listed 7 times with "cheese-y" lines like:

• "Your AGING MOTHER Demands that you Buy Lusora (LHCS)"

• "DO NOT just turn to page 6 right now. First, buy LHCS below $3, read the rest of this report, and then call your mother to tell her the good news."

• "BIG NEWS drives stock prices way up and Lusora Heathcare Systems (LHCS) is about to become the most recognized stock since early Microsoft."

Turns out, "Scott Fraser's Elite Stock-Market Advisory" is all about getting you to buy a stock. (Does Scott Fraser even exist?) The entire thing is a shameless pitch to get you to load up on the stock and drive up the price. Ridiculous.

I strongly suspect this is illegal, despite the lame disclaimer printed on the back of the letter. The beginning of it reads:

IMPORTANT NOTICE AND DISCLAIMER: This stock profile should be viewed as a paid advertisement. In order to enhance public awareness of Lusora and its securities through the distribution of this report, Innovative Technologies paid the publisher, Nat-Con Publishing, Inc. the sum of $450,000.

Aha! You were paid—in advance—to "recommend" the stock. Can you say "conflict of interest?" As if the fine print makes it okay!

My point in sharing this: There are still shady direct marketers out there. Please don't be one of them.

End of rant.

Comments

[Griffin]

Great advice!

[Perry Droast]

Ryan,

I've been receiving "Scott Fraser's" magalogs for a few years. This is the legal (I think) version of a pump and dump. These types of ads are paid for by a group of investors that own large amounts of very inexpensive penny stocks. Usually under a buck or two, sometimes only a few pennies. Because they are illiquid, only a few buyers push the stock up quite a bit. Then they sell chunks of stock all the way up and part of the way down. Then when it's all said and done they buy it all back when the price falls back to pennies again. He's not the only one doing it. In fact John Myers is doing it too. He was a legit investing newsletter writer/analyst writing for Agora Publishing. He hit rock bottom in my eyes when he started doing this.

This brings up a good point. Would you write one of these ads if you had the chance? I bet it pays real well. It might be hard to turn down but ethically I would have a tough time writing an ad like this.

[Ryan Healy]

You ask a good question, Perry. I've turned down work before; I would turn down this kind of letter as well. It just doesn't add any kind of value to the person who winds up buying the stock.

I suppose you could argue that a person who buys a "pump and dump" stock will get to "ride the wave" as well.

But someone who falls for this is not going to be sophisticated enough to have any kind of money management rules, much less actually follow them. (Stop losses, trailing stops, taking profits at certain levels, etc.)

What's more, I wouldn't want my reputation to be synonomous with "pump and dump." Know what I mean?

[Bill Murphy]

Good job in exposing a scam artist:

http://www.sec.gov/litigation/admin/34-48544.htm

[Scott P. DeMenter]

To steal from ol' Mark Twain, the difference between direct mail and junk mail is the difference between lightning and the lightning bug.

[Juel Edwards]

I was looking for "Scott Fraser" 's address when I found this blog. I bought True North Energy on his recommendation and it has gone down ever since, now down 90% from my entry. Can't something be done about such people? I am also down on Accuray by 48% recommended by another shyster, insider selling is rampant.

[Ryan Healy]

Juel - Unfortunately, not much can be done. Chalk it up to a lesson learned and move on. Teach others so they don't make the same mistake.