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MARKET COMMENT
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Scams have been around since Adam was a lad. Whilst the methods by which stings are perpetrated have changed, they habitually follow similar patterns. They invariably lull victims into believing that they are about to get something for nothing! Recently, a new con has come to the fore in the US. If past experience is anything to go by, it can only be a matter of time before it crosses the pond. According to Reuters, voice-mail messages are being left on answering machines by female callers who are pretending to call a girlfriend, but who have dialled the wrong number and not realised their error. In the message, the caller innocently passes on vital inside information about a company that she has learnt from her stockbroker boyfriend. The regulator believes that these suggestive voice mails are part of a "pump and dump" share scam that encourages voice-mail recipients to buy shares in the company mentioned. That drives up the share price of the company allowing the perpetrators of the scam to sell their shares quickly at a profit. "Pump and dump" is also widely used by 'boiler room' dealers who will talk up a share in order to drive up its price. Closely akin to boiler room scams are spam scams that aim to achieve similar results by bombarding their prey with share tips. However, as soon as the promoters stop touting the share the price of those shares can fall rapidly causing many investors, apart from those that sold early, to lose their money. By contrast 'recovery' scams aim to assist victims of share scam recover their lost investment. By paying an up-front fee, these so-called recovery specialists promise to help scam victim exact revenge by recovering their losses. However, it will come as little surprise that no money is ever recovered resulting in duped investors throwing away good money after bad. It's always worth bearing in mind that there are no real short-cuts to investing in individual shares. Buying shares in companies entails a lot of hard work analysing the past performance of those businesses and also their potential to grow profits. It's a cliché, but always remember that "If it sounds too good to be true, then unfortunately it probably is."