Be Careful of the Headlines: Investments That Seem Too Timely

Video Transcript

Kelly Kesner: I’m Kelly Kesner with Investor’s Watchdog University. With me is Pat Huddleston. He’s the founder of Investor’s Watchdog. And today we’re going through the red flags portion of the syllabus and speaking about investments that may be just a little bit too timely, things that are catching the headlines. And from what I’ve seen in my experience is that advisors need to establish credibility with the investor and seem like they know what’s going on and so they tend to speak from today’s headlines and catch an investor’s attention. Is that what we’re speaking about?

Pat Huddleston: That’s exactly right. Yeah. They want to be seen as a truth teller. They want to be seen as somebody who investors perceive as, “Hey man, this guy’s got the up to date information.” And so they will tell you about something you read in the headlines pretending that they don’t know you know it already just so it registers in your brain, “Hey, that’s true. You know what? I read that in the paper yesterday.
This guy is up on his stuff. He understands what’s going on.” And so ideally for a scam artist 95 percent of what he tells you is going to be the truth, the gospel truth that you can go the newspaper and find it truth. The thing is the five percent that he doesn’t tell you is the really important stuff.

Kelly Kesner: So, an example would be headlines about oil prices could be, “I’ve got this new investment just because of what’s going on in the oil industry right now.”
Pat Huddleston:

Yeah, exactly. And that kind of news could spark oil and gas frauds or it could also spark clean energy frauds, right? You say, “Hey, I’ve got an alternative to oil.” So, they could spin that headline any different way. A great example of this happened right after the Gulf oil spill. Everybody remembers that, right?
Well, the number of scams that cropped up in the wake of that was so bad that the FCC had to issue a press release. They actually said that investors had to watch out for people offering products and technology for remediating oil spills. They had to watch out for folks that claimed to have contracts with BP to help with the cleanup. They told people to be on the lookout for folks who claimed to have contracts with the government, with folks like the Coast Guard, and the EPA because so many scams had cropped up claiming those things.

Kelly Kesner: I bet that could roll into and then scams about medical treatments for illness from ingesting any of that stuff that was in the Gulf.

Pat Huddleston: Yes, that’s exactly right. And you mentioned medical treatments. We know how the population is aging. You’re going to see an awful lot of healthcare frauds coming out. Cancer’s still out there. AIDS is still out there. Anybody who can claim they’ve solved that puzzle is going to be able to go do quite well.

Kelly Kesner: And I know we talk about this in a future segment, but baby boomers and seniors especially tend to be targeted populations.

Pat Huddleston: Yeah. That’s exactly right. We’re going to have several segments focusing on the problems of baby boomers and elderly. Let me mention one thing that you’ve seen in the most recent headlines, things you need to watch out for right now. What’s been in the headlines more since 2008 than sort of turmoil in the financial world, right, currency prices up and down, whether the Euro was even going to survive.
Well, that’s been in the headlines and so scam artists have started to pitch foreign currency option scams. They’ve said, “Hey listen, it doesn’t matter if the Euro is up or the Euro is down, as long as we have a census of which way it’s going we can make a lot of money on it.” And so we’ve seen a real explosion of those kinds of things and its come right out of the headlines. So, people really have to be careful.

Kelly Kesner: So, basically, the take away from this is be a little weary of investments that seem just too timely, just too spot-on for what’s going on in the headlines.

Pat Huddleston: That’s exactly right. Yeah
Kelly Kesner: Okay. We’ll get into more of that later and I’m sure we’ll discuss some of the ways to protect yourself against that, but for right now that’s all for this installment of Investor’s Watchdog University and until then class dismissed.

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