Opinion: Telemarketers add tricks to trade

Here is the scenario (with fictitious names):

I pick up the phone and hear, “Hi, Mr. Davis, this is Jim Jones from XYZ Investments. I spoke with you six months ago.”

“No, you didn’t.”

“Oh, yes I did. That’s what you told me then. I must remember the conversation better than you do. Plus, I have it right here in my notes.”

“I did not speak with you before.”

“Don’t you remember? I recommended Apple Computer to you at $82 – now it’s over $120.”

“Jim, you are not the first person to try that ploy with me. Take me off your call list. I am not interested.”

“You mean you don’t want to make money with …”

Click.

I hate to be rude, but there are times when there is no choice but to hang up.

If you have received a call like this, you know what I mean. Here are some of the things they all seem to have in common: an East Coast accent, a hurried, aggressive style and the incredible ability to have selected (well after the fact) a stock that performed remarkably well. Apple Inc. example is the most recent.

It occurs to me that such calls may be aimed at seniors, in hopes that the “you don’t remember” line might resonate, but who knows, they might be directed at businesspeople the caller believes are too busy to recall every conversation. If it’s the former, it might work occasionally; most it’s the latter, I suspect that even the harried businessman will remember calls offering to help him make a lot of money.

Note, too, that this technique – having morphed from the old, “The purpose of my call Mr. Prospect is …” – also has been used after the price of gold has run up sharply or (as I have written previously) oil has spiked. As a matter of fact, the oil calls are increasing again while the gold calls have become quiet. It’s funny how I never get calls saying that the stock or gold or oil is at a low point and should be bought. Don’t these guys know about buying low and selling high?

Other risks

While the mainstream media put their particular spins on the various factors that they believe influence the markets, little is heard from them when it comes to two underlying threats to stocks and bonds.

The first is minor: the news of the day or hour and how it is presented. We refer to that as “headline risk,” an example of which might be a headline designed to get attention by couching itself in negative terms. “GM strike could idle thousands” might be an example of a headline that could scare some investors into a knee-jerk reaction of selling their shares.

Headline risk is generally temporary, the news behind it invariably having been known and acted on in the investing community well before the headline appears in the local paper or on TV. If that type of news causes a significantly negative reaction, investors and traders are likely to jump at the opportunity to buy. Ah, sweet market psychology.

The second underlying threat is considerably more serious: it is “legislative risk.” The fear on Wall Street (and it also should be on Main Street but is usually late in getting stirred up there) is that political parties will do harm to the economic engine that drives America, while tweaking the tax code at the margins, refusing to address the vaunted “third rail” of Social Security reform, and through any number of proposed laws (immigration come to mind?) telling us what is best for us whether we want it or not.

With both the president and Congress wallowing in partisan politics that have driven their approval ratings below 30 percent, one might think they would start showing some common sense. One would be wrong.

As this presidential nominating and election period continues – and it will be going on far too long – proposals and comments from the candidates will bring both headline risk and legislative risk.

If you have been consistent with your investment discipline, the headline risk is something you know how to handle.

But what about the greater, possibly long-term, adverse, legislative risk? This one you need to act on with letters and phone calls, especially if you believe that Washington produces short-term fixes for serious long-term problems, solutions that frequently create unintended consequences that can cause serious economic, cultural and social harms.

Clark Davis is a 37-year investment veteran and CEO of Saint Louis Investment Advisors, a specialized money-management company. He can be reached at cdavis@slia.com.[[In-content Ad]]