Definitely too good to be true
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Dear Mr. Berko:
Your column is the first page I turn to in our newspaper, and I have done very well in the last eight years following your good advice. Now I must write you regarding a radio show here on WLS-AM in Chicago. It’s called “Unconventional Wisdom: The CSE Investment Show.” They advertise for people to sign up and pay for their seminars on how to make money on stocks using options regardless whether the stock market goes up or down. They teach how to use options such as covered calls and leaps to make money. The two show hosts, Mr. Hooper and Mr. Zalewski, say that using options, investors can always make between 3 percent and 6 percent every month and sometimes can make as much as 10 percent to 12 percent monthly, even when the stock market goes down. They say if I do this in an individual retirement account (IRA) that the gains will be tax-free. I’m 74, recently retired, and this seems like a better idea than working part time as a telephone solicitor.
S.T., Aurora, Ill.
Dear S.T.:
WLS, a huge 50,000-watt station at 890 on the AM dial, is fondly called the “Big 89.” It was founded in 1923 by Sears, Roebuck & Co., which chose the call letters to stand for “World’s Largest Store.” WLS has an incredible history and is now a property of Citadel Broadcasting, which is having big problems paying its bills.
S.T., you also may have big problems paying your bills if you hook up with Messrs. Hooper and Zalewski. Those pseudologists should broadcast that program on satellite radio, where the average listener’s IQ and gullibility is 20 points lower. However, these lads must be attracting attention, because I’ve received quite a few letters from readers who were agog at the claims for 3 percent to 6 percent monthly gains no matter what the market does. A 3 percent monthly gain is 36 percent annually, and a 6 percent gain is 72 percent a year.
Some readers may not know that options are short-term contracts between a buyer and a seller to purchase or sell 100 shares of a named stock at a specific price for a specific time period ranging from one week to one year. And LEAPS is an acronym for Long-term Equity Anticipation Securities, which give the buyer or seller a three-year time frame to affect a transaction for a named stock at a specific price.
But let’s not get bogged down in a discussion about options, because they have nothing to do with my answer. Rather, because the concept of options is befuddling to most investors, it’s easy for a conjurer to spellbind investors with cockamamie claims like: “You can’t lose money in a down market” or “You can make 3 percent to 6 percent every month.” So forget the options. Just know that it’s a stupid waste of your money to attend one of their disingenuous seminars.
I’ve been an investor for almost 60 years. I’ve managed clients’ money for 43 years and have written this column for 35 years. I’ve watched a lot of water flow over the dam, and in all those years of watching, I’ve never heard of a mutual fund, investor or hedge fund claiming to earn 3 percent to 6 percent each month for any extended period of time. Bernie Madoff only claimed 10 percent annually.
But Hooper and Zalewski’s returns are so “fabulistic” that the big shots at Goldman Sachs, Merrill Lynch, Fidelity and Vanguard would sell their mothers and daughters into slavery for those skills. Well, maybe not Fidelity and Vanguard.
If you are not convinced, then before you plunk a chunk of change for a mendacious seminar hosted by two mythomaniacs, request the names and phone numbers of six previous attendees who have earned 3 percent a month for at least three years and call them. However, I’ll wager nickels to knickers they won’t give you real names. Messrs. Hooper and Zalewski are what a plaintiff’s attorney would call “articulate incompetents.”
And for the record — gains you make in an IRA are never tax-free; rather, they are tax-deferred. There’s an important difference between the two.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, Fla. 33775 or e-mail him at mjberko@yahoo.com.. © 2010 Creators.Com
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