I mean if it is featured in countless Hollywood films, it must be true!
I mean was this a real thing? Or was this the equivalent of “Your computer has a virus” of the time?
I know of no adult whose response to a cold call would be other than expletives, how exactly did people pay through checks in the mail? If people are stupid enough to do that why even sell junk stock, just straight up scam and run off with the money.
To clarify the OP, obviously people DID IT and got scammed. What I am asking is if there was a legit cold calling stock selling industry where an average person would know others that bought actual stock this way and gained or at least broke even.
If this never existed I can’t see how so many could fall for buying worthless no name company stock, or outright scams. A stranger calls you and convinces you to buy stock from a company you don’t recognize for several thousand dollars from them, presumably by writing a personal check. This sounds absurd.
Kind of like telemarketing or vacation plans/rental now.
I received a few of these stock calls from the boiler room operations. They’d claim they talked to you before and “we’d made money”. Then a high pressure sales pitch. It might have worked on the old and unsuspecting. I would just leave the phone (remember they were attached to the wall with wires in the olden days) on the desk or table and quietly walk away. Half hour later, it’d be safe to hang up the dead call. I never got to the payment part but a personal check was sufficient back then for most transactions. It just took longer.
Is it really so incredible that people would write a check? AND send it snail mail?
Ever hear of “Mail Order”? Ever see a 500 page catalog from Sears, Roebuck & Co. or Montgomery Ward?
For 2 generations those two books delivered not only the furnishings of a house, but the house itself*.
In the 1920’s Sears, Roebuck and Co. actually sold houses - by mail order - go to the train station with several heavy wagons or trucks and pick up pre-cut lumber, windows, etc.
The incredible part isn’t that people would write and send a check to a world famous company known for generations, the incredible part is writing and sending a check to an unknown person who just cold called you to buy some stock in an unknown company.
I only mentioned checks because I was wondering how they were getting paid, I also considered wire transfer or Western Union.:o
People actually kept buying houses they couldn’t afford because they assumed that house prices always went up?!
People actually kept buying tech stocks in anything because, hey it was a tech boom?!
People gonna do all kinds of stuff.
Back then, there was no internet, so information moved more slowly, but everyone had a friend who knew someone who made a bundle on the stockmarket. So when a well-spoken man from a legit sounding company (like “Merryl Leach”) calls you up and asks you to trust him with a lazy $1000 you have lying around, you might want to join the “investing class”.
Then the broker calls you and tells you you made $5000 last week on your $1000 investment! You get paid and, next week you find yourself calling him to find out what stocks are hot right now.
"Well, let me see Frank … there is one heavily trading stock but you’ll need at least $20,000 to get in. Are you interested? Could be BIG returns!
Most boiler room operations ran a long (or maybe medium-term) con. I doubt that there were many people who would actually send a check based on a single phone call. They depended on building trust and then cashing in.
For example:
Step 1: A broker calls and says, “Hello Mr Grude. This is Bob Jones from Roiler & Boom Securities. Relax. I am not calling to sell you anything today or to ask for any money. I just wanted to introduce myself.” Then he goes on to explain how he makes many people very rich. Then he ends with, “If our research department finds a stock that is about to explode, may I call you back and tell you about it? No obligation.”
The mark figures, what the heck, I’ll get a free stock tip and says, “Yeah. Sure.”
Step 2: The broker calls about a week or two later and says “Hey! This is Bob from R&B. Remember we talked last week? I promised I’d call. You know I’m a man of my word. Got a pencil and paper? Good. Write this down. POS Electronics. I just got through talking with our research department. They are EXCITED about this one. It is poised to go into the stratosphere. You call your broker and buy some. I’ll call you back the next time we get a hot one, OK?”
Step 3: Wait for POS Electronics to go up in price and call again. (How do you know it will go up? I’ll explain later.) “Grudo, my man. Bobby from R&B again. Remember I told you to buy POS? Did you look in the paper this morning? Up 50%. How 'bout that? But no time to dwell on the past. I just got off the phone with my contact in Washington. The FDA is about to approve a new blockbuster drug for smegliosis. Just waiting to type up the paper work. Could be ready in a day or two. When this news hits the street the drug maker could easily double overnight. No time to wait on this one. After news gets out, it will be too late. Grude buddy, will you buy some with me? Most of my first time clients invest $25,000 or so. But if you want to buy more, that wouldn’t be a bad idea.” At this point, you feel like you know your buddy Bob who hasn’t let you down and you say, “What the heck, I’ll send you a check.”
How do you know the stock in Step 2 will go up? You recommend a stock that R&B is about to start a pump and dump operation on and call back during the pump phase. Alternatively, you choose a group of volatile stocks and give each mark one stock from the group. Only call back those marks whose stock has gone up. And Step 2 can be repeated one or more times.
There are a lot of variations on this. It doesn’t exactly work the same each time. But that’s the general idea: Build trust. Cash in.
It may seem naïve to us today, but people in that era were more trusting of financial institutions. Shady outfits exploited that trust. Anybody contemplating investing today has more recent memories of lots of people losing their shirts in the market, by fraud or just bad luck.
Today, selling investments by cold calling would be a pretty tough job. But to paraphrase John Wayne, it’s easier if you’re a crook.
My father (81 y/o at the time) was taken in by a phone scam and before the shouts of fools and money let me say this. He is a Princeton graduate. Well respected in his career. An author of a well-received book and in this stage in life (now 90 y/o) still working as a speaker on environmental issues. He is no fool. Problem is he really did not understand what was being done to him.
Someone called claiming to be his cell phone provider. Gave a great pitch about how his phone service was expiring and that his older phone had to be replaced. Offered a “great deal” on a new plan and phone. He agreed and gave his credit card over the phone.
Bad idea but after several weeks of back and forth with letters form law offices sent, the scammers finely relented and agreed to a full refund for return of the phone. To my surprise they were actually a “legitimate” phone service provider who was allowing scammers to drum up business for them. So in the end it only cost him postage, a lot of hours of his time and a good deal of pride. Problem is most people wont have that much access to legal assistance and just loose the cash in the end.
A lot of these scams rely on hitting a lot of people until you find the one who is unfamiliar with what you are hawking. I don’t remember the details but my mother as assistant corporation council in Washington DC prosecuted a person(s) back in the 80s for some scam over the phone involving selling lightbulbs of all things, to the elderly mostly.
The problem is there is always someone out there willing to scam and con and even the best of minds can be taken in by a really good pitch.
Legitimate brokerages did cold calls; it was a job given to the newest brokers as a way for them to build clients. It was not a scam, but the callers would call and try to sell stock – not on a “get rich quick” basis, but more on “would you like to earn more on your savings.”
Cold calling does work – for a small percentage of calls, at least. But a good salesman could get one or two new clients a month and build a practice.
One of the guys at the firm had started as a stockbroker in the early 30s, going door to door. He managed to pick up clients at a time when no one trusted the stock market, and many had lost everything in the crash.
There are good reasons to buy stock, and a good broker can be very useful in showing them to you.
One memorable call I received was from a broker who was “calling back” Jim Jones.
I said, “Wrong number”.
The broker then said he must have misdialed. He said he found a great stock offer for his client that looked like it would double his money over night. (at that point I was supposed to try to get in on it)
I said “Good for Jim. I’m sure he will be thrilled”.
Broker then had to go to strategy B with, " Hey, I could let you in on this too"
Keep in mind that today you can setup an account with an online broker without ever dealing with an actual human. Back then, this wasn’t possible. You pretty much had to have an account with a broker at a firm like E.F. Hutton or Merril Lynch. So it wasn’t implausible that you might talk to a broker at a firm called Stratton Oakmont (the name chosen partly so it sounds respectable). And some of the stocks were for recognizable companies, like the shoe company Steve Madden.
I had them call me a few times. Usually pushing some unknown penny stock that was “about to skyrocket” or something similar. The stories usually involved a new patent or a sure hit movie from some unknown company. I laughed at them and hung up.
Correct. It’s hard for the younger generations to understand the pre-internet days. Brokerages, both legitimate and otherwise, did lots of cold calling. They identified the better neighborhoods and went through the phone book trying to find new clients. There were no discount brokerages before 1975, and even after that there were few until the mid-1980s. If you wanted to buy stock, you had to use a brokerage firm and do it in person or over the phone (no internet, remember).
I interviewed with a stock brokerage in 1984 and cold calling was indicated to be a big part of becoming established and getting new clients. This was a real, legitimate brokerage, and the broker said after I talked to all of my family, friends and acquaintances, I would use the phone to drum up new clients. Of course, scam brokerages did the same thing, but instead of recommending IBM and Kodak and General Mills, they pushed penny stocks.
This makes me wonder. Did the “scam” brokerages actually provide legit brokerage services? E.g. if a scummy brokerage called you and tried to pump some penny stock, and you expressed interest in doing business with the brokerages but wanted to buy IBM, what would happen? Would they hang up? Would they sell you IBM but continue to try to pump their garbage? Would they be happy to be getting their commission fee and treat you nicely? Would they just take your money and run, leaving you with nothing?
I suspect there were true “scam” artists who simply stole money. But I imagine most of what are referred to as “scam” brokers were licensed stock brokers looking to earn commissions. They made cold calls to try and get new clients. Certainly, if they happened upon someone who was thinking about investing, they would tailor the sales pitch to what the customer wanted - blue chip stocks, new companies, whatever. In any industry, you have those who are more and those who are less ethical.
The thing about penny stocks is the brokerages earn larger fees and commissions on thinly-traded stocks, so that’s what they pushed. They were also able to use the “get in on the ground floor” sales tactic for small companies that they couldn’t do with established stocks. The whole thing is psychological and has to do with “hitting it big” if a stock goes from 50 cents to a dollar, rather than patiently waiting for Kodak to inch up.
Stock brokers have long been licensed and regulated, so it would have been possible to find out if a broker was properly licensed. Being licensed would allow a broker to properly sell securities, but the sales pitch and ethics to properly advise a client would vary.
Whether you’re selling stocks, trying to get votes for a political candidate, or taking a survey, cold calling is a touigh job. The great majority of the people you call aren’t interested in what you have to say, and will hang up on you- maybe after cursing you.
In the same way, most people are going to curse e-mailers who tell them, “I am the President of Nigeria and I need your bank account number.” But if even 1 person in 100 (often a naive older person) responds, the operation can be a success.