Predicting Market Direction
You wake up one morning and walk over to your mail box. There’s a letter in the mail from a broker or brokerage house, lets call it Big Brother, predicting that S&P500 will go up in price this month. You trash the letter assuming it was spam. Within a month you get a second letter, again from Big Brother notifying you that S&P500 indeed went up and that you missed out on large gains if you had enrolled in their 24 month predictions program. Prediction fee is only $1,995 a year. Second letter also makes another prediction stating that S&P500 will still go up next month.
This catches your interest since they already correctly predicted the move one time but you discard the letter anyway thinking it could be just pure luck. Within a month you go online and check out the price of S&P500 now versus one month ago and indeed it went up again.
Next month you receive a third letter from the Big Brother notifying you of their next prediction that S&P500 will go down this month. Indeed, within a month SP&500 goes down. Three correct predictions in a row. Still could be luck so you discard the letter again but your interest increases exponentially, or at least you already starting to have naughty dreams about money.
You keep receiving these letters month after month correctly predicting what the market is going to do with terrifying precision. By the month five, I guarantee you already checking up your savings (or even a home mortgage) to see if you have some money you can spare to loose. By the month 6 or 7 you’re hooked. You cannot just sit and wait idly while all these wonderful opportunities are passing you by. You have signed and enrolled in their 24 month no refunds prediction program for $1,995 a year. You might think, that’s lot of money, but that’s a very small fee comparing what you will make within a year knowing a fricking direction of the market! You already have excel sheet showing all your debt paid off, travel plans and another sheet where you listed all relatives and friends to take care of once you get rich. Or not.
Here’s how the scam is done from Big Brother’s perspective:
Big Brother starts out with lets say 10,000 prediction letters and splits them into two groups of 5,000. First group (Let’s call it UP Group) of letters is predicting that markets will go UP while the second group (let’s call it DOWN Group) is predicting that markets will go DOWN. Big Brother then mails out all of those letters to different households.
Big Brother waits and see what the market is going to do and then mails out conformation letters ONLY to the correct group. For example if markets went UP, Big Brother mails out conformation letters only to the UP Group.
DOWN Group never hears from the Big Brother ever again!
Now they have 5,000 users believing that Big Brother predicted market direction this month.
That’s not enough predictions in a row to convince anyone,so they again split up that group in two. UP and DOWN again with 2,500 customers in each group and do the same thing over and over until some of them take the bait. 2,500 will be split into 1,250 and so on. Eventually they will end up with couple of hundred really trusty customers. If they can do this scam few times over, they can clear few millions of doallrs within two years easily. Interesting part is that some of the customers will actually make money by pure luck so they might sign a contract for another two years not knowing that they’re paying $1,995 a year for essentially a coin flip.