A few years back, I knew a person that was a potential customer of mine, not a friend. I only say this to explain why I was interacting with him and the level of our relationship. I have a scenario that always troubled me, and I thought, why not see what others think, here.
I was calling on his place of business as I did every week, and one day he decided to tell me he probably wouldn’t be working there much longer, and why. I should point out at this time, he was probably making $12 an hour at best.
His reason was this. He was told by some acquaintance that there was a publicly traded company called ABC Oil (Made up name for this post) that was currently selling at nearly a penny per share. This acquaintance of his advised him that in short order, they expected this stock to balloon to approximately $25 a share within a few months. So if he bought $2,000 worth of stock, it would be worth $500,000 later.
I’m not a trader, but I am a devout skeptic. So of course, my bullshit radar went through the roof. After speaking with him, a quick Google search showed that ABC Oil stock purchases were a scam. But aside from that, I know enough about stocks to know two things.
- Stocks do not multiply by 2500 times within a few months. A company worth $100,000 isn’t going to suddenly be worth $250,000,000 tomorrow. It may have happened in history somewhere, but these stories are clearly more bogus urban legend than common occurrence or even rare occurrence.
- The acquaintance investor who was rich had NOTHING to gain by giving him this tip, UNLESS they already owned this worthless stock and needed to dump it. If it was truly going to grow 250,000%, they would have just bought it themselves.
So my question to you is this: knowing that this was most certainly a scam, that he was fairly poor and didn’t really have $2,000 to waste, that he wasn’t a friend or someone I knew very well, and he was about to get duped, (He had either already committed to buy, or wrote them a check, but I vaguely recall he was somewhat already obliged.) would you have said something and tried to stop him? Or would have let him have a dream for 2 months, then a $2,000 life lesson thereafter?