Money Angles

Overwhelmed with junk mail and dinnertime phone calls? Go to www.dmachoice.org to opt out. In a few months, the flood should taper off a bit. Of course, do this and you may very well miss your chance to join the Cheese of the Month Club.

Money Angles

by Andrew Tobias

Chapter 13: JUNK MAIL

Free! 100 Shares of Stock in a Public Company

Seven hundred million trillion tons of junk mail are sent out across this country every year. I get half of it.

Much of it would make me rich if only I would listen. “More explosive price action ahead in low-priced stocks,” reads one envelope. “No-risk triple bonus offer enclosed!”

“Inside,” reads another, “find out how $8,750 grew to $405,125 in only 13 weeks!”

“Free!” reads a third, “Get 100 Shares of Stock in a Public Company with This No-Risk Offer.”

A hundred shares of stock free? Wow! I wonder which stock it is. General Foods? Hewlett-Packard? Sears? The letter doesn’t say.

The way to deal with junk mail is not even to look at it. Anything that arrives with less than twenty cents postage or a computer-generated address label gets tossed out unopened.

Which is why advertising copywriters have begun reserving their most inspired moments not for the messages printed inside the envelopes but for the messages outside. Somehow, between the time that you bend your right wrist, claw-like, to clasp the top envelope in the pile cradled in your left hand . . . and the time, a moment later, that you flick that same wrist to send the envelope flying for the trash–somehow in that moment a message of such urgency and intrigue must be conveyed as to stun you in mid-flick.

Examples abound.

• From Mutual of Omaha: “If You Think $2 Doesn’t Buy Much Anymore, Look Inside … You’ll Be Amazed!” (Amazingly, they were selling insurance—and $2 didn’t buy much.)
• From Mother Jones: “URGENT REMINDER ENCLOSED.” (The deadline for Christmas gift subscriptions was fast approaching.)
• From an address in Washington: “Ted Kennedy hopes you’ll throw this away!!” (Out it goes.)
• Bulk-rate from “The Honorable Ronald Wilson Reagan, President of the United States.” (Oh, that Ronald Wilson Reagan.) Wonder what he could want. Out it goes.
• From the American Civil Liberties Union: “An Open Letter to President Reagan.” (Gosh! Letters from Reagan, to Reagan . . . Should I forward it?) Out it goes.
• From International Living: “You can now earn up to $80,000 TAX-FREE by living abroad . . .” (assuming you have the skills to earn $80,000 and don’t mind living abroad).

Some junk mail can be strangely personal—and not just because of the strange ways they stick your name, or variants thereon, into the advertising copy.

• From a doctor in San Antonio: “Are you over 40? [No.] You could be missing out on the best sex of your entire life! [Really?] To find out why, see inside. [Well, it can’t hurt to look.]”
• From Ovation magazine, bulk rate, a “special invitation” from my cousin Andre Previn. As it is the first and only communication I have ever had from my spectacularly gifted cousin, verbal, visual or otherwise—I’;ve never met him—and as my middle name is Previn (really—we’re cousins [and—1998—I still haven’t met him]), I am sorely tempted to open it. Out it goes.
• From a company in Illinois: “Do you have a system for getting organized that works?” They have a wall-sized calendar.

A hazard in throwing all this out unopened is that you won’t know what you’re missing. Take the envelope headlined: “Me? Sleep in a subway station?” Either some wonderfully creative real estate developer had hit upon renovating unused subway stations (in which case I was being offered a “great space, no view”), or this was an appeal to aid New York’s homeless. We’ll never know. And what are we to make of: “Demand a nuclear-free New York!” Was New York planning to join the arms race? Or was this about the Shoreham, Long Island, nuclear power plant? You’d assume the latter, but judging from the fine print—still on the outside of the envelope—you’d be wrong. It was about the stationing of missiles someplace upstate, when, of course, everyone knows they should all be stationed up in Somebody Else’s state.

Junk mail can depress you—what can you expect from an envelope marked “Urgent” and sent from the World Mercy Fund?—but there’s actually quite a lot of celebrating going on. The amazing Mutual of Omaha offer referenced above was in celebration of Mutual’s seventy-fifth anniversary. The Visiting Nurse Service of New York was recently looking for $90 donations in celebration of its ninetieth anniversary. A company selling quartz watches for just $2 (“this is not a misprint”) was doing so—all this explained on the outside of the envelope—”to celebrate the 10 millionth watch sale of the famous New York jewelry firm of Abernathy & Closther.” Surely you know the firm.

I love the ones marked, Personal and Confidential down by my name, and Blk Rt in the upper right. And, of course, I get a lot of animal mail. It is very hard to resist.

“Inside: an urgent appeal to stop the killing of 6,000,000 animals . . . Open At Once.”

Six million animals? How endangered could they be if there are six million of them? What are we talking here—hogs? chickens? Oh, God . . . okay, I’ll open it.

The appeal proved to be from the Kangaroo Protection Foundation. One might think this largely an Australian issue, but apparently it’s all our fault for lifting the ban on kangaroo skin importation. We did so, according to the letter, “under intense pressure from the Australian government,” which, democratically elected though it may have been, obviously knows nothing about the wishes of the Australian people, who are, the letter says, all furious over the kangaroo harvest.

The compromise I worked out with the KPF—having opened these letters, one must rationalize one’s non-response—was this: I would send no money, but neither would I ever eat or wear anything even remotely marsupial.

Why should I? I have more than enough other delicacies available parcel post.

From the Collin Street Bakery: “What Bordeaux is to wine and Maine is to lobster, Corsicana, Texas, is to fruitcake—the New York Times.” The bakery’s so darn proud of that fruitcake, a four-color mouthful of it peeks out at you through a Texas-shaped plasticene window. These are, furthermore, guaranteed fruitcakes (I couldn’t resist: I opened the envelope). If you or your friends have ever tasted better, your money is refunded. Bob McNutt, Bill McNutt and Bill McNutt III stand behind that promise, and Gene Autry and the Kuwait Oil Company are among the list of Distinguished Clientele. We’re talking serious fruitcake here.

And from Cheeselovers International (never mind how I get on these lists): “If you find a 3-inch PINK SLIP in this envelope, you have won a diamond necklace in our $1,000.00 Sweepstakes.”

I don’t wear jewelry, but that is only because I’ve been waiting to win a Cheeselovers International diamond necklace. I opened the envelope.

The letter begins: “Dear Cheeselover, Before you look at a single cheese—search through this envelope. If you find a 3-inch colored slip it may be your lucky day. And if the colored slip you find is pink it means you have won a genuine diamond solitaire necklace. To claim your prize, just follow the directions on the pink slip. [The cheesewriter seems awfully confident that I’ll find a pink slip.] Then—once you’ve calmed down (if you are a winner)—look at our delicious cheeses.” (Special this month: the Creme de Menthe Cheese Ball, “the most sophisticated cheese spread of all.” Move over, Velveeta!)

Well, it did take me a while to calm down, let me tell you. Because naturally, like everyone else who got this mailing, I found a pink slip. But I never bothered to claim my free necklace (which cost $2 for shipping), because I had a feeling the diamond might be kind of smaller than the one I’d been dreaming of.

Actually, I was lucky to be offered a diamond necklace of any size. (Hey, fella, what more do you want?) My August Cheeselovers letter had declared prominently across the outside of the envelope: NOTICE OF REMOVAL. I risked being struck from their mailing list if I didn’t order some cheese. The next month I got an envelope that said: “GOODBYE. This may be the last letter you receive from us.” And now, a month later still, and still having ordered no cheese, they were giving me a diamond necklace.

The diamond, I discovered someplace in the mailing, was a 17-facet quarter-point stone. Say, hey, Jose! A little calculation (there are 100 points in a carat, a carat is a fifth of a gram, a gram is 3.5 hundredths of an ounce) produced a gem weighing nearly 18 millionths of an ounce. Diamond dust.

But if diamonds are not a great investment, and if getting them free for $2 apiece from Cheeselovers International is not the best means of acquisition, there’s no lack of mail to tell you what is.

Here’s an envelope that promises to tell “How you could have made 1,555% without being an investment expert!” Of course, the implication that investment experts make 1,555% is almost as absurd as that by opening this envelope and signing up for this service, you will, too.

The headline on the back reads: “How a $10,000 investment became more than $165,000 since 1975!” A footnote beneath the text next to the chart on the back of the envelope confesses that this was a “hypothetical” $10,000. But it would’a grown to $165,000 if only this service had discovered and promoted its magic formula back in 1975. There follows the SEC inspired disclosure that “Past results are not necessarily a guarantee for equivalent future results”—the understatement of the age—particularly since, in this case, the “past results” were hypothetical.

(You tell me what happened over the last ten or twenty years, and I’l construct a sure-fire strategy that would have worked magnificently if only you had followed it. One such involves buying stocks whenever a pre-merger NFL football team wins the Super Bowl, and shorting them whenever an AFL team wins. As Professor Steven Goldberg has pointed out, far more remarkable than this coincidental correlation would have been someone’s predicting it. No one did.)

For $96 a year you get to see whether a strategy that would have worked over the past eight years is the right one for the next eight. What’s more, there’s “No emotional involvement. No guesswork. No worry.” Just follow the monthly advice. Like connect-the-dots, only at the end you’re rich. What’s more, if after two months you’re not pleased with the newsletter (how can you assess its performance after two months?), you can get your money back—less the $16 you paid for the first two issues and any money you may have lost following its advice.

Or perhaps you’d rather “Profit by Learning Politicians’ Dirty Little Secrets,” as another envelope invited … “a Unique New Publication for the Sophisticated Investor,” just $275 a year. Isn’t that great? Here you have scores of sophisticated reporters for The Economist and the Wall Street Journal struggling to come up with the occasional secret, and these two guys (two guys write it) come up with a newsletter full of dirty little secrets month after month after month.

But why spend good money to get rich—hey, a dollar’s a dollar—when the very next envelope in the pile promises a free report on HOW TO ACHIEVE FINANCIAL INDEPENDENCE IN THE NEXT THREE YEARS? I ache to open the envelope. Pressing real tight, I can even see the words IRON-CLAD GUARANTEE showing through from the inside. But you know my rule about junk mail. Out it goes.

Because really, if you sift long enough, you will eventually come upon an envelope that will not only make you rich, like the others, and at no cost to you, like the one above, but without your even having to open it. Like this one bulk mailed from Howard Lake, Minnesota, emblazoned: “The Dow will pass 2300… Silver will hit $95/oz . . . The prime rate will sink to 8% . . . Housing values will gain 30-50% . . . all within 18 months!” The envelope goes on to promise “10 more profitable forecasts for 1984-85 from the fastest-growing investment analysis service in America,” but the four on the outside of the envelope more than suffice. Just sell everything else and buy silver.

Too easy? Nothing worthwhile comes free? Okay, go ahead and pay the subscription fee ($150, The Money Advocate).

The rub comes when one of your $150 newsletters is saying one thing and another, the other. (Or when both are saying the same thing and both prove wrong.) This happens all the time.

Who’s right? you wonder—and, as if by telepathy, comes, bulk rate, a buff and maroon envelope headlined just that way. “Who’s right?” It enumerates contrasting predictions by Howard Ruff and Harry Browne (gold will zoom; no it won’t); Vern Myers and James Blanchard (deflation is unstoppable; 30 to 35% inflation’s around the corner); the Aden Sisters and Mark Skousen (gold’s going to $4,000; don’t hold your breath). Gee! All these preeminent experts, strangely full of praise for each other and frequently touting each other’s pricey monthly poop sheets—”Who’s right?”

“At last, you can find out! (see inside).”

One examines the envelope in hope of unmasking this arbiter of investment prediction, this forecaster’s forecaster, this Edgar Cayce of international finance, but there’s no return address. So we’ll never know who it is unless we open the envelope, and you know the rule.*

[*One set of envelopes I do consistently open comes from American Express’s Travel Related Services Company. I open them to see just how far the concept “travel-related” can be stretched. No fewer than three such travel-related offers came in one day’s mail not long ago. One was for a $540 Vidal Sassoon Infinity Necklace (sorry, I get all my jewelry from Cheeselovers); another offered goblets engraved with my name and crest; the third offered a dozen crystal paperweights, presumably to keep my papers from flying all over while I’m off traveling.]

Swamped by all this stuff? “Too bad, Tobias,” reads the caption of a cartoon showing through the window of an envelope designed to catch me in mid-flick—”I told you reading 43 newspapers would warp your mind!” This would appear to be the beginning of a pitch for a news digest newsletter, not to be confused with a newsletter digest newsletter, several of which solicit with equal enthusiasm. The style of the cartoon is suspiciously like one that shows through the window of another envelope, in which I am apparently in the midst of a tax audit. “Tobias,” says the auditor, “you should be proud to be a taxpaying American.” “I am! I am!” I apparently say, but a little balloon above my head shows I am thinking I could be just as proud on half the taxes.

Personalized junk mail cartoons! I’ll bet they don’t have them in Russia. Does this mean ten years from now we’ll be watching cable TV and the cable box atop our set will insert our names into the audio whenever the commercial broadcaster leaves a coded blank? (“You deserve a break today—Tobias—at McDonald’s.”)
And will that spell the end of junk mail as we know it?

These are heavier questions than I mean to ask or dare to answer. The question I should address—no snap either—is whether any of these financial newsletters can make you money.

Some undoubtedly can. But which?

“Would you pay $5 per month to find out whose investment advice really works?” asks an envelope. To which the sensible reply is, “No, but I’d pay $5,000 a month to know whose will.” For there’s the problem. It’s easy to find newsletters (or mutual funds or brokers or crapshooters) who’ve had a great couple of years; not at all easy to judge which will.

The concept of a $135-a-year newsletter called the Hulbert Financial Digest, which tracks the performance of a variety of other newsletters, is to find the ones with the hot hands and climb on board while they’re hot; then deftly abandon ship (before everybody else does) when their hands begin to cool. Never mind that most of your gains, if you have gains, will likely be short-term and thus heavily taxed. It’s particularly important to bail out ahead of everyone else when a letter has developed a following. When 5,000 of you go to sell 300 shares apiece of some $13 stock—well, 1.5 million shares may be more than the market can absorb in one day without the price slipping a point or four. (Indeed, the hot hands get hotter, at least for a while, because their recommendations are frequently, in the short run, self-fulfilling.)

One of the hottest hands over the past five years has belonged to Dr. Martin Zweig, whose $245 Zweig Forecast is published every three weeks, with special bulletins when conditions warrant and a hotline you can call for daily comment. Marty Zweig is a smart and personable fellow. Whether paying him $245 a year will greatly improve your lot in life I cannot say. On the back page of each newsletter, there’s a listing of his open positions (the things he’s recommended you buy) along with the paper profit or loss you would have made on each one. At the bottom of the list is a figure for average profit: 12.9% in the most recent letter, although I don’t believe it takes into account brokerage commissions or taxes.

This figure doesn’t attempt to include all the wonderful profits you may have reaped from Dr. Zweig’s past recommendations—only the profit or loss on the position he suggests you still hold. It’s not a weighted average in any way—just the sum of sixteen profit and loss percentages divided by sixteen. What’s interesting to me is the temptation Dr. Zweig must be under not to recommend sale of the first two entries on his list, IBM, up 66% from where he recommended it in July 1982, and Walgreen, up 98.5%. In fact, a footnote shows he sold half these positions at significantly lower prices . . . but has not yet had the heart to recommend sale of the other half. In part this may be because he thought IBM, even when it hit 130, was still cheap (he had sold the first half at 83), and in part—if he’s human—because he hated to see that winner removed from the top of his list in every subsequent issue of the newsletter. Likewise Walgreen, which he had bought at 17. Half he sold at 25, but the other half he recommended holding even when it hit 40. Was it really, at 40, one of the sixteen best buys he could find for his subscribers—or would it simply have been a shame to have to drop it from his list? Without those two magnificent holdovers, IBM and Walgreen, the average gain before commissions and taxes on the other fourteen open positions in the issue of the newsletter I’m looking at would have been 3%.

It’s got to be a nightmare to have tens of thousands of people scrutinizing every investment decision you make, so I sympathize with Dr. Zweig if he held onto IBM and Walgreen to keep the back page of his newsletter looking good (and I have no proof that he did). The nightmare is in part ameliorated by the $245 a year each of those tens of thousands of onlookers tosses into the pot, but let’s not begrudge The Zweig Forecast that money. In 1981 and 1982 followers of Zweig’s recommendations would have gotten it back in spades and shovels and wheelbarrows. Zweig was great. In 1983 and at least the early part of 1984, they could have done about as well as Zweig in a Sealy Posturepedic. [That’s a mattress, kids.] However, for 1985 Zweig’s recommendations are likely to be extraordinarily good, as they were in ’81 and ’82; or else not so good, as they were in ’83; or else kind of rotten, as they were on rare occasion way back when. Who knows? The $225-a-year Option Advisor newsletter, reports Hulbert in his digest, was up a spectacular 97.9% in the first quarter of 1984. On the other hand, it was down 93.4% in 1983. So, if you’d invested $10,000 according to its recommendations in 1983, you’d have been down to about $660 by the start of 1984, and then that $660 would have doubled.

And how can we forget Joe (“I can never be wrong again”) Granville, whose market-shaking predictions you could have received for $250 a year, or, when he was really hot, by watching the nightly news? Granville was great for a while, except that those who stuck with his advice would ultimately have been taken to the cleaners. (“My name’s Granville, not God,” he eventually shrugged.)

Howard Ruff has a newsletter. Subscribe and you get a free LP, on which Howard sings “If I Were a Rich Man,” “Hymn to America,” “I Walked Today Where Jesus Walked,” “My Way,” “Climb Every Mountain” and “The Impossible Dream” . . . and/or copies of all Howard’s outdated hardcover books. The newsletter is largely occupied with introducing additions to the Ruff family (he has 30 or 40 kids and grandkids), spurring readers to political action (he has his own lobbying organ), and promoting new or affiliated newsletters. He has great skills as a communicator and marketer, substantial skill as a singer and financial analyst.

He will start one newsletter with an anonymous, and possibly fabricated, letter so he can defend free enterprise and the profit motive (“Dear Howard: Why are you always trying to sell us other newsletters, coins, books and cruises? All you care about is getting rich. You’re greedy”). He starts another by chewing out impatient subscribers who wonder why gold and silver still haven’t gone up. The mystery of it is that he actually has more than 150,000 fans paying $89 a year (and more) to cheer him on.

He’s the misunderstood multimillionaire underdog, fighting valiantly against the big bad Government, and the fact that his investment advice is sometimes good, sometimes not so good, is almost beside the point. It’s you and he against the establishment, you and he against the Russians, you and he against the welfare cheats, you and he against Congress (well, he’s got a point there), you and he against promiscuity, you and he against impatient, ungrateful subscribers.

You and he on exotic, arguably tax-deductible investment seminar tours. You and he assuring his next book, Making Money, climbs onto the best-seller list, thereby confirming his popularity and expertise. (“Buy the book sometime in the two weeks beginning May 14,” he offered 175,000 subscribers, and your newsletter subscription will be extended at no charge.)

The investment letters I do like don’t attempt to predict world events, the price of gold or even the course of the stock market, but provide the kind of fundamental analysis on overlooked or undervalued situations I don’t have time to do. And even then I don’t have a great deal of confidence in them, because picking undervalued stocks is a tough, tough game. Most people will be better off picking a seasoned mutual fund that picks undervalued stocks, like Mutual Shares Corporation.

Generally, when asked where to look for sound investment ideas, I suggest a subscription to Forbes. But that’s no good because no one expects to get rich fast reading Forbes. We want to believe there’s a simple, worry-free way to make 1,555% on our money.

And I don’t blame us.

***