If you're active in the markets (as I am) you probably get these "cold calls" from time to time pushing this stock or that, and claiming that the caller is "great" at making good market calls.

On the surface these might even sound ok.  The latest one I got was from a  pushing Vodaphone (NYSE: VOD) and claiming that they had called the rise (which, incidentally, they kinda did - they cold-called me a few months ago well off the bottom and recommended it - around $23.)

Looks good, right?  Nice breakout.

Well, not so fast.

See, I get a lot of these "Cold Calls."  The last "infamous" one was a guy who was pumping Rite-Aid (NYSE: RAD) which he claimed was "a lock" to go to $5.  How'd he do?

If I remember correctly, I got the call on that one right around $1.75 on the same premise a breakout after "consolidation", so that would have been a really ugly loss.

Here's how these "boiler room" shops work folks.

The "analysts" and "brokers" will come up with a list of stocks.  Who cares how.  They then call you and recommend one, and mark it in their "tickler" file.

If the stock goes down they'll call you with a different one and hope you don't remember them and their firm's name (which might change the next time you hear from them too!)  But if it goes up, they call and tell you "look how good we are - now stroke us a check to manage some money for you."

See the scam here?  Only the winning bets get reported and accounted for.

I caught the ******* who pulled this crap on me with Rite-Aid a few months back and reamed him a new one.  He was pumping something else at the time and didn't mention his blown call (of course), but I log my phone calls and index them electronically, so his name popped up on my screen.  Oops for him.  When I got done with him he needed a jar of this for his O-ring:

Nowdays most of these clowns try to hit my cell, which is an even worse idea for them, since I have call barring.  Once I have your number (or if you try to call with it blocked) you don't go to voicemail, you just get dropped unceremoniously on the floor, and since you can't reach me to "talk about it", you'll never get off the "jackass" list either.

Here's the bottom line folks: If you insist on believing that these guys actually have a decent record, you need to ask them to prove it.  To do that demand that they fax you, on corporate letterhead and signed by a corporate officer, all recommendations made by their firm over the last 12 months with the exact dates of each recommendation and a verified statement that the list provided is true and complete.

They won't give you that, as if they do so and tell the truth you will be able to immediately verify exactly what they're doing (which is what I described above) - and if they lie they just opened themselves up to a monstrous lawsuit.

Short form: Every one of these firms should be hung up on immediately, but if you want to make their life difficult, lead 'em on a bit and then tell 'em that you need to answer the door and will be right back.  Then put the phone down and leave it unattended for 15 minutes or until they give up and hang up.

That way they won't be able to cold-call someone else.