Re: 4/24/00 - Scams And Spams
April 24, 2000
--------------------------------------------------------------------------------
SMARTMONEY.COM: Scams And Spams
By PAUL R. LA MONICA
Smartmoney.com
(This story was originally published Friday.)
NEW YORK -- Message boards get a bad rap. I have trashed them myself. Witness one of my first columns last year - back when I was writing these strange little rants only once a week.
Admittedly, the boards are easy targets for mockery. But they can also be a great place to gauge market moods and investor sentiment. They can even be a source of story ideas. People like me sometimes use the boards to quickly get in touch with average Joe and Jane investors. (I rarely post, usually preferring to lurk. But if you ever see something from Thedudeabides on Raging Bull - fans of the wacky Coen brothers movie 'The Big Lebowski' will get the reference - or Isles73 on Yahoo! Finance, that's me.)
But here's my single biggest concern about the boards: No matter how great a post may be, no matter how intelligent someone may sound, no matter how much you want to believe what someone is saying is true, you really have to take everything with a healthy dose of skepticism. In fact, if you're anything like me, you'll be highly doubtful that anything you read is true.
For example, a reader sent me an email a couple of days ago telling me to check out a post on Raging Bull from CMGI (CMGI) CEO David Wetherell. So I went to the post and there it was, a lengthy commentary about the effect of margin calls on the market written by someone with the handle Dwether. Dwether did not give any guidance as to where stocks might be heading since, as the post read, 'being a public market CEO, I am not free to comment on what might happen in the markets.'
Yeah, right. David Wetherell with the time and desire to wade through boards and converse with ordinary shareholders! If you believe that, I've got a bridge I'd like to sell you!
But guess what? I feel stupid - sadly an all too common occurrence - because Dwether is in fact David Wetherell. CMGI spokeswoman Deidre Moore confirmed that Wetherell has been posting under the name Dwether since 1998. It makes sense. After all, CMGI is the majority owner of Raging Bull, a subsidiary of search engine AltaVista (which postponed its IPO earlier this week). Call it a guest star appearance.
Wetherell's posts are proof positive there are many good things about the message boards. It gives individuals the chance to discuss stocks, ask questions and get helpful answers. And occasionally a Wall Street big shot like Wetherell may in fact take the time to go to the boards to chat with investors. So I thought it would be interesting to give a little tutorial on how best to navigate the message boards, what to look out for and how to stay out of trouble.
The first and most important rule is: Be prepared anytime you see a stock tip or somebody posting 'news' on a board. 'Don't believe everything you read. Be critical. Be incredulous,' says Jeffrey Housenbold, general manager of Raging Bull.
Two noteworthy cases of stock manipulation illustrate the point. Last year, someone went through the trouble of creating a bogus news story about a company called Pairgain Technologies (PAIR). The poster, who subsequently was caught (and, as it turns out, was a Pairgain employee), copied the Bloomberg News logo and set up a Web page to make it look as if Bloomberg was reporting a sale of the company. This was not true, but investors fell for it, driving Pairgain's stock up 30% in just two hours. After the takeover talk proved to be a hoax, the stock fell 15%
More recently, someone's idea of fun was to fabricate a fake press release from Lucent (LU) announcing an earnings warning. This was not implausible, since the company had already posted a real earnings warning in January. Lucent, along with Wall Street analysts, quickly branded the report inaccurate. Nevertheless, the stock fell slightly following the post. A day trader has since been charged with securities fraud for creating the release.
So, as Sgt. Phil Esterhaus in 'Hill Street Blues' used to say - Let's be careful out there. There are simple ways to find out if something is fact or fiction.assuming you are willing to do some legwork.
First off, if someone posts a story link, make sure the story actually links to the publication's site. If there's just text, cut and pasted, go to the alleged information source and see if the text is really there. If it's a press release, go to that company's site or call investor relations and ask about it.
It's unfortunate, but you can't take anything at face value on a message board. I've even had a brush with a scam artist myself.
A couple of months ago, someone posted a message on Raging Bull that said I was recommending a bulletin board stock that would soon hit $15. The message ended with my name, phone, fax number and email. Thing is, I had never written about that company. I got some email and phone calls from readers and I was happy to tell them the post was false. I sincerely hope nobody listened to this poster. At the time, the stock was trading at $3. Now it trades at less than $1.
Less devious, but equally annoying, are spam messages. If you're going to the Microsoft (MSFT) board on Silicon Investor, Raging Bull, Yahoo or any other popular finance message board sites, the last thing you want is to read a message from someone trying to steer you to a Web site touting can't-miss penny stocks. I have a simple rule of thumb here: When you see a message that begins 'Take a look at this,' resist the urge to take a look. Fortunately, the major message boards have been doing a better job lately of filtering spam. But of course it's impossible to completely stop spam. Any site with a large audience is a spammer's delight. (Which is not to say that I don't enjoy Spam, the food product. Now there's good eating! Just kidding.)
Here's another tip. In general, I find that people who take the time to write frequently are those worth reading on a regular basis. But it's also important to find posters who have a point. At times, these boards are like a stream of consciousness writing experiment gone bad. 'There are some messages that are just GO DELL GO,' Raging Bull's Housenbold says. 'That's not particularly insightful.' And given the sheer volume of messages out there, you can't waste your time reading the bad ones. (Or else all those productivity gains Alan Greenspan likes to talk about will go down the drain and the Fed will be forced to raise rates by a full point to stop inflation! Just kidding again. Stop hyperventilating.)
On the positive side, if you follow a message board for an extended period of time, you'll find it's a lot like 'Cheers'...a place where everybody knows your name. However, it doesn't hurt to be curious about a new poster's motivations - especially if they are being antagonistic. It isn't always the case, but in my lurking experience I've noticed that boards for stocks with a lot of momentum tend to attract two types in the investing community: the short sellers and the pump and dumpers.
So please, be careful. The sick thing is that a person can post a bullish comment about a stock one minute and then, under a different name, trash that stock five posts later. You never really know someone's true motivation for posting a message. So a certain level of skepticism is helpful to not get duped.
Still, all in all, the boards can be immensely entertaining. And as long as you stay away from the scams and spams they can be financially rewarding too.
SmartMoney.com ¸ 2000 SmartMoney
smartmoney.com |
