article from New York Times :
February 7, 1999
MARKET WATCH
The Net Is a Congenial Spot for Stock Touts
By GRETCHEN MORGENSON
EW YORK -- While the broad market indexes hardly budged last
week, shares of a group of lesser-known companies, including J.B.
Oxford Holdings and Siebert Financial, were moonshots. Traders
watched the stocks double or more in the course of a day on no
news whatsoever.
What or who was behind the moves? The "what" is the Internet.
Siebert Financial, a discount brokerage firm in New York, and J.B.
Oxford, a rival in Los Angeles, got hot because they are both on
line.
Siebert ran from $19.125 on Monday to $49.50 on Wednesday,
then dropped back to $35.125 at week's end. J.B. Oxford, which is,
by the way, under investigation by the Securities and Exchange
Commission for possible market manipulation, closed on
Wednesday at $12 and on Thursday made a high of $25.75 before
ending the week at $11.75.
More interesting is the "who" behind the activity. It seems to be
"Merlin," a man posting stock picks in an Internet chat room
called trading-places.net.
Outside of cyberspace, Merlin is a Scotsman named Chris Rea, 45;
he is pictured on the Web site aboard a yacht. Rea said on Friday
that he founded Trading Places last September. It is a Web site for
day traders, the histrionic types who furiously buy and sell stocks
through the day. He calls the company a "facilitator of trader
training and trader communications on the Internet."
In less than six months, Rea said, he has drawn 817 members to
his site who pay $279 a month to get instruction in day trading
and access to Merlin's stock picks.
But Rea's reach also extends to thousands of people who learn of
his picks indirectly, from friends or other traders. Net watchers
say that helps explains the violent moves in stocks he pushes.
Before the market opened on Friday, Rea said, he recommended
Omega Research, a Miami maker of financial analysis software.
The stock was at $5.25. "Within half an hour, it ran to $10," he
said. Never mind that the stock fell back to $7.125.
"Right now we're promoting IMON," Rea added on Friday morning.
That's the ticker symbol for Imaginon Inc., a small software maker
in Greer, S.C. "We made it rock," Rea said. The stock rose 25
percent that day.
On-line investing is rife with dubious characters, Rea said; by
contrast, he added, "we see ourselves as being the white knight in
this industry." Still, one member of his site who is a professional
trader says that the enthusiastic Rea rarely tells people when to
sell -- a problem, given that the stocks inevitably fall after their
spikes.
Rea declined to discuss his background, other than to say that he
was a trader for years in London, moved to Spain and then came
to the United States 10 years ago. Five years ago, he was in the
business of designing and producing mailers for car dealerships.
He is not a registered broker.
As essentially a publisher of financial information, he is generally
exempt from regulation. Only if he were found to be buying
ahead of his customers or taking money from the companies
whose shares he recommends would he be subject to regulators'
wrath.
He says he does neither. And indeed, Trading Places is filled with
effusive testimonials to Merlin's magic.
So this is the way we live now. Thousands of people from all over
the nation buy stocks on the advice of a stranger known only by
his alias and a blurry picture. Strange days. Strange days, indeed.
trading-places.net |
