TOO ALL, A MUST READ
Subject: Cyriuss: ANATOMY OF A STOCK PROMOTER
Date: Mon, 15 Jun 1998 18:17:02 -0700
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================= CYRIUSS' NOTES: June 15/98 ===================
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MR. SHORT
Exclusive to Mr. Cyriuss
June 16th, 1998
ANATOMY OF A STOCK PROMOTER:
Inside Penny Stock Scams
We tire of hearing about the much-abused notion: Blame it on the Stock
Promoter! Guiltless speculators, who have no desire to GET RICH QUICK by
speculating in the penny stock marketplace, shift all blame from their
irresponsible decision-making to a lowly, often stupid PR man. If you
want to shoot the messenger, that's fine, but you're missing the whole
boat and end up helplessly lashing at the wrong target. You might want
to step inside the world of penny stocks and discover how it really
works.
Stock promoters come in all shapes and sizes, races and religions, and
backgrounds and ages. Stock promoters can work from wherever there is
phone service, fax service or an Internet connection. There are certain
common denominators, of which you should become aware.
The most common denominator of the stock promoter is his or her
enthusiasm for the security. Whether we are talking about the Roaring
20's, the Dirty 30's, the Scandalous 50's & 80's, or the Depressing
90's, you will find that ALL stock promoters have an ebullient and
exuberant cheerleading, can't-go-wrong attitude about the issue they are
flacking.
The promoted stock is presented as the solution to your specific
financial dilemma. It will absolutely, positively surf you to a new
financial freedom. In a nutshell, all your dreams will come true.
A stock promoter may have a flair for writing glowing statements about
a company's prospects. Those working telephone banks generally have
calming voices. Some sound staccato. Both massage money from your
wallet.
The next common denominator is that the stock promoter will use the
written or spoken word to build your trust in him. He wants to become
your friend. A stock promoter can only fleece you if become his friend.
If you are a very big investor, he may even spring for lunch. Most are
polite and have impeccable manners. But, stock promoters have no real
friendships built upon trust, because they, themselves, trust no one in
the penny stock marketplace. It is amusing to watch the better promoters
scam the less clever promoters who fall for the deal. The most
unscrupulous con fellow churchgoers or at temple. Some will get their
closest friends into the deal and they find a new set of best friends.
Let's look inside the head of the average stock promoter. He has a
soothing voice. Yet, he spends most of his "free" time at sex clubs,
getting smashed into oblivion, doing drugs and wildly spending the money
you have lost. It is a trademark that most wildly swing between feast
and famine when it comes to their personal finances.
Don't blame the stock promoter. Prior to joining this exclusive club,
he failed at his chosen profession. Most are failed stock brokers. The
rest can come from literally any walk of life, although many have some
previous telemarketing experience. A third common denominator is they
are failures in most aspects of their lives.
Stock promoters are just the front for the operation. Whether they are
a phone man or a newsletter writer, they are really as much out of the
loop as you are. The fourth common denominator is that they are inexpert
in this field, whether it is geology, Venezuelan legal affairs or
high-tech. They are just mouthpieces. They say what they are told to
say. Their opinions are carefully crafted by the stock operator. Under
the spotlight glare of someone versed in the subject, they fly apart.
Their incompetence becomes readily apparent to all but the amateurs.
During a stock promotion, the experts scramble from the sinking ship
while some shortsell the stock.
Despite their cheeriness and glowing statements about the company's
prospects, stock promoters are usually a sullen bunch. They whine a lot.
In an off moment, you'll find them complaining about one thing or
another. They have no zest for real living. Stock promoters live in an
artificial, superficial, pointless shadow of a caricature that an
ordinary investor would call "a life." Only the insane would consider
inhabiting such a world. Consider that if you were repeatedly beaten
down in life to the point of suicide, had lost all of your friends, your
spouse, your livelihood and your dreams, only then might you be ready to
become a stock promoter.
The next common denominator is greed. Stock promoters are selling their
stock to you. No wonder they are so cheery. You are the customer. It may
not be a meal you can digest, but they will sell it to you anyway.
Stock promoters most often get paid in stock options. The higher the
stock moves above the option price, the greater their profit. If they
have an option at 15 cents and the stock is trading around 90 cents, who
do you think is doing the selling? Shortsellers is the frequent lament,
but more often it is the stock promoter hitting your bid. The very deft
promoter will sell you the stock at the offer.
Newsletter writers get paid, one way or another. They may be paid a
flat fee to cover the stock, but those are just promo sheets. A higher
class of newsletter writer gets cheap stock, i.e. a bloc of stock
trading at below the norm, or options. The blue-chip newsletter writer
participates in a cheap private placement (stock + warrant), also known
as 2 for the price of 1. Also below the normal trading price. Those
writers will also short the stock, offshore, to lock in their profits
before the share price declines. The more clever newsletter writers
arrange for a fee paid to them by a fund, for finding the stock; the
fund buys the stock and pays a finder's fee to the newsletter writer. In
that way, they can claim they aren't trading the stock. Others - the
honest ones - have another trade the stock while they write about it;
they then split the profits accordingly in offshore accounts.
The stock promoters are just the pipeline or the messenger. Their
purpose is to boost the shares in one way or another. Shoot the
messenger, but for whom do they work?
The REAL brains of the operation is completely hidden. The Brain behind
the entire promotion is the Stock Operator. At first, a handful of
broker-dealers might know or suspect who is running the show.
Sometimes, it is obvious, especially on the Alberta or OTC exchanges
because the "large" shareholder is a financial group or capital group.
For instance, whenever you discover that a company has a large offshore
fund financing the play, that is a red flag that a stock operator is
behind it. There are many other red flags.
Some stock operators are better than others. The clumsy ones struggle
to get stocks above $1. They can't attract the best phone men or
newsletter writers. The sharks can drive a company's shares past
$5/share with amazing trading volume.
The way the penny stock market game works is quite insidious.
There is one stock operator that accumulates most, if not a substantial
bloc, of the stock in the company. Generally, this guy is so hideously
detested that the deal would suffer should his name be immediately
disclosed. These stock operators have such a bad track record at burning
investors that many stock exchanges have banned them. Yet, they still
need to make a living and exchanges can't always stop someone from
taking a position in a company. Stock operators don't need more than
one or two deals every few years to keep them in clover.
You may notice how trading volume in an erstwhile heavily promoted
stock suddenly dries up. After six to 24 months, the stock operator
sucks all of the loose shares, mainly through attrition, from
disappointed hands into his various accounts. One million shares,
purchased at five to seven cents, is cheaper and less troublesome than
buying a defunct shell and reviving it. Some may buy the defunct shell
from an even seedier shell provider; the shell provider will get paid in
newly printed certificates and join in the selling bandwagon when the
promotion starts.
Once the accumulation phase has ended, the stock operator vends a story
into the stock. That may be a geological prospect or an intellectual
property (although some of them don't sound very intelligent). We've
seen very powerful stock operators negotiate a private placement with a
company to speed up the accumulation phase
The next phase is the promotion phase. This is the trickiest of stages
because the stock operator frequently combines the promotion with his
dumping of the stock. A seasoned stock operator will wash-trade the
stock up the stock chart, to attract interest. Paid newsletter shills
and Internet commentators will follow. They will be attracted to the
trading volume and prospects for their followers. Your stockbroker will
get sucked into the whirlwind of the promotion. A powerful stock
operator will also have numerous brokers and traders "assisting" him in
the stock's runup. They, in turn, become a chorus of mouthpieces for the
operator.
The majority of penny stock operators live in Scottsdale, Palm Desert,
Boca Raton, London, Toronto or Switzerland. For the most part, the less
successful ones live in Vancouver. Many stock operators once interned as
stock promoters and properly learned their dirty tricks. That shows you
how down the evolutionary cycle a stock operator really is.
The penny stock world is not as large as one may imagine. A sustained
runup in any security can only occur when the ascending volume and
number of mouthpieces (fronts, promoters) compels the na‹ve speculator
to "average up" or go on margin to buy more shares.
If the stock operator has properly run his promotion, the same people
will keep buying as the share price rises. That is when investors are
not just burned, but scorched!
The myth of an accumulation/promotion/distribution cycle is just that:
a myth. It is a two-step process. Accumulation through attrition of
previously burned-out plays, buying shells, or taking down a private
placement; followed by a short or extended promotion/distribution phase.
The promotion/distribution phase lasts for as long as the stock
operator still owns shares in the company. When he's sold out, the game
is over.
There is a little-known technical indicator that signals when the
promotion is over or has stumbled. As long as that technical indicator
rises, the stock goes higher. When it slumps, the promotion is over. At
the point the indicator quickly sinks, the game is over. Those still
holding the stock end up on stock chat forums grumbling about how they
were burned, ripped off or scorched.
You could hire private investigators, run background checks, hire a
geologist, and so forth to get to the bottom of the snake pit. Commonly,
someone in the business is already one step ahead of you, having already
done that. This also shows up in that key technical indicator. It is the
best kept secret in the penny stock market.
In the next issue, THE CHARIST will disclose that technical indicator.
If YOU want to stop getting burned in the penny stock market, email to Mr.
Cyriuss for our next issue.
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Regards GB |
