Well Thank You DCF.
Sometimes the obvious is overlooked.
Here's a good read. IMHO <g>
I may not know all the answers, but I am willing to watch, look,
listen and learn.
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.
Happy investing!
KZAP |
