Pump and Dump Alerts – May 24, 2011

| May 24, 2011 | 0 Comments

Pump and Dump AlertsIt seems like every day my e-mail fills with investment opportunities of a lifetime.  There are promises of guaranteed riches… all I have to do is buy some unknown company’s shares that are ready to launch to the moon!

But really, how do these pitchmen have such incredible vision?  Do they have an insider feeding them secrets?

The answer is no…

There’s an unregulated market for companies to sell their stock.  It’s called the “pink sheets”, one of the over the counter markets (OTC).  Here, companies are able to sell shares without meeting SEC requirements.

In fact, in most cases they don’t have to provide any financial information at all.  Essentially, it could be a guy working out of his garage without an actual company… producing nothing!

This guy could just be looking to abduct money from unsuspecting investors.

Here’s how it works…

These garage entrepreneurs begin the hype marketing immediately.   Their goal is to bring people in on the “secret” the company has… and how their product is so revolutionary.

“Investment” relations companies are hired to get the word out.  They advertise on the internet and by snail-mail.  It’s plastered and pushed, hitting the ultimate target… the get rich quick crowd.

These story spinners are self-proclaimed “expert analysts”.   They’re supposedly pros at analyzing company financials and business plans.

The majority of these companies being pitched don’t have any sales whatsoever.  We have a company doing nothing, marketed by frauds… without any financial or analytical experience.   No credentials whatsoever.

But this won’t stop them and the companies helping to push their shares.

These amateurs create a marketing tornado from thin air.  They fake up an incredible product, fictitious sales projections, and potential rivaling Google… all born from catchy, creative writing.

What’s more, the marketing moguls earn big bucks creating the rouse.  Sometimes in cash, other times in stock they can dump on unsuspecting investors.

Any way you slice it, it’s just garbage!

This scam is known as “Pump and Dump”.

You see, cooking up companies is a great way for everyone involved to make money except you!  Normally, company shares are very thinly traded, if at all.   By putting all the pieces of the scam in place, a market is instantly born for the company.

Now the action can begin…

The marketers have done their job, drumming up interest from thousands of investors.  Shares can now be dumped on the new buyers.

As the excitement builds, new investors gawk at the spiking prices… everyone wants in before it’s too late!

But there’s a problem.

In a very short time, the rush slows to a drip.  Volume plummets.  And the once rocketing shares plunge back to earth.  The market dries up and the buyers are gone… it’s over.

And the result?

The guy in the garage and the investor relation firms make mountains of cash.  But most investors lose all their money.

So how can they get away with this?

This may seem like blatant fraud, but it mostly flies under the radar.  As long as they disclose what they’re doing, it’s actually legal!

Right now the SEC doesn’t investigate these scams.  That’s because these companies are unregulated.  They only warn investors about the deception.

Truthfully, this is unscrupulous.  Thousands of investors lose millions of dollars each year investing in garbage.  These ploys are rampant with new ones hitting email inboxes every day.

Fortunately, there’s a better way…

Investing in small cap companies is a great way to make money.  Plain and simple.

Consider looking for penny stocks with a track record of revenue growth.  You’ll find many are “best in class” in their sector… deserving of your investment dollars.  And all of them have business plans and financials backing them up.

Also, I encourage everyone to research the companies you invest in – the SEC website is an invaluable resource.

Investing is all about balancing risk and reward.  Be sure you stay on the right side of the equation… never gamble your money on penny stocks, who aren’t reporting to the SEC.

You will lose your money!

In fact, since 1926, small cap stocks have significantly outperformed every other major asset class including blue chip stocks, gold, and even real estate.

Until next time,

Brian Walker

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Category: Pump & Dump Alerts

About the Author ()

Brian joins the Penny Stock Research team as a seasoned independent trader and financial analyst. Brian graduated with a B.S. from the University of North Florida and now resides in Scottsdale, Arizona. With a background in economics and statistics, he has a keen ability to uncover profitable and growth-focused companies. He has years of real life know-how in analyzing fundamental and technical data that gives him an edge drilling down on companies and financial results. With over 15 years trading experience, Brian has become an expert in the ever-changing equities markets. Today, he scours the markets hunting for penny stocks that offer low risk and high reward.