Thursday, October 02, 2003
On the Internet, no one knows you aren't a Wall Street analyst
“People who trade stocks, trade based on what they feel will move and they can trade for profit. Nobody makes investment decisions based on reading financial filings. Whether a company is making millions or losing millions, it has no impact on the price of the stock. Whether it is analysts, brokers, advisors, Internet traders, or the companies, everybody is manipulating the market. If it wasn't for everybody manipulating the market, there wouldn't be a stock market at all.…”
Via TechDirt, Jonathan Lebed: Stock Manipulator, S.E.C. Nemesis—and 15
If you read the article, it's not exactly clear what Jonathan Lebed did that wasn't any different than anyone on Wall Street would do, other than not being a part of Wall Street (and maybe being a 15 year old kid—that's kind of hard on the ego to be sure). Jonathan also states that the stock market isn't really based on anything rational (like that's anything new—my Dad considers the stock market a form of legalized gambling for instance) and he was able to buy quite low, hype then sell high and make nearly $800,000 in about six months or so (during the Internet Bubble).
I occasionally get spam hyping some penny stock, something like:
From: Tom Schser <firstname.lastname@example.org>
To: (bogus addresses)
Subject: OTC Stock Play
Date: Fri, 20 Jun 2003 12:40:45 -0700
OTC Stock Alert's Last Two Picks:
CPLY from $.08 to $.53 in 12 days fro a GAIN OF OVER 500%!!!
YPNT from $.22 to $1.25 in 18 days for a GAIN OF OVER 400%!!!
HERE IS OUR NEXT EXPLOSIVE STOCK PICK:
C.E.C. Industries Corp. (OTC: CECC)
BUY AT $.19
SELL TARGET $.85 = DIAMOND PLAY!
URGENT HOT NEWS: CECC Secures $20,000,000 Equity Financing for the Completion of Revenue Producing and Profitable Acquisition Targets.
And so on. And if you check the history of CECC you'll definitely see the spike around June/July 2003, although it never did get anywhere close to 85¢ a share; it looks like it peaked around 45¢ a share. But Tom there probably never expected it to reach 85¢ a share—he probably dumped it once he doubled his money.
Even funnier, one money later, I got the exact same spam (only this time, from a Dave Schasrger—email@example.com), only this time, the buy price was 25¢ and if you check the history, it went up, but not like the first time. Possibly someone saw the past history, bought into it, and dumped it before Dave could.
Pure speculation on my part.
Now, it might be interesting to see how the next one of these plays out.