More on Penny Stock “Tips”

Just heard a good segment on NPR‘s All Things Considered, which ties in well to the blog post I wrote last week.  

There was also a segment on the BBC interviewing Joshua Cyr about his spam stock tracker, actually demonstrating how much money you would lose if you followed these tips. 

Check out Cyr’s blog.  He has lots of interesting posts (and comments) on this subject.  I didn’t realize that there now seem to be professional penny stock “promoters” who will promote your stock, and only charge you based on the results.

One comment I saw asked, “If spam predictably boosts prices fo a day, why don’t people just short the stock and take advantage of it?”   My response: most brokers will not let people short stocks that are not traded on an exchange, or have a price below $3-$5.  

This is one way in which short trading restrictions hurt the overall market.  If it were easy to short these stocks, spammers would be able to make a lot less profit from these techniques, and they would decline to a much more manageable level without any enforcement by authorities: the market would police itself, with traders using the spam as a tip to sell instead of buy, keeping the stock price more in line with what it would have been without the spam blitz.

Another related article….

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2 Comments

  1. Joshua said

    Thanks for the blog link. Just wondering when BBC interview aired. I was just trying to track it down. How did I sound?

  2. [...] As readers know, I get a little hot under the collar about spammers manipulating the price of stocks.  I’ve decided to try to take a little money from them for a change…  I’ve been monitoring my spam email for a couple weeks now.   On 10/16 I received a spam recommending GDKI, on 10/17 and 10/19 I received spams pushing TXHE, From 10/20 to 10/23 I received 4 spams pushing MXXR, then one pushing EQTD on 10/24, and since then five spams pushing AUNI. [...]

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