Pennies from Heaven

Recently I’ve been trying to educate myself about the stock market and how people profit from it.  Realizing that I’d probably never be able to retire on my paycheck, I figured I might look into investing what I can and hopefully watch it grow.  Therefore, I’ve started reading books about stocks, options, fundamental and technical analysis; anything I can get my hands on that makes sense to me.  The key phrase in that last sentence is “makes sense to me.”

I’ve found that the Wall Street biz is not something that comes easy to everyone.  Actually, I think it goes out of its way to make understanding it almost impossible.  It seems to have it’s own language, and it almost takes a financial guru to wade through the mess of terms, symbols, mathematical equations, and whatever else one might find lying around in this world of cut-throat stock traders.

A few acquaintances of mine have, as I’ve discovered, been playing what’s known as “penny stocks.”  These are, by definition, any stock that’s publicly traded with a price under $5 per share.  Believe it or not, some of these can sell as cheap as $0.0001 per share!  As I’ve discovered, along with these “penny stocks” come manipulators and promoters who somehow tout these stocks to others to increase the price only to let them dump the price, leaving hundreds, if not thousands of people “holding the bag” of worthless stocks.

How, you might ask?  Well, it seems to work this way:  there are a number of sites on the internet which tout an ability to pick the next stock that’s going to skyrocket in price, and by signing up with their newsletter, you’ll get first notice of these stocks so you can get in early to make a profit when the stock price has risen.  One of the most popular of these sites, it seems, is a group called Awesome Penny Stocks.  This group will “pick” a stock, slam your email box full of how this or that stock is the greatest thing since sliced bread, talk about how the stock is continuing to rise and almost promise riches that would make Mitt Romney jealous.  According to some, the Awesome Penny Stocks group is the king of the penny stock promoters.

You may ask yourself, like I have, how these groups can pick stocks that go up in value each and every time.  One person explained it to me like this:  The stock promoters will buy up millions upon millions of shares of a company, shout the praises of said stock to the moon, and as more and more people buy into the stock raising it’s price share, the group of promoters are selling their super-cheap shares at the elevated prices, thus locking in profit for themselves.  Once they’re finished, the stock price falls faster than it would take Hitler to burst hell wide-open.

With all the technical indicators I’ve been reading about that supposedly will help you get a handle on where a stock might be headed, they are all pretty much useless as far as these promotions are concerned.  Manipulation takes the drivers seat when it’s promotion time.

Take, for instance, the debacle that happened this week with the latest Awesome Penny Stocks pick.  It was released on Thursday, and the price of the stock shot up at least 230% in that same day.  Out of curiosity, I looked at it at lunch, and saw it had risen around 230% from its initial $0.15 price at market open.  Sounds too good to be true, right?  Well, it seems this groups pick has always risen anywhere from 200 to 500% or so every time.  Usually, it takes about a month for it to do so.  When it dumps, however, I would never want to be the one left holding the bag.  These stocks dump FAST.  There was one such stock they had promoted that eventually went to $2.40, only to dump to around 0.40 in a matter of an hour.  Once you saw it start falling like that, you’d hardly be able to get out of your position before it was too late.

This most recent pick I mentioned earlier they started touting Thursday dumped the very next day to $0.04.  Apparently, this is very unusual for this group of promoters.  Hundreds of people were left holding the bag Friday when this happened.  It was tragic, especially for the ones I mentioned earlier who had actually bought into it.  One person I know of lost at least 5 figures in one day.  It truly is sad.

The moral of this story?  I guess you could say that if it sounds too good to be true, it usually is.  So if you’re looking for penny’s from heaven to fall, be careful if you’re standing out in their rain, because those things can bruise you on the way down.

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