What Judge Judy Taught Me About Penny Stocks


by John Whitefoot - Date: 2007-03-14 - Word Count: 656 Share This!

I was watching Judge Judy the other afternoon. The litigant was charging her "ex-friend" with fraud. The defendant asked her friend to cash some money orders for her. Apparently, there was a Nigerian model that had some money orders she needed cashed. She couldn't do it in her own country so she sent out a rash of unsolicited emails hoping someone would come to her aid.

If you cashed the money orders for her, you could keep a certain percentage and then wire her the remainder. Naturally the model would only accept U.S. cash.

Oddly enough, the money orders were fraudulent. But by the time the bank notified the litigant of this fact, she had already passed on the cash to her ex-friend, who had kept her share and wired the rest to the poor model in Nigeria.

Now, my question is...how is it that people continue to get duped by email scams promising the world?

Yes, it's fair to say the scammers sending out fraudulent emails are greedy, hoping to cash in on peoples apparent good will. At the same time, it's important to note that the people responding to the emails are also hoping to make a lot of money for doing basically nothing themselves.

In the end, both parties are, when it comes right down to it, greedy. Remember... if it sounds too good to be true...it probably is.

The same logic can be applied to the mountains of unsolicited emails I get every day touting tomorrow's "Wall Street juggernaut today". Somehow, I am one of the fortunate ones lucky enough to receive the "heads up" on tomorrows next wonder stock.

According to my most recent unsolicited email, (grammatical errors aside) I need to "GET IN BEFORE THEY RISE AGAIN SO YOU CAN TRADE AT THE TOP THIS WEEK!"

For fun, I watched this stock's trading patterns over the next couple days... just to see how many people got involved in this dog-of-a-stock. Well, the stock was trading near $0.45 the day the emails went out. Over the next two days the stock soared to $1.01, by the third day it had fallen back to the $0.45 range. Where it continues to linger.

More often than not, the individuals or companies pumping these publicly traded companies are paid in stock. Nowhere in the press release does it say they are paid in restricted stock. And I guarantee they sell their stocks the day after the email blitz is sent out to unsuspecting investors.

Naïve investors that think they are going to get something for nothing. And they won't.

Still, I have to ask myself, why would someone give me an unsolicited heads up on a financial windfall? Exactly, they wouldn't.

If the stock was so great, they'd secretly snap up shares themselves. I certainly would. But the fact is the stock isn't all that great and they need unsuspecting investors to buy into the hype and send the stock price higher.

Stock market scams are not limited to emails. Stock market hucksters have evolved in stride with modern day technology.

Aside from showing old clips of WKRP in Cincinnati, YouTube has become a stomping ground for stock scams. Companies issue press releases promoting their high-tech developments to investors on YouTube. For astute investors, this might raise a few eyebrows...and red flags.

One investor I am aware of drops the names of the executives of companies he receives spam emails from into the SEC's litigation database. It may (or hopefully not) surprise you to learn that a number of these executives have been charged with "Executing a Fraudulent Pump and Dump..."

This bit of 15-second Due Diligence can yield eye-opening results.

So, avoid reading unsolicited emails and financial invitations to YouTube. Neither will help you locate good stocks.

For real, quality penny stocks, based on healthy companies, with tremendous upside potential do you own due diligence...and check out respected online penny stock services that offer unbiased research, such as www.PeterLeeds.com. Or, to chat with like minded penny stock investors, check out www.pennystocks.com.

Related Tags: market, stocks, stock market, penny stocks, penny stock

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