Comments on: Avoid Investment Scams and Bad Advice, Redux

By: Harper Capital

Harper Capital — Wed, 28 Oct 2009 15:21:02 +0000

David, I’d like to say much more bluntly than comment #8 did above: Some people are just too prone to a gambling mentality to resist. (I could say stupid, but I tell my kids not to use that word!)

In their eyes, all stocks are like dice- so buy the ‘cheap’ ones where they see a chance to double quickly.

In fact, I’ve had clients call me about a ‘hot stock’ that is similar to the ones mentioned here. Inevitably, they are complete junk (a mining company with HQ in Jersey City, NJ?), and yet the response is: ‘well let’s just buy some and then sell it _before_ it goes back down.’

Good stuff, David! Thanks for posting.

By: Primary Work at Home

Primary Work at Home — Tue, 27 Oct 2009 12:16:40 +0000

It is very important to check the products and company first. Thanks for sharing this.

By: DaveinHackensack

DaveinHackensack — Sat, 24 Oct 2009 06:49:09 +0000

“Do your work, and buy cheap, boring ideas like I do.”

I’m with you on cheap (at least relative to future earnings prospects), but boring is no fun. When I want to take a nap, I turn on Bloomberg TV and let the soft hum of analysts talking about mega cap stocks lull me to sleep. If there’s a mega cap in a promising sector, I’d rather find a much smaller company that’s positioned to benefit from the same macro trend but has more potential upside.

“You can usually stop right there.”

You can, but then you’d be missing out on the occasional real companies with solid prospects that trade on the OTC BB, such as two I’ve mentioned here previously. Also, bear in mind that investors have gotten their heads handed to them with Dow components such as C in recent years. Whether it’s the NYSE or the OTC BB, you have to sift through the costume jewelry bin to find the true gems.

By: tom brakke

tom brakke — Fri, 23 Oct 2009 18:16:42 +0000

I was quoted in a piece on TheStreet.com that concerned a penny stock that has skyrocketed in the last few months. My comments related to paid-for research, not the stock itself (Cel-Sci: CVM).

A look at some of the huge number of comments posted by readers will demonstrate that many “investors” fall in love with a story, no matter who the teller is or what his stake in the outcome is. They are simply unwilling to doubt.

http://www.thestreet.com/story/10613318/1/cel-sci-stock-promoter-has-troubled-sec-past.html

By: But What do I Know?

But What do I Know? — Fri, 23 Oct 2009 13:08:04 +0000

Thanks for this, David. My son came home from middle school the other day and asked me what penny stocks were. It turns out some other kid has been bragging about his acumen in picking them (I don’t know if there is real money on the line here, either with the kid or his parents.) I’m going to go through your article with my son–it should be a very useful primer on pump-and-dump.

By: David Merkel

David Merkel — Fri, 23 Oct 2009 05:08:04 +0000

q — it has been submitted.

By: q

Thu, 22 Oct 2009 20:20:42 +0000

you can always let the SEC know what you found: enforcement@sec.gov

By: matt

matt — Thu, 22 Oct 2009 19:58:49 +0000

“OTCBB:”

You can usually stop right there

By: David Merkel

David Merkel — Thu, 22 Oct 2009 14:17:06 +0000

Terry, your point is well taken. I am not talking about blind trust, but getting a true multiplicity of opinions that instructs and questions, and helps lead due diligence. I don’t know everything, but I have disparate friends who know many things.

With Madoff, the social group engaged with it was rather unitary, and information was scarce. I did a piece on red flags regarding Madoff, et alia after the fact, but those flags were ignored because of greed, snobbery, and an unwillingness to question.

http://alephblog.com/2009/02/27/a-new-appreciation-for-the-plumbing/

By: Terry

Terry — Thu, 22 Oct 2009 14:04:14 +0000

David–

Your advice was “Cultivate networks of knowledgeable friends who are trustworthy,…”

This is exactly how the Madoff scam was propogated. A few honest and knowledgeable (of what Madoff was selling) people bought in, then told their friends, and so on, until the sorry unwind.

I have many trustworthy and knowledgeable friends, but–in the end–I do my own homework before investing (& still often screw up). It is my money I’m investing and no matter how honest and knowledgeable my friends are, they aren’t going to make up my losses (or share my gains).

This includes your own quarterly updates here, which I actually find quite balanced and informative. For me, it’s a starting place for investment research, not an ending point for buying and selling.