Yesterday, I received a pitch in the mail for a penny stock.? They should put a big red X over my address, but alas, they don’t.
Now for all of my prior penny stocks that I have been written about, all have done horribly.
Now we have AER Energy Resources [AERN] which has done horribly, and does not file financial statements, having “gone dark.”? From a research note on the web, this is what they said:
Please be advised that VictoryStocks.com has been paid $1,300,000 by Sanaz Trading Inc. to perform promotional and advertising services for a one month profile of AER Energy Ressources Inc. which services include the issuance of this release and the other opinions that we release concerning AERN ? VictoryStocks.com has not investigated the background of Sanaz Trading Inc. the hiring company. Anyone viewing this newsletter should assume the hiring party or , affiliates of the hiring party own shares of AERN of which they plan to liquidate, further understanding that the liquidation of those shares may or may not negatively impact the share price. VictoryStocks.com has received this amount as a production budget for advertising efforts and will retain amounts over and above the cost of production, copywriting services, mailing and other distribution expenses as a fee for our services. As such, our opinion is neither unbiased nor independent, and you should consider that when evaluating our statements regarding AERN. VictoryStocks.com is owned by: FreePennyAlerts, LLC, 40 East Main Street, Suite 572, Newark, Delaware 19711. Questions regarding this release may be sent to Editor @ VictoryStocks.com.
I only ran into that scam because I Googled Lone Star Gold [LSTG], and that popped up.? Lone Star Gold is a negative income negative net worth stock.? A promoter for Lone Star Gold snail mailed me, complete with handwriting and excess staples, but the horrid disclosure in teeny tiny type was this:
IMPORTANT NOTICE AND DISCLAIMER: This paid email advertisement by XXX (hereafter “XXX” does not purport to provide an analysis of any company’s financial position, operations, or prospects and this is not to be construed as a recommendation by XXX, or an offer to sell or solicitation to buy or sell any security. Lone Star Gold Corp. (hereafter “LSTG”), the company featured in this issue, appears as paid advertising. Mermaid Finance Ltd has paid $1,768,000 for the dissemination of this info to enhance public awareness for LSTG. Although the information contained in this advertisement is believed to be reliable, XXX makes no warranties as to the accuracy of any of the content herein and accepts no liability for how readers may choose to utilize it. The information contained herein is based exclusively on information generally available to the public and does not contain any material, non-public information. 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Each promoter paid more than a million bucks.? Given the light level of trading in the stocks, and the low share price, the promoters were trying to do a significant pump-and-dump.? Personally, I think it would be really tough to squeeze over $1 million off of these tiny horrible companies, but maybe I don’t know the revenue model so well.
As I frequently say, “Don’t buy what someone want to sell to you.? Buy what you have researched, and what you think has value.”? Ignore penny stocks, with all of the ads that are on the web.? Short them if you dare.? These are horrible companies; any stock that has someone paid to promote it is a sell.? Sell, sell, sell!
This could not be simpler, so ignore the touts that promote penny stocks.? Short them if you dare, “the market can remain insane longer than you can remain solvent,” as Keynes said.
Penny stocks are for losers who dream of great gains.? They get the losses that they deserve.
Background: I teach high school physics. In my AP class, I have some cross-registration with the Micro-econ & Personal Finance classes. In those classes, they play the “Stock Market Game” in which they’re given $25k and compete for the semester for the highest total. Inevitably, discussion of economics, stocks, and that game finds its way into my class where I am incapable of _not_ getting involved.
Problem 1: The game only lasts for a semester (4 months). Result: very short term thinking
Problem 2: The teacher pushes stock-chart reading, “200 day average vs 50 day average”, looking at price movements, etc. There is little (if any) balance sheet reading, company growth investigation, or stock price evaluation going on.
Relevance for here: The kids immediately turn to penny stocks thinking to make a quick buck- “If I buy 50,000 shares of this company at $0.25, I can sell it for a huge profit when it goes up to $0.50.”
Question: Do you have any recommendations for short quips / talking points to reveal their folly to them?
(I had a kid last year almost not graduate when he became so enamored with playing the stock market that he thought he could “crack the code” and make a fortune off penny stocks.)