We have all received them by mail. They arrive as slick, colorful, bright, detailed reports on a basic investment, still trading for pennies on the next big tech. They have fancy names for them like “Wall Street Insider” or “The Underground Stock Report.” They often link promoted actions to legitimate businesses or common sense needs around the world. The problem is that, although it always sounds promising, they gently caress you and make you participate in what is known as “pump and pull”.
The anatomy of the scam involves these micro-businesses that are normally listed on the Over the Counter Bulletin Board (OTCBB). They are also known as “Pink Leaves”. The OTCBB is not part of the NASDAQ Exchange and typically involves extremely small startups with questionable stability. They typically pay a “stock promoter” a large sum of money, and are often part of the scam themselves. Large blocks of stock are building up and the mail goes out. The trap is now set as unwitting investors begin to see stocks move from the bottom and try to catch the wave. As investors pile in and stock prices rise, stock owners and promoters sell everything, “The Dump,” and leave you with the stock.
They will often lead you to Internet bulletin boards with carefully controlled messages while you patiently wait for the next big “thing” to rise from the ashes of a few cents or micro cents to 50 cents, a dollar, maybe the next Google! Hey, even if it went to 0.04 cents, it would double my money, right? Unfortunately, after promoters and company members leave the building, although these companies will continue to operate for a while, they very rarely stay for long. Need more proof of a possible scam? Read the fine print. The words we want to make believe are not there because of all the big claims and pretty charts that have us mesmerized with the potential riches of the world. The fine print will actually tell you how much the promoter is paid if he owns shares and highlights in many ways that this is a highly speculative high risk investment. The reality is, in my opinion, that it is not an investment at all; it is a major scam that needs to be stopped.
So this week, when the next fancy-looking mailer arrives at your house and you think, hey, it’s only $5000, let’s do it! Throw away!!! Potentially good and great companies don’t start out on the OTCBB as pink sheets. The stock market has its own inherent risks and if you treat it like a casino; it is very likely that you will get the same result as when you go to a casino.