Thursday, January 15, 2009

Pump & Dump

For those of you who don't frequent the Comments portion of this blog, I'd like to share with you all the following exchange:



P&D stands for, "Pump and Dump."

"Pump and dump" is a form of microcap fraud that involves artificially inflating the price of a stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme "dump" their overvalued shares, the price falls and investors lose their money. Stocks that are the subject of pump-and-dump schemes are sometimes called "chop stocks."[1][2]
While fraudsters in the past relied on cold calls, the Internet now offers a cheaper and easier way of reaching large numbers of potential investors.[1]

--Wikipedia

Next time some genius accuses me or anyone else of pump & dump, understand that you are accusing someone of a crime, for which the remedy is a tort called Slander. You might also want to know what the salient elements of P&D are:

(1) False and misleading positive statements;
(2) In order to sell the cheaply purchased stock at a higher price.

Unless both elements are present, there is no "pump and dump" only slander per se (per se because I am an attorney). The fact is, I still own every stock I mentioned in this blog this year and I also have had a huge short position on, so I could withstand a little drawdown on those longs, while cleaning up on those shorts.

As for the poster or anyone else seeking personalized trading advice, call Cramer. I'm here to share my ideas, not to give advice.

On a brighter note, my readership has grown exponentially in the past six months and I continue to get welcome appreciation of so many of you, through emails, donations and positive comments. Those of you with your heads on straight should take away from this Blog a wealth of insight and newly found skills in trading your own accounts. Clearly, that is representative of the vast majority of my readers and I hope that I continue to be worthy of your praise and support as this year rolls on.

Be forewarned that there is a major low coming and we will all spend much of 2009 building wealth on the Long side of the investment arena. We just aren't there quite yet. So be prepared for the ride of a lifetime, but only when the market says, "Buy, buy, buy."

A

14 comments:

Newbie said...

But why would you say the following: "TGB is breaking out, all reward measurements are up in the 200%+ range." all the while speculating there is a major market low coming? Was I supposed to short TGB?

Allan said...

Good question, Newbie. The answer is to look at each opportunity separately, that is to say TGB can go up several fold, as can puts on the QQQQ. With just a little luck, you win on both sides. Your puts double, you exit, maybe add to your TGB at lower prices and later, when the markets are in rally mode, you double your money on TGB.

That is just one scenario, others include being wrong the the market falling but making up for your short losses with your TGB win. Another would be to exit TGB on a 5% stop, while letting your Q puts run.

Look, you can't win if you don't play. There is no guarantees either way, just a wide array of potential outcomes, pick your spots, apply your strategies within the context of sound money management and be persistent, It works.

Lastly, don't just blindly follow every trading idea I post, use your own mind and your own logic, pick my best ideas based on your own ideas of what works and what doesn't. You will be amazed at what you are capable of achieving. I know I was.

Michael Lomker said...

Ah, the hazards of having someone actually read your blog. I haven't had too much of a problem with that yet. ;)

I hope we don't have to start putting the 3 paragraph legal disclaimers on every chart that we post.

Marmaduke Weatherall, IV said...

Allan:

With all due respect (and MUCH respect is, indeed, due) do you not think that yesterday's bounce off of lows to a rally, coupled with terrible financial news this Friday AM (Merrill 150Bn, Citi, etc) coupled with a big pre-market rally today bodes for a bottom having been put in?

Should we not be flat or long at this point?

Please state your reasons for long//short/ or flat.

MW

Marmaduke Weatherall, IV said...

Allan:

Also, how do you feel about investing in the metals these days?

The old money tends to be leaning towards holding large sums of the metals themselves. Not the stocks or futures.

Your issues?

MW

Anonymous said...

Allan:

Don't let the jokers get you down. I just noticed your blog last month and wish you the best.

I will dedicate 5% of all my profits from your blog and plough this % into the "Donate"
key.

Would it be an imposition to suggest that ALL readers do the same? Or am I out of line?

Christopher

Michael Lomker said...

Marmaduke, this is an A wave (temporary rally).

I'm not sure how versed you are in Elliot wave but I'd greatly recommend signing up for Prechter's "Financial Forecast Service" at elliotwave.com. He gives you a couple books just for the cost of shipping...it's a great value.

CruiseGuy said...

I love the Allan ForeWarning....but even more the optimism that there will be a point in 2009 that will be "buy, buy, buy"....been a while since I have even heard a glimpse of that from Allan except for NNVC...

I looking forward to quick descent to the major low and then the awesome rise that will follow.

CruiseGuy

Anonymous said...

Allan,

Don't let the "newbies" bother you, they're everywhere. Those of us that have been following you for years, trust your judgment and any recommendations you give. keep up the good work!

waiting for your analysis on ACTC. I've done mine, and its giving me the same goosebumps as NNVC did in late 2005.

dk

Anonymous said...

I never knew what Pump and Dump was. Thank you for the definition.

I don't mean to be a wiseguy, but...

Wouldn't it be libel, because it was written, and not slander, which is when someone say something?

You are the attorney, right?

Allan, at this point, you seem to be a public figure, so wouldn't it make it very difficult to prove libel?

Allan said...

My bad, you're right, libel. As for public figure, that's debatable but it doesn't matter, you can't spread malicious lies even about public figures.

My point was not about lawsuits, it was about throwing around thrash talk when you don't even know what it means. If you want to lose on Wall Street, get in the habit of blaming others for those losses, the hits will just keep on coming.

Allan said...

Christopher: Five percent sounds about right, it's also an investment expense which may attach some tax benefits as well;

dk: I like ACTC, look for it to be featured in an upcoming Blog;

MW: nothing has changed in my analysis, as each day passes we are closer to that decent into the abyss of a Wave 5 Major Low;

Michael: Agreed, the EW Financial Service is well worth its modest cost. If you hit their site from my Blog, I get brownie points.

Anonymous said...

It is debatable on whether or not you are a public figure. I suspect you are not, but the 1964 definition may be evolving with the invention of the internet. I don't know. That is why I asked.

Rather than scaring the guy with a lawsuit, and everyone else away from your site, I probably would have denied it like you did and said such a personel smear is out of bounds and not the point of the blog.

Good luck trading next week. I like your blog and wave count. I agree we are in the 5th wave of something, and have temporary support at the 61.8% retracement.

Allan said...

Re: Good luck trading next week

I more I do this, the less luck appears to affect success. A better catch phrase would be:

Find a trend and follow it.

May be able to write an entire blog on that phrase in the near future.