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Historical Timeline
Penny Stocks
1900-2008
Pre-Web 2.0 Stock Promoters Heyday Boiler rooms Bre-X to $300 The wild, wild west
2008-2011
Pre-Pump Crowding Web 2.0 & the OTC Market Tighter U.S. regulations Promotion costs surge Social media revolution Death of Mister X
#PSC2012
2012 Year In Review Year of the Promoter APS around the world Revolutionary promotion Counterfeits, boiler rooms, text messaging & SPAM
2013
2013 & Beyond
???????????? Tighter regulations Guerilla promotions Foreign market entry
PrePromotionStocks on http://profit.ly Former stock promoter (2004 2010) Trades pre / active stock promotions [LONG BIAS] $208k in 1.5 years, 68% win rate, 21% average gain Generated ~74% of profits in 5% of total trades
%P&L: 29.25%
BUY: $0.1911
SELL: $0.247
ENTRY: 12/17/11
EXIT:
STRATEGY:
101.33% $0.0225
$0.0453 12/16/11
10/30/11 pre
$1.71 $1.08
$0.83 $0.05 $0.35
$1.05 $0.902
$0.42
2/24/12 1/18/12
3/30/12 8/22/11 8/25/11 6/18/12
confirmed pre
pre confirmed pre confirmed
$0.511 $0.44
$0.323 $0.281 $0.25
10/19/11 confirmed
$0.0367 8/17/11
10/27/11 pre
$1.065 $.985
AVERAGE: ($22,865)
ABOT annotated chart showing buy, sell, how much $ left on table
The Lifecycle of a Stock Promoter Inevitably Leads To First In, First Out (FIFO) Trading
The Mister X Effect FCPG: 31 days HHWW: 24 days KNKT: 24 days ALZM: 14 days AVVC: 0 days WTFS: 0 WSML: -1 aka RETIREMENT (or re-branding???)
Campaign duration from launch to peak goes from weeks to a few minutes Traders understand that the only way to profit is to be First In, First Out. Examples include PennyStockAlerts.com & XTremePicks.com (duration < 15 min)
Direct correlation between how fast information flows and the duration of a promoter's lifecycle As a promoter reaches the maturity phase, either start trading F.I.F.O. or risk getting RARSd
Person-to-person or snail mail promotions All buyers were suckers Promotions lasted 1-10 years or more o Buyers very spread out (polar opposite of today's OTC market) Difficulty monitoring stock manipulation meant little/no regulation
SOURCE: http://prepromo.co/chopstocks-businessweek
Technology and deregulation In-house "chop stocks" Promotion was done over the phone - easy to turn the faucet up or down Establishing trust over the telephone paved way for the Wall Street "pitchmen"
"The regulators have always seemed to be a day late and a dollar short--or perhaps more accurately, years late and billions of dollars short." -Gary Weiss, BusinessWeek
"All over the country there are complete fools hunched over computer screens imagining they're Wall Street tycoons."
-Jonathan Schwartz, Caviar Crimes
Information Imbalance
Imbalance in the supply & demand for information targeting stock traders People wanted "stock picks" - S.E.C. filings were for losers (remember Cramer) so ideas came from poor sources:
o Press releases flooded w/ ticker spam o stock forums on Prodigy & AOL, yahoo finance, ragingbull, siliconinvestor, iHub o email newsletters: HotOTC, "Stock-Dogs"
Information Imbalance
Stock promotion was incredibly cheap Ticker-tagged news w/ good story = 7-figure $volume
o Tim's An American Hedge Fund book explains the early online stock days o Scam Dogs and Mo-Mo Mamas by John Emshwiller does too (talks about Janice Shell)
more regulation o try depositing a cert! 2011 S.E.C. Roundtable: o DTC proactive w/ "chills OTCBB Liquidity decreasing o 2008 $vol fell 58% vs. 2007, sharpest recorded YoY decline (hasn't recovered - will hit new lows in 2012) Unlike years prior, news releases no longer moved penny stocks. o Promotion is the lifeblood of the penny stock market.
Social media and Web 2.0 enable mass communication in real-time Traders becoming smarter More accurate content about penny stocks on the internet Teachers emerge and fill the need to publish accurate information about trading Real-time chatrooms become very popular
A stock promotion campaigns duration from launch till peak continues to decrease over time because theres more traders and less long-term investors.
Stock promotion becomes more expensive as liquidity dries up o Rebirth of hard mailers Market maker participation* o AYME w/ MSEH/NXTH? o WDCO w/ APS? EquityFeed / EDGAR relatively unknown to traders Stock could trade $500k intraday & stay under radar Speculators not actively digging through S.E.C. filings to connect-the-dots
*The comments above merely reflect the opinion of the presenter and are based on his experiences watching real-time Level 2 activity. Theres no concrete evidence to prove that market makers collude with stock promoters.
Year of the Pre-Promotion Knowledge of stock promotions hits an all-time high PPS distribution increased w/ the profit.ly launch Tims popularity has a trickle down effect onto Michael Goode (brilliant teacher) IL, ATA & NoDummy
Promoting the promotion o BestDamn, StockHaven, Leslie Howard, APS Tim's industry revolution o power of affiliate marketing
Desire for traders to be the very first to get in had caught like wild fire
I know its a scam stock but I can still get in & out fast and make a profit. Result: Very crowded trades B.C. (Before Crowdedness) & A.N.D. (After NoDummy)
Branding is everything
o
Stock spammers able to build brand equity AtomicPennies able to develop a brand without spending big $$$ Doesnt matter what is being promoted just who is promoting
o
o o o o
SEFE: The Next LEXG PUNL: The Next IDNG STNT: The Next STEV ORYN: The Next STEV TFER: The Next JAMN SYNC: The Next BVSN PSON: The Next LUXR ????: The Next LEXG
The next XYZ will almost never match the performance of XYZ because the trade becomes incredibly crowded from very early on.
SEFE: PennyStockWizard GWBU: APS w/o fresh chart STEV: 2nd round mailer CLSR: unknown incher w/ high price
per share
Future Trends
Cat & Mouse Games Adapt & Readapt o Between regulators & promoters o Between promoters & early speculators
New Brands Emerge More Frequently TBX / "Wizard" o Start new brand & launch promo (few will buy). If it's a successful promo that new brand's equity shoots up (the Wizard model) o Spam emails using existing lists but sent from a new "persona" + successful campaign launch = spike in that new list's "health"
Future Trends
Globalization
Increase in U.S. regulation will lead to promoters moving into international markets w/ few regulations (since they're still in their infancy)
Market participants from around the globe will be able to buy stocks trading on any intl. exchange
Future Trends
New media outlets o How long till a pump iPhone / Android App? Uncompensated opportunities o Well-respected entrepreneurs like James Altucher will have an even greater influence on stock prices when publishing articles o While certainly not a well-respected organization, look what the "NIA" has been able to accomplish by playing on people's fear (as opposed to greed).
Will help you develop an intuition to spot changes in the constantly evolving market environment