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Buy Low, Spam High
An anonymous reader writes "A recent study on spam has revealed that spammers see a return between 4.9% and 6% when selling stocks they have bought low and spammed the world with." From the article: "The researchers say that approximately 730 million spam e-mails are sent every week, 15% of which tout stocks. Other estimates of spam volumes are far higher. The study, by Professor Laura Frieder of Purdue University in the US and Professor Jonathan Zittrain from Oxford University's Internet Institute in the UK, analysed more than 75,000 unsolicited e-mails. All of the messages touting stocks and shares were sent between January 2004 and July 2005."
Not exactly. They're getting a 4-6% gain the next day, not annually. Fire them off once a week, and you're talking several thousand percent gain annually.
It's still an attempt at market manipulation, and the SEC should come down on anybody who does this like the fist of an angry god. CEOs have gone to prison over this, you would think they could at least bitchslap these spam-and-dump traders with a hefty fine.
Information wants to be anthropomorphized.
The stocks they pick are always crap. Unlike XFGW, that sucker is ready to POP! I'm talking 30,000% return in just a few months! Yah, baby!
After watching these a few times, I actually tried buying one of the stocks. The best chance is if you look at the stock and it hasn't risen any yet (meaning you get the email before everyone else).
I bought about $100 of a $.20 stock and wound up selling it for $.55. I've stayed away from them though usually as I seem to only look at them after the price is moving.
Folks, that's 6% in 2 days, not 1 year. That's about 33,000% anually.
actually they do sometimes catch them.
insert inflammatory anti-microsoft comment here
There is a certain group of people who are constitutionally unable to do something as mainstream as say, investing in solid funds to make their money. They need to feel like they are "getting the better" of others.
Spammers are usually certified losers, and few really ever actually make anything of themselves, and if they do make any money, they manage to lose it somehow by themselves, or AOL starts digging in their backyards for it.
These people you could almost feel sorry for if they weren't clogging your mail box, stealing bandwidth, trying to sell bad deals to the unwary, and underwriting organized crime by paying for use of their botnets.
On second thought... maybe I don't feel sorry for them at all.
I wonder if it is against NASDQ/NYSE/etc exchange rules for a company to knowingly engage or have a 3rd party engage in unsolicited spam to promote the stock.
If it is NOT, then I think it should be. I could see how a spammer who is long or short on a stock could do this without the company knowing, but if it could be proven, perhaps it would be analogous to issuing a public statement by the company.
Thoughts?
I only came here to do two things; kick some ass, and drink some beer...looks like we're almost out of beer.
One morning I got my email right after the market openned, saw no movement... on a whim, bought a few hundred bucks worth, figuring, people stupider than me had to fall for it... Made about 20%-30% on the deal after commissions...
Haven't tried in a few years, been to busy, but it was actually pretty funny... Thought about doing that with some small money... I mean, the annual percentage gain is really impressive if you actually acted on all these and got some fast run ups...
The problem is, it's all short term, which means major taxes... Alternatively, you could do it in an IRA or other shielded account, but that means keeping in cash except when you make the play... no margin means you need to keep cash sitting around when you aren't playing, which cuts into returns... If you have margin, you can always move the cash in 2-3 days later conveniently.
Alex
Not exactly. They're getting a 4-6% gain the next day, not annually. Fire them off once a week, and you're talking several thousand percent gain annually.
Quote TFA: The team found that a spammer who bought shares the day before starting an e-mail campaign and then sold them the day after could make a return on his or her investment of 4.9%.
Now the stock market is open ~250 days/year. 1,04^250 = 18127,37 = 1812737%. Not just thousands, millions. Now that's a decent ROI for any "company".
Live today, because you never know what tomorrow brings
Maybe I'm out of the mainstream on this but I don't see this as an issue at all.
I don't like spam any more than anybody else does here but it's an unfortunate fact of life that is here to stay as long as we are using the current e-mail system. Getting mad at people for spamming under this system of total anonymity and lack of accountability is like getting mad at your cat for eating the food you left on the kitchen table before you left. All we can really do is find a way to deal with the spam while we think of a new way to go about things.
That said, compared to other spams this is relatively benign. Who is hurt here (besides the fact that it clogs our inboxes and spam filters, which as I said is a fact of life and is going to happen anyway)? Are we afraid that people will be tricked into buying these stocks and then lose money when they plummet? Because that sounds to me like a good way to teach people not to take financial advice from complete strangers. The law is not for babying people and shielding them from all discomfort; sometimes people need to take a lesson or two at the school of hard knocks.
audioLibre - freedom of music
At first I thought "who are these stupid people buying stock from spammed tips?", but then I figured as long as you are one of the first to buy - you will gain almost as much on the stock as the spammer, without having spammed anyone.
I guess the trick is to get onto a spam list that has the largest effect on the market (the widest distribution?), and get in early (perhaps many many e-mail addresses?) and try to be at the start of the spam list (perhaps addresses aaaaaaa@mail.com, zzzzzzz@mail.com etc).
As long as you get in early on stock being manipulated, and your not the one doing the spamming, your less guilty than the spammer and there is a slightly better chance you'll get away with it....
While it is interesting to see the return for the spammer, check out the return for the sucker that buys them. http://www.spamstocktracker.com/
You'd probably be better off shorting these stocks a few days after the spam is sent, since the price will certainly fall. That being said, shorting is very risky and should only be done by experienced investors. But if a stock price is being hyped by spam, you know it will be falling soon.
Shorting isn't something you can do with every stock. In fact there are even stocks in major indexes that can't be shorted. When you short a stock, you are essentially borrowing the stock, selling it and promising to return it in the future. But, you have to borrow the stock from someone. Most penny stocks would be considered "hard to borrow" and not available for shorting.
Further, there are rules about when you can short a stock - only on an uptick.
Bottom line, shorting isn't usually possible in these situations. This is probably why the spammers chose the penny stocks - cheap to take a position, don't have to worry about people shorting the stock AND there are usually not that many shares outstanding, so it doesn't take much to move the market.
People like you who *know* it's a scam and are trying to get ahead of the other suckers are an even better market - as with the Nigerian-corrupt-official scams, you not only get duped, but you're in no position to bitch about it :-) It's basically like trying to be in the early phases of a Ponzi or pyramid scam.
Unlike the other scams, it is possible to make money on this by selling short, but if the scammer's only making 4-6% on the deal, it's pretty risky, and it may be hard to get brokers willing to do short sales on worthless penny stocks without paying enough in commissions to eat up your loss. On the other hand, it should certainly be easy to collect data on this kind of thing, because if you're like me, you get a couple of new stock scam offers a day, and you could track the prices after you get them.
Bill Stewart
New Fast-Compression-only CPR http://preview.tinyurl.com/dy575ks