The Stock Detective Investor: Beat Online Hype and Unearth the Real Stock Market Winners

241 Pages·2000·0.91 MB·English

by  Kevin Lichtman

B u s i n e s s C u l i n a r y A r c h i t e c t u r e
C o m p u t e r G e n e r a l I n t e r e s t
C h i l d r e n L i f e S c i e n c e s B i o g r a p h y
A c c o u n t i n g F i n a n c e M a t h e m a t i c s
H i s t o r y S e l f - I m p r o v e m e n t H e a l t h
E n g i n e e r i n g G r a p h i c D e s i g n
A p p l i e d S c i e n c e s P s y c h o l o g y
I n t e r i o r D e s i g n B i o l o g y C h e m i s t r y
e
WILEY
B O O K
WILEY
JOSSEY-BASS
PFEIFFER
J.K.LASSER
CAPSTONE
WILEY-LISS
WILEY-VCH
WILEY-INTERSCIENCE
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Stock Detective
Investor
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Stock Detective
Investor
Finding Market Gems Online
Kevin Lichtman
Lynn N. Duke
John Wiley & Sons, Inc.
New York • Chichester • Weinheim • Brisbane • Singapore • Toronto
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Copyright © 2001 by Kevin Lichtman and Lynn N. Duke. All rights
reserved.
Published by John Wiley & Sons, Inc.
No part of this publication may be reproduced, stored in a retrieval
system or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording, scanning or otherwise, except as
permitted under Section 107 or 108 of the 1976 United States Copyright
Act, without either the prior written permission of the Publisher, or
authorization through payment of the appropriate per-copy fee to the
Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923,
[phone], fax [phone]. Requests to the Publisher for
permission should be addressed to the Permissions Department,
John Wiley & Sons, Inc., 605 Third Avenue, New York, NY 10158-0012,
[phone], fax [phone], E-Mail: [email protected].
This publication is designed to provide accurate and authoritative
information in regard to the subject matter covered. It is sold with the
understanding that the publisher is not engaged in rendering
professional services. If professional advice or other expert assistance
is required, the services of a competent professional person
should be sought.
This title is also available in print as ISBN 0-471-38775-4 .
For more information about Wiley products, visit our web site at
www.Wiley.com.
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In loving memory of
Sidney and Dorothy Lichtman
K.L.
To my parents,
Gaeton and Vilma Nucci,
for teaching me that anything is possible,
and to my husband,
Glen Duke,
for proving that it’s true
L.N.D.
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F
OREWORD
Every investor dreams of owning shares of the next
Microsoft, Cisco System, or America Online. Unscrupu-
lous stock promoters and brokers prey on this desire with
pie-in-the-sky pitches for low-priced stocks boasting the lat-
est “revolutionary” product or technology. Too often, there’s
neither product nor technology—and no revenues and no
future.
In fact, a company’s insiders may seek only to pump up
the stock price and dump the shares at a big profit—for them.
Promoters shrewdly use Internet, e-mail, or direct mail to tar-
get unknowing investors. This form of fraud and deceit is
growing. The Securities and Exchange Commission estimates
annual investor losses to penny-stock fraud at $6 billion.
Stock Detective Investorboldly takes on the schemes, scams,
and scums that lurk in the little-known, little-examined dark,
grimy netherworld of investing.
Kevin Lichtman launched the original Stock Detective as
part of the FinancialWeb.com Web site in the summer of 1997
(www.stockdetective.com). As a stock promoter turned re-
former, Kevin could smell a rat but he had no experience or
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FOREWORD
training in the rigors of investigative journalism. Award-
winning news reporter Lynn Duke, a fighter for the individual
investor, joined the venture that fall. Together, they pursued
and exposed fishy stock promotions and companies that made
inflated claims. Indeed, Stock Detective achieved an impres-
sive track record in busting “pump ‘n’ dump” schemes and
other market shenanigans.
The work of Kevin and Lynn did not go unnoticed.
Chicago Sun-Timesfinancial columnist Terry Savage, for exam-
ple, lauded Stock Detective in her June 6, 1999, column, stat-
ing: “I’d rank this Web site as the greatest advance in investor
protection since the SEC was created half a century ago.” Stock
Detective Investorstrives to live up to such lofty praise.
Investors who dare tread into the choppy waters of
penny stocks should know what they’re up against. Stock
Detective Investor helps chart a steady course for these in-
vestors and highlights the resources available to protect them.
You’ll need this book’s do-it-yourself approach to investor
protection, because the Securities and Exchange Commission
is short on staff and funds to sufficiently combat the growth
of securities fraud.
If you like David Letterman’s “top 10” lists, you’ll benefit
from this book’s list of 10 warning signs of possible stock
fraud. When should an investor exercise a health skepticism
about a company?
Stock Detective Investor also provides understandable ex-
planations of complicated subjects such as reverse mergers,
Regulation D, and “scalping”—and how these vehicles are
used by unscrupulous stock promoters. There’s useful com-
mentary on investing via the Internet, including tips for on-
line traders and warnings about online message boards. And
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Foreword
there’s a comprehensive list of names, street addresses, tele-
phone and fax numbers, and e-mail addresses for securities
regulators in all 50 states, the District of Columbia, and all
Canadian provinces.
But the strongest asset of this book is the passion of its
authors. Kevin and Lynn firmly believe in their cause because
of the letters they receive from real people like “Jason” who
was scammed out of thousands of dollars. Although more elo-
quently written than most, Jason’s letter spoke for many
novices lured by the potential of Internet-induced investment
riches. Here are some portions from the actual letter:
I bought shares of [XYZ Corp.] and [ABCD Inc.]
after hearing about them from [a Web site]...I
made rash decisions based solely upon the advice I
was getting from one source over the Internet, but
I kept rationalizing my actions. I saw how trading
volume went way up when “a newsletter” profiled a
stock, so I thought they had to be for real. I watched
ABCD gain nearly 50 percent in just a few weeks,
only to fall shortly thereafter ...
I thought they were doing me a favor by giving
me these hot leads over the Internet, before word
of them circulated into the general populace. Then
I watched both XYZ and ABCD move steadily
downward, but I convinced myself this was just a
temporary setback. I saw [OKOK Corp.] moving
up, and decided to buy some of that, too. It had
only been three or four months since I started in-
vesting in the newsletter’s monthly picks, and I
was brimming with optimism ...
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