Truth About Bull
by Peter Leeds / www.PeterLeeds.com
The Forty-Seven Sides to Every Argument
People that think there are two sides to every argument, two ways to interpret every set
of data, haven't met many stock promoters and haven't read many corporate press releases.
In financial markets there are thousands of different factors at work, hundreds of
different interest groups, tens of potential interpretations on the information that
actually makes it through the screening, omissions, and exaggerations. And most
importantly, there is only one you. It is you who has to filter and summarize the
facts and opinions that reach your ears, discard they misleading, ignore the
unimportant, isolate the lies...
With success at interpreting all of the overwhelming amounts of information
you receive about a stock, you could be very good at picking winning stocks. But who can y
ou trust? What sources of information are honest, and which are blatant lies. And of
course, the hardest to spot are those slight exaggerations.
Let's start with a look at the least dangerous information sources, The
Media, and progress towards the most vile, purposeful, and persistent terror in the
world of penny stocks, The Promoter.
But The News Said So!
If you learned all the hidden forces at work in what the media screens and puts out,
and knew of all the interest groups and advertisers with their hands on the strings,
your jaw might drop. Spend 10 minutes talking to a public relations specialist,
and ask them how the magazines, newspapers, and television shows decide on what
to publish. The truth is that the media are not even close to being partisan or
unbiased, and while they often base things on fact, they derive their influence,
and thus their danger, through the spin they put on their stories, and more
importantly the facts that they leave out of them.
Unfortunately most people think, "I saw it on the news, so it must be
true." That car review you read in the national newspaper - a paid
advertisement. The pre-Christmas hype about the shortage of Teletubbies, or
Play Stations, or Pokemon... purposeful and well planned. In fact, almost all
newspapers and television networks have a certain political alliances, and act
and report accordingly to support their interests.
As well, media likes to jump onto similar stories all at the same time.
For example, when the Internet was in its days of unbridled growth, all you could read
about was the successes that the dot coms were having. When the party was over and the
Internet companies began to collapse, all you read or heard or watched was about how the
sector was crashing down. But what about those Internet companies that were doing badly
when most were soaring, or doing great when most were collapsing. There were many of
them, but it wasn't considered newsworthy at the time.
How does this relate to penny stock investing? In the dot com example
above, it is likely that the media helped produce both the irresponsible buying frenzy
that drove prices to ridiculous levels, and helped exaggerate the subsequent selling
which sent many dot coms to unbelievable bargain levels.
The bottom line is that it is important to interpret what each separate
media corporation decides to feed you. They are all independent companies that are
going to act in their best interest. You need to do the same.
We Prefer To Call It "Down-sizing"
CEOs and corporate representatives have an incredible way of putting negative things
into a positive light. You say, "You aren't making any money and are laying off
40% of your staff." They say, "We are very optimistic that our corporate
restructuring will help us achieve our goals."
You say, "The additional stock offering will dilute stocks, and per share
values." They say, "We are excited to increase liquidity and raise
Also be aware that even audited financial statements can play with
numbers, and attribute costs to different categories and offset costs, etc... For
example, a company that sells an asset for a one time gain can suddenly be showing
that income in earnings, giving the appearance of a trend, or masking a drop of
earnings when the external item is not factored in.
I Heard a Great Stock Tip at Work
No you didn't. When you are in this business every one you talk to suddenly becomes
an expert. These are people, some of whom have never even traded a stock for a gain,
or traded at all. Literally, 9 out of 10 tips are bad, especially if it involves a
tip from a guy who knows a guy, or someone "on the inside." In fact,
insiders do not relinquish vital information for everybody to profit from. They
keep it to themselves.
So then where do this stock tips come from? There are actually hundreds of professional
promoters out there whose jobs are to instigate and fuel these 'tips', and it is amazing
how the 'hot tips' spread like viruses.
It has proven difficult for professional traders to turn consistent gains and
uncover winning stocks, so how could the guy at the water cooler be very good at it,
especially when he hardly invests?
Take the advice of these people if you want, invest in the hot tips if you
want. Just do yourself this one quick favor: next time someone is giving you a stock tip,
ask them what the company's revenues are at, and how much long term debt they have.
If they can answer these questions, ignore all our comments presented here. If they
can't, read these comments one more time.
Where Information Goes To Die
We highly discourage even visiting the message boards. Never in the history of
civilization has there been a greater forum of mis-truth, inaccuracies, and
uneducated commentary. Only a tool as powerful as the Internet, and with the
reach of the world wide web, could have the capability to accomplish this. It is
kind of like the "Hell" of information.
Promoting Their Own Best Interest
There are promoters out there who get paid a huge amount of stock options with one
goal in mind - drive the share prices up so that the option values make them rich.
How they drive the prices up is besides the point to them, and the problem. Often
dishonest practices come into play.
The worst of the bunch are the high-pressure sales people who call you in
person on the phone and try to get you to buy. Their tactics are well-honed, and they
leave you feeling frenzied, excited, and impatient to dump your life savings into whatever
miracle stock they are touting.
There are a hundred things wrong with buying these stocks, so we won't even
entertain the concept of discouraging you through explanation. Just to give you a quick
comment to demonstrate what we mean, try and sell the shares you bought off of a telephone
promoter. Good luck.