BERKO: Penny stocks are for suckers
Friday, June 22, 2012 7:00 AM
Dear Mr. Berko:
Charles, a devout and refined member of our evangelical church, allowed us to invest $5,000 into 4 million Iraqi dinars recently. He said that in November 2013, the Iraq government will raise the value of the dinar, making each dinar worth 33 cents. His said Iraq has 26 percent of the world’s oil, which costs $2.25 a barrel. And in November 2013, the Iraq government will have complete control of everything and be strong enough to ship oil to the U.S. and other nations. And the 4 million dinars we keep in our bank box, which cost us $5,000 and will be worth $1.3 million. We are excited, especially since Charles has investors who want to buy our dinars for 3 cents today. He says it is foolish to sell because they’ll be worth 11 times more in a year. Now he wants us to invest $10,000 (this is the minimum) in penny stock trading, which makes real fast money. We’ve heard results from two people who do this with him. Each of them made more than $40,000 last month. We only have $7,800. So Charles said he would buy 68,000 dinars from us at 3 cents ($2,200), so we’d have $10,000, and we could repurchase those dinars from our profits for the same price we sold them. Do you like penny stocks? Can we make $40,000 a month in them? Please answer very soon. We don’t want to miss this opportunity like we almost did last year with our dinar investment.
R.R., Jonesboro, Ark.
A year ago, $5,000 would have bought 5,815,000 dinars, not 4,000,000. And today, $5,000 will still buy $5,815,000 dinars. I think Charming Charlie spent $3,300 of your money on dinars and kept $1,700 for himself. There’s a good possibility your dinars are counterfeit. Because most folks can’t tell the difference between a real $100 bill and a fake one, I doubt you can tell the difference between a real and a counterfeit dinar. Sorry to break your bubble, but Charming Charlie has charmed the socks off your feet. Your 4,000,000 dinars will never be worth 33 cents or even 3 cents. Rather, they’re worth 0.076 cent or $3,000 if you can find a buyer. Just for grins and giggles, offer your 4,000,000 dinars to Charming Charlie at a penny each and watch his face flush. Your dinars are worth diddly squat, and in November 2013, the dinars will still be worth diddly squat or less. Please consult with (name and title omitted) in Jonesboro, and he’ll show you how you got snookered. I suggest you go along with Charlie and sell him 68,000 dinars for $2,200. When his check clears, tell Charlie I advised you to change your mind and keep the dollars. If the dinars are not counterfeit you might be able to sell the remaining 3,932,000 dinars for $2,800 and break even.
Meanwhile, the penny stock market is for stupids. I suspect Charming Charlie has a long line of stupids waiting to give him $10,000 checks. And when that line is gone, Charlie may disappear into the sunset and board another ship of fools to fleece. So I’m willing to wager a Benjamin to a bucket of road apples those folks claiming a monthly profit of $40,000 are shills. The penny stock market is SCAM (Suckers Crazy After Money), and the promoters are the folks who make the bucks. Playing the penny stock market is like playing the lottery. Your chance of winning is just as good whether you buy a ticket or not. The usual penny stock deal is the Pump & Dump. Scammers buy millions of shares of a penny stock and spread exciting rumors in the press and financial reports to create lots of excitement. Demand surges, the scammers sell their shares to the stupids, the market crashes and the stupids are left holding the carcass. The opposite of Pump & Dump is the Poop and Scoop. Scammers spread bad news so investors sell in panic, which crashes the stock’s price. The scammers buy the stock once it reaches a low level, then spread positive rumors, selling the shares as prices surge.