Friday, March 10, 2006

This Blog is priced to sell! Explosive Growth!

So we ALL know that stock spam, in addition to pr0n spam ,are two of the biggest nuisances that one receives in their mailbox daily (if not hourly). But what evidence do we have of this nuisance? Well, fear not humble reader, for I have painstakingly taken the time to actually track the performance of some of these spam emails to gain empirical evidence of the utter garbage that is stock spam.

First a bit of background. How, or why did I decided to do this? Well, when your only job is to sift through the spam filter looking for good email (ham), you come across a LOT of email that just should have not been sent. Love notes, bank account info, passwords, pr0n pictures, etc. Keep in mind that this is a corporate network with business email address we are talking about, not a personal email account. So after seeing literally hundreds of emails a day for stock tips that are poised to explode, I figured, why not occupy a little of my time and keep a track of how these “monster” stocks actually perform.

Now, obviously, this is not a true scientific study, but with that being said, it does give a decent snapshot of how things work during the short time that I conducted this experiment. Each day, there was usually one giant offender that popped up repeatedly. They would send out about 200 or so emails lauding the values of this company. The next day, it would change to a different stock (or in the rare case, it was repeated). Upon arriving at work around 8:30-9ish, I recorded the opening price, and at the end of the day, recorded the high value and closing value.
To add extra test values, I took some of the less prolifically spammed stocks and added them in as well to see if they had better performance from being sent by a different spam provider.

Here’s the data:





So these microcaps are “theoretically” designed for people with lots of petty cash that can just dump money into these stocks and buy, 500-1000 at a time to hopefully make some sort of profit. But if you look at the average percent change, it comes out that you would be losing money just on the stock itself if you based your purchases on the spam emails. That doesn’t even factor in brokerage fees, and the ever so dreadful capital gains tax that is VERY high for short term holdings (which is taxed at your ordinary income rate, which varies from 10% to 35%).

Assume you made 50 bucks on the sale from one of these microcaps. You then have to pay the brokerage fees for the purchase and sale. Pretending you are using etrade, we are going to estimate the brokerage fees are 10 for purchase and 10 for sale. That’s 20 bucks there. Then you have to pay the tax (not now, but when it comes time to pay taxes yearly due on April 15th), which will be anywhere from $5 to $17.50. So at a minimum, you’ve paid 25 to earn your 50, and quite possibly you would have to pay 37.50. This is using a good scenario for just one. You would have to repeat the success each time to actually gain a decent profit. The possibility that you will actually make money on these spam stocks is rather low considering the average change for these stocks was negative -.06%. This just goes to reinforce the fact that the true experts say you can’t do market timing, and that anyone who says you can is selling something.

So what have we learned today class? Number one, microcap stocks are no place to be doing business. Number two, spam is a complete waste of space, and costs people more money than the good that it brings to a small few, and number three, I have WAY too much time on my hands at work. This concludes your daily lesson in stock spam…

Oh, and btw – I’ve got a great lead on this new stock that’s poised to quadruple its value next week…

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