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Blogs by Erik Hare
Stock Marks, not Market
8/17/2007 6:41:14 AM
I admit it, I’m something of a perma-bear when it comes to the stock market. I believe that any time you put your money into something you cannot see, there is the potential for abuse. Multiply that by hundreds of millions of people investing hundreds of thousands of dollars, and eventually there will have to be an enormous scandal.
The stock-peddling industry is full of con men. The volume of spam that I receive shows that at least some people make a living by puffing up penny stocks. Yesterday, that reached a new level when I went to collect my mail.
Amid the many bills and distinct lack of checks for services rendered there was a note from “The Natural Contrarian” proclaiming that “Amish Naturals (AMNT) is the Next Kraft!” (all emphasis verbatim). I opened it up, and there was a fancy fake newsletter proclaiming that:
“Amish Naturals (AMNT) is the next $BILLION Brand-Name & YOU can Cash-in NOW below $2.50 per share. I told you to buy AMNT in November – right before the share price TRIPLED – NOW the next price-run is above $10!”
I thought it was a joke. I have Amish ancestry, and I’ve worked with many Amish over the years. I know their language, Plattdietsch, well enough to understand a few things. A stock scam based on the Amish? It … well, it had to be a joke, right?
No, it’s not a joke. What is this company? I’ll leave it to the 26 March edition of Forbes to explain a bit:
“Since going public on Halloween, Amish Naturals shares have jumped 65% to $1.98, generating an $86 million market value. The Holmesville, Ohio company got its listing via a reverse merger with a shell firm that had run a fashion Web site. Amish Naturals now touts organic pasta as the product line, but nothing has been sold, a significant factor in its nil revenues and negative net worth. One apparent winner so far: a mysterious outfit called Firstsummit Ltd. that paid $690,000 to promote the stock. Investors in Hong Kong and Vancouver also seem to be involved. An Amish Naturals rep disclaims any connection with the hype. Despite bearing the same name as the reclusive sect famous for eschewing modern conveniences, Amish Naturals does have working telephones. However, we couldn't lure boss David Skinner to one. And he isn't Amish.”
That sounds harsh. But a quick look at the SEC filings shows that in 2005 this company lost ten grand total, and hasn’t filed for 2006. Fascinating stuff for a market cap of $97 million. After hitting a low of $0.98 a share it is indeed back up to $2.23 a share, but since we know that this is the subject of hype you have to expect that for a small cap.
Why am I going on about my spam mail so much? First of all, I think this is a real hoot as scams go. Make money fast by exploiting the Amish! Yeah, that’ll happen – separating a Dutchie from his money is far harder than the scammers think. They seem to have forgotten that with all their computers and fancy mailers the simple life is a hard cash based economy, and the people who live it are very good at holding on to large stacks of bills.
But what this really tells me is that not only are stock scams more prolific, they are also much more desperate. That has to be a sign that things are getting very bad. In good times, there is always one more mark flush with cash that they can target. The need to send out mailers that seem like a joke at first means that there just isn’t as much money floating around for them to grab easily. That’s a bad sign.
Naturally, it might mean that people are smarter and not buying into the scams anymore. Call me a cynic, but I doubt that one. I figure that if there’s any serious volume around, there’s always another fish waiting to be cut up for chum. But the sharks are apparently getting very hungry.
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