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Stock spam on the rise
Date published: 12/16/2006
E-mail allows spammers to reach people quickly and cheaply. Perhaps partly as a result, the scam can be profitable, according to a report published in July called "Spam Works: Evidence from Stock Touts and Corresponding Market Activity."
Spammers who buy the stock the day before touting it and sell as trading volume increases make about 6 percent on average, according to the report. The person who buys the stock on the day it's touted and sells two days later loses about 5.5 percent.
A June report titled "The Effect of Stock Spam on Financial Markets" notes that there are three categories of people involved: the spammers, the naive recipients who believe they have a hot tip and the "smart" recipients who try to benefit off the suckers.
Mark Ramsey, a certified financial planner and investment representative for Edward Jones in Fredericksburg, advises people to delete the e-mails immediately. "Common sense tells you to stay away from these types of investments," Ramsey said.
Instead of hitting the delete key, some people are intrigued, said Bern Mahon, president of Union Investment Services and a Fredericksburg financial adviser. He says he sometimes gets calls from clients about spam-touted stocks. He tells them to consider the source. "Would you take legal or medical advice over the fax machine?" he asks.
If people are determined to try their hand at these issues, Mahon has another piece of advice--give the money to charity instead.
"At least you would feel good about it," he said.
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