the OTC .today

August 3, 2011
Today's PUMPs & dumpS

After we released our advisory on Portage Resources, Inc. (POTG) last night, we were sitting around, marveling at how much money CEO, Paul Luna made in a short period of time, when it occurred to me that we had missed the obvious sign that this deal was a scam.

As we reported, Luna paid $20,000 to gain control of 75% of the company.  In other words, he was automatically giving up 25% of the assets he was vending into the deal to the other shareholders of the company.  At one time last month, the deal had a market cap of $1 billion.  Now if the properties collectively were worth $1 billion, would Luna really have given up a quarter of the asset in exchange for the shell?  A pink sheet shell which can deliver 100% of the paper sells for $150 - 200K.  A legitimate natural resources (mining) company can be public on the Bulletin Boards (not the Pink Sheets) in as little as three months from filing registration papers, for about $50K in costs.

No Luna's goal fro the outset was to make a fast buck.  And we're pretty sure that even he is surprised with the success of this scam.  We name the SEC an accessory for its lack of oversight which allows for people to get hurt by con men like this.

Which brings us to a question asked by one of our readers yesterday, which we thought deserved a public answer.  His email read,

"You guys are so good at what you do I have to wonder why you don't short the stocks you expouse [sic].  There is nothing illegal about shorting stocks is there?"

True, shorting stocks is not illegal, provided that the shorting is not naked, which would be impossible for the average Joe anyway.  Naked shorting could only be done by a market maker or someone really well connected.  However, shorting penny stocks is very difficult and allowed by only a couple of brokers.  And in order for those brokers to be able to offer shorting, they have to have the stock held in someone elses account or be able to borrow the stock from another broker.  When it comes to penny stocks, this can come with high risk and expensive fees and strict margin requirements.

Furthermore, we freely admit that we aren't smart enough to short these stocks.  Pumps and dumps are executed by con men.  As a rule, con men are very intelligent who are always at least one step ahead of their dupes.  Shorting a stock can be very dangerous if the stock is involved in an expert pump and dump scheme like POTG was.  Ordinarily, a shorter might have thought that the first time the share price hit 60 cents was a good place to short the stock as that had already represented a 400% increase.  The shorter would have been correct, but first the stock ran to $1.20 and a margin call would have been issued, at which time the shorter would have had to put up another 60 cents a share security or risk being taken out of his short position at a huge loss.  We would rather be able to sleep at night than worry about facing a margin call just because a scammed stock had a huge spike in share price.  Now famed penny stock shorter, Timothy Sykes might say otherwise, and he likes to crow about his short successes, but you never hear about his losses.  Nobody hits 100% of their investments and as we have all learned, it only takes one big loss to take us out of the game for a while.

Please don't take mistake our reference to Mr. Sykes as a dig against him.  We actually respect his views and use his articles in our research.  We believe that Mr. Sykes is an astute analyst and researcher.  That having been said, he is in it for the money, both in fees to his readers in profits from his stock positions which he touts after he has taken them.

Finally and most importantly, we don't short stocks because we wish to be able to present our information as unbiased and be able to say that we have nothing to gain from our subscribers.  We have no desire to take advantage of the public.  We publish this website as a public service in order to educate and hopefully, eventually eradicate scams in the penny markets.  Simply put, we hate con men.

Alert:

At least one paid tout is sending emails promoting CNUV
We classify this as a pump and dump.

Alert:

At least two paid touts are sending emails promoting CXLT
We classify this as a pump and dump.

Alert:

At least two paid touts are sending emails promoting VNTH
We classify this as a pump and dump.

Alert:

At least one paid tout is sending emails promoting SFMI
We classify this as a pump and dump.

Alert:

At least one paid tout is sending emails promoting LOGL
We classify this as a pump and dump.

Alert:

At least one paid tout is sending emails promoting CGFIA
We classify this as a pump and dump.

Alert:

At least one paid tout is sending emails promoting EAPH
We classify this as a pump and dump.

Alert:

At least three paid touts are sending emails promoting NYXO
We classify this as a pump and dump.

Alert:

At least one paid tout is sending emails promoting WTCG
We classify this as a pump and dump.

Alert:
At least one paid tout is sending emails promoting FTEG
We classify this as a pump and dump.

Alert:
At least one paid tout is sending emails promoting IDLM
We classify this as a pump and dump.

Alert:
At least one paid tout is sending emails promoting AXIH
We classify this as a pump and dump.

Alert:
At least one paid tout is sending emails promoting GATA
We classify this as a pump and dump.

Alert:
At least one paid tout is sending emails promoting ZERO
We classify this as a pump and dump.

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