The Conservative Cat

Several tricks are in use here.

• To fool spam filters, the link on the page is to a free Geocities URL, which redirects you to all-weather.biz. They can't use their real address because the .biz domain is automatically flagged as suspicious.
• The spam pretends to be directed to someone else, so that you think by clicking on the link you'll be able to spend someone else's money.
• A picture of the Dallas Cowgirl Cheerleaders is displayed while you wait for the site to load. I suppose I should feel grateful it wasn't an ad for diet pills.

While we're on the subject, it's worth spending a little time to discuss the way stock scams work.

The ironclad rule of investing is that gain is commensurate with risk. A $1 increase in the price of a $1 stock doubles your investment, but a $1 drop is complete bankruptcy. Worse, there is a real possibility that the stock is in fact a gigantic embezzlement scheme. Here's an example of how that works. Mr. Fraud loans $2 million to a small company but structures the deal so the company doesn't actually get any cash from him. The company turns around and sells $2 million worth of new stock. Fraud then collects the $2 million and disappears, and the shareholders are left with essentially worthless stock.

This sort of trick generally requires an over the counter stock. Most over-the-counter stocks are legitimate, but they have their status because they can't meet the requirements for listing on the various exchanges. The stock being recommended on the spam mail's web page is an over-the-counter stock called Grifco. It looks legitimate, but as you can see from the graph on the left, the stock fell out of bed two years ago. The story behind that drop is particularly tragic. They did a 1-for-20 reverse split to get the share price above $1, and then it began an immediate slide to $0.28. The closest it came to getting itself back above $1 was in July of 2005, when it was attempting a takeover of Global Oil Tools. The takeover failed and the stock dropped again.

Why is Grifco hot right now after being cold all summer and fall? Well, the theory is that Grifco produces supplies for oil drilling, and if Iran "turns off the spigots", the oil industry is in for a big boom. They back up their recommendation with this little quip.

The Money Flow Index indicates big investors have been quietly accumulating big blocks of stock and the 20-Day Moving Average vs. Price is signaling that this stock is about to explode.

Who are the big investors buying up this stock? As a matter of fact, 365,000 shares were recently purchased by an outfit called Indices & Industry Leaders who just happen to be the guys who sent out the spam. The average daily volume in Grifco stock is around 200,000 shares. By making one of these huge purchases at a price above the 20-day moving average, they not only justify their statement about big investors, they also create a situation in which it looks like the stock's recent downward trend is about to reverse itself.

It's possible that there's nothing untoward here and the Indices folks actually believe what they say. The thing is, you can't count on Iran turning off the spigots, and even if they did, there are dozens of companies that make parts for oil rigs, including Halliburton.

So, if you are in the habit of ignoring Hot Stock Picks, rest assured that you are doing the right thing. And, if you're still bothered and want to spend on something that sounds good but could very well be just a bunch of hot air, send your money to me. If you're going to get taken to the cleaners, it's best to have it done by a superior life form.

Respectfully submitted,

Ferdinand T. Cat