From: floydb@rpi.edu
Subject: Re: penny-stocks
Date: Thu, 17 Dec 1992 15:28:18 GMT

In article <BzDurE.7IK@news.cso.uiuc.edu> cs101a64@ih-nxt09.cso.uiuc.edu (cs101 student) writes:
>In article <1992Dec16.223532.9269@rose.com> andrew.delic@rose.com (andrew  
>delic) writes:
>> I'm new to investing and 'playing the market' - and I recently bouught a 
>> pile of shares which are penny-stocks.  My financial advisor told me he
>> felt 'very comfortable' with this stock.
>> 
>> I found out (after buying the stock) that penny-stocks are extremely
>> dangerous and very risky.  I went for another visit to my advisor,
>> and he re-assured me that this company has earnings, etc, etc.
>> 
>> Should I be feeling safe with my money now?  After all, I am dealing
>> with a reputable company and a professional advisor who is in tune with
>> the market and knows what's going on and whats coming up, etc.
>
>DUMP THE PENNY STOCKS AND YOUR ADVISOR!  You should probably file a  
>complaint about your advisor and a lawsuit for any losses.  Your advisor  
>may be the company's way of dumping stocks it does not want or he/she may  
>be trying to inflate commissions.  Obviously, your advisor did not inform  
>you of the risks.Then read some good books on investing.  

stuff deleted

>
>

IMHO, The alarmist reaction of 'cs101 student' should be taken with a
grain of salt as well. Few situations in life are a black-and-white as
cs101 would attempt to lead people to believe. Think about if for a 
second, Why are there separate markets (e.g. NYSE, AMEX, OTC, Phil, Tor.)?

Each market has its own requirements that must be met before a stock is
"listed". Some stocks may be listed on multiple markets, though they 
might have a primary arena. NASDAQ may evolve into a sort of 'after-hours'
market but this is another story...

As an investor you have the right to receive an up-to-date prospectus
(primarily for recently issued stock) and/or any available annual reports,etc.
You should review this material and any other material you feel is 
important before investing in a stock, but even more so, before investing
in 'thinly traded stocks'. What is the average daily volume of the stock
you invested in? Was you trade the only trade in the stock for that day?

Risk has many faces, and some of the books mentioned most likely discuss
various kinds. In addition to 'fundamental analysis' of a company's situation
you might need to look at the market for its stock (e.g. trading history,
volume, high's, low's, etc.). Penny stocks may in fact be readily effected
(price) by one or more significant trades (e.g. insiders, large share holders).
These factors may play a role in your comfort level, to the extent that you
probably will not know what may significantly effect the price of the stock
until after it has happened, advisor or no advisor.

With respect to your advisor, its is good advice (often given advice) to keep
in mind that no matter what is recommended the advisor only make their income
on trades. If you have serious concerns regarding the advisor you might try
contacting other 'market makers' in a particular stock; you could post more
detailed information to the list; you could contact the SEC inquiring about
your advisor, his company, and the stock (e.g. any investigations on-going...)

I wouldn't "dump" your advisor or his company cs101's advice alone, especially
if you approached the company looking to specifically invest in penny-stocks.
They may be taking advantage of you otherwise, but regardless, it is your 
money and you ultimately are responsible for what is bought and sold and when.

2 cents

barry


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