Will They Ever Learn? Chat Rooms – Running With the Herd, Chasing and Paying Dearly For Rainbows!

There are two regular presences found on the chat rooms; they are dominated by the “living room day traders” whose chances for a loss are stacked against them with the odds playing 1080/1, and they are sprinkled with chat room investors. The first bunch think the stock market is nuts and that its primary purpose is to give each and every one an opportunity to buy and sell quickly and often such, seemingly, as to ensure to a maximum; the American dream the constitutional right to lose one’s money – albeit the losers will say, but the sweet and bitter adrenaline rush of talking big and talking day trade is well worth the pecuniary losses.

Meandering through the ever changing recommendations – stocks are usually promoted artificially on a mere say so, and this is particularly notable on the day trade chat rooms – one can see the pattern and it’s never good. The stress and dialogue is never on the company but on volume, chart, cryptic press releases and micro engineered pop ups to sucker the gullible all of which for the small companies being “discussed” are and can be easily manipulated. It’s exciting and that’s the point for the 1080 losers to every one winner: it’s great to be the one though!

Try an intelligent communication or posting some fundamentally and verifiable useful reason to buy a stock and the promoters (the 1 in the 1080 present on the chat rooms) download an arsenal of diatribe, even going to having the innocent soul “banned” from the site for suggesting some reading before letting loose on one’s dollars. Chat rooms are a sucker’s game designed to attract the unknowing gluttons for punishment who rather than Google a company to see what the press or news releases say, rather than Email the company and get some veridical information, will rush to buy on an unknown promoter’s – often moderator’s – say so. The feeling of owning hundreds of thousands, even millions of shares (of a stock selling for a fraction of a penny) simply is worth the loss.

The second batch believes the economy is doomed and so the overwhelming consensus triggers a reflex reaction since the end is near; let’s make a killing, what the hell. The selection process is simple, any one of the fraction of a penny stocks promoted to the herd grazing in the chat rooms. Drunk with greed, driven by the high, the participants mask the depression and dejection driving their internal mechanisms; they buy for the sake of buying, knowing that the promoter will soon drop the bottom out. Look at SPGN for one of thousands of examples I have documented all of which were heavily promoted on the chat rooms.

Personally, a swing trader right of Attila the Hun, I like stocks that sit in sideway trades slowly building their fundamental business rather than their volume and charts. The first will ensure the other and the market is full of small (market capitalization of $25 million or less) companies that meet exacting rules to justify investment. Let’s take one as a mere example of hundreds – Falken Industries traded on the OTC under symbol FLKI.

As a general rule I stay away from companies
(i) whose market capitalization is less than $ 10 million,
(ii) whose press releases are not backed up by articles and general industry press,
(iii) who are not rated “Current Information” on the Pink sheets, where most of these companies can be found together with Toyota and many other behemoths of international business,
(iv) that do not provide swing trade opportunities, not less than one and not more than three annually.

I like to see discussion about real deals at press conferences, not prospective deals. I like press releases that follow press conferences. I like to see products not pretty web sites neatly conceived by IR or promotion outfits. In fact the rule I usually find to apply in small cap situations is that success is generally inversely related to the size and complexity of the company’s corporate web page. I buy their products on their web store, touch them, feel them, use them and pepper their shareholder, info, or communications department with questions about products, products, and more products, a small company with less than 50 product conceptions and global distribution will not earn a right to my dollars. A small company that takes more than 48 hours to answer my Email will get no further attention either. FLKI passes all of these tests – and strangely enough, though it generated a juicy 1900% return for its investors in the last 52 weeks, it also generated 890%, 390% and 40% on three swing trades during 2009.

I am an analyst for the Automobile After-market industry. Consequently I admit to more familiarity (and a likely penchant) with companies such as FLKI who have a dominant global business in the industry. But the importance of the criteria is paramount and must be found, notably in a Pink Sheet stock, and this, whatever the industry you favor.

Of course one could simplify the advice for present chat room will be victims; as Keynes said, “the central principle of investment is to go contrary to the general opinion.” Good companies not unlike FLKI are of no interest to the dominant promoters which monitor the activity on chat rooms and spin their stock on volume and charts. You can be certain that when the chat room crowd sounds off on where a stock is going, that sudden burst is the center of the herd as it thunders toward a cliff.

Manic speculator is too kind a word for the 1080 / 1. They are a credulous kind easily parted from their money. Volatility, volume, charts and madness are the order of the day. Chat room moderators, all too often promoters pushing their wares sit around salivating – banning from their sites any participant polluting the environment with logical and edifying information: there should be no sunshine cast upon the goings on of their chat room.

Some will argue that the 1080/1 should have to pay for their sins of greed and leverage. I have to concede that this is tempting at least for the knowing, but chat rooms would have nothing to exploit if they were populated by anyone other than those noteworthy for their distinct credulity.

After every crisis one can find predictions abound that the crisis will be followed by a rebound and then a long period of sideway trading. I don’t buy it. Sure this is backed by past performance, but if the past was a a real component of the future, I and all other industry analyst would be rich.

Prudently I consider alternatives. As a contrarian I run from obsessions – much like those regularly found on chat rooms.

As for now my best gem in the rough, fundamentally sound, globally present and with more than 160 product conceptions out and an equal number in the pipeline, trading sideways for a time, rising bit by bit, I sound off on FLKI. Of course I know that because as you guessed it I touched it, felt it, smelled it, and confirmed it all before I put the whole dollar it took to buy 5 shares at the current 20 cent price.

Falken Industries Ltd OTC: FLKI is a diversified industrial conglomerate that operates in Chemicals, Wet Wipe and Biodegradable Technology. Falken Industries Ltd is the concept behind more than 160 products distributed through a network of global platforms and the recipient of trade awards for innovations, biodegradability and environmental and health quality standards.