Buy Low, Spam High

An anonymous reader writes "A recent study on spam has revealed that spammers see a return between 4.9% and 6% when selling stocks they have bought low and spammed the world with." From the article: "The researchers say that approximately 730 million spam e-mails are sent every week, 15% of which tout stocks. Other estimates of spam volumes are far higher. The study, by Professor Laura Frieder of Purdue University in the US and Professor Jonathan Zittrain from Oxford University's Internet Institute in the UK, analysed more than 75,000 unsolicited e-mails. All of the messages touting stocks and shares were sent between January 2004 and July 2005."

More spam then!

[Cybert4 (994278)]

Well at least these email won't get me in trouble at work, unlike some of the nastier ones.

But it's scary that people are actually following any information in this spams. Unlike Nigerian scams, this at least has a hint of legitimacy, which will mean the spam floodgates will open even further.

I notice the department is "anything-for-a-buck". That will change after the singularity. I see money as being a non-issue then.

Re:More spam then!

[russ1337 (938915)]

At first I thought "who are these stupid people buying stock from spammed tips?", but then I figured as long as you are one of the first to buy - you will gain almost as much on the stock as the spammer, without having spammed anyone.

I guess the trick is to get onto a spam list that has the largest effect on the market (the widest distribution?), and get in early (perhaps many many e-mail addresses?) and try to be at the start of the spam list (perhaps addresses [e-mail], [e-mail] etc).

As long as you get in early on stock being manipulated, and your not the one doing the spamming, your less guilty than the spammer and there is a slightly better chance you'll get away with it....

Re:More spam then!

[pete6677 (681676)]

You'd probably be better off shorting these stocks a few days after the spam is sent, since the price will certainly fall. That being said, shorting is very risky and should only be done by experienced investors. But if a stock price is being hyped by spam, you know it will be falling soon.

You're the ideal victim for these spammers

[billstewart (78916)]

Sure, there are people who actually believe the H0t St0xx T1pZ they receive in their email, because if the saw it on the internet it must be true, but (while remembering Mencken's advice) I'd hope that they're not the majority of people who buy the stock.

People like you who *know* it's a scam and are trying to get ahead of the other suckers are an even better market - as with the Nigerian-corrupt-official scams, you not only get duped, but you're in no position to bitch about it :-) It's basically like trying to be in the early phases of a Ponzi or pyramid scam.

Unlike the other scams, it is possible to make money on this by selling short, but if the scammer's only making 4-6% on the deal, it's pretty risky, and it may be hard to get brokers willing to do short sales on worthless penny stocks without paying enough in commissions to eat up your loss. On the other hand, it should certainly be easy to collect data on this kind of thing, because if you're like me, you get a couple of new stock scam offers a day, and you could track the prices after you get them.

Wow

[Anonymous Crowhead (577505)]

So they get about the same return as relatively safe investments and all it takes is a whole bunch of extra work and risk.

Re:Wow

[nosredna (672587)]

Not exactly. They're getting a 4-6% gain the next day, not annually. Fire them off once a week, and you're talking several thousand percent gain annually.

Re:Wow

[Kjella (173770)]

Not exactly. They're getting a 4-6% gain the next day, not annually. Fire them off once a week, and you're talking several thousand percent gain annually.

Quote TFA: The team found that a spammer who bought shares the day before starting an e-mail campaign and then sold them the day after could make a return on his or her investment of 4.9%.

Now the stock market is open ~250 days/year. 1,04^250 = 18127,37 = 1812737%. Not just thousands, millions. Now that's a decent ROI for any "company".

Not quite

[by Anonymous Coward]

Not quite true either. Assuming these people pay taxes that will be a huge hit on their returns. For instance a US investor would get slapped with significant short term capital gains which can be in the neighborhood of 30-40+% depending on what state you live in, etc. Plus there are stock transaction fees on top of this moving in and out of the stock. Finally, there is a significant chance that the SEC may see this activity and be able to trace your recent purchase/sale and find you. Most of these stocks t

Re:Wow

[ShibaInu (694434)]

Shorting isn't something you can do with every stock. In fact there are even stocks in major indexes that can't be shorted. When you short a stock, you are essentially borrowing the stock, selling it and promising to return it in the future. But, you have to borrow the stock from someone. Most penny stocks would be considered "hard to borrow" and not available for shorting.

Further, there are rules about when you can short a stock - only on an uptick.

Bottom line, shorting isn't usually possible in these situations. This is probably why the spammers chose the penny stocks - cheap to take a position, don't have to worry about people shorting the stock AND there are usually not that many shares outstanding, so it doesn't take much to move the market.

Re:Wow

[Golias (176380)]

It's still an attempt at market manipulation, and the SEC should come down on anybody who does this like the fist of an angry god. CEOs have gone to prison over this, you would think they could at least bitchslap these spam-and-dump traders with a hefty fine.

Re:Wow

[B11 (894359)]

actually they do sometimes catch [itweek.co.uk] them.

Report them!

[Kelson (129150)]

Every once in a while a batch of stock spams comes in and I forward a bunch of them in a message to enforcement [at] sec.gov

I don't know if they actually do anything with the data -- within an hour I get an automatic response thanking me for the report and telling me that their investigations are confidential, and that's it.

Re:

[Ironsides (739422)]

So they get about the same return as relatively safe investments and all it takes is a whole bunch of extra work and risk.

I think the article means 4.9% to 6% per scam, meaning they make that in about two days, not over the course of one year. 4.9%, compounded once every two days for one year comes out to over 500,000%

Re:

[Red Flayer (890720)]

So they get about the same return as relatively safe investments and all it takes is a whole bunch of extra work and risk.

RTFA. That's not an annual rate of return, thats a one to two day rate of return. 4.9% was the average 1-day rate, I don't care to do the math right now, but over the course of a year (holidays and weekends excluded), that compounds to a gajillion percent.

Re:Wow

[tnk1 (899206)]

There is a certain group of people who are constitutionally unable to do something as mainstream as say, investing in solid funds to make their money. They need to feel like they are "getting the better" of others.

Spammers are usually certified losers, and few really ever actually make anything of themselves, and if they do make any money, they manage to lose it somehow by themselves, or AOL starts digging in their backyards for it.

These people you could almost feel sorry for if they weren't clogging your mail box, stealing bandwidth, trying to sell bad deals to the unwary, and underwriting organized crime by paying for use of their botnets.

On second thought... maybe I don't feel sorry for them at all.

Re:

[jhfry (829244)]

I could be wrong, but I think they mean that make between 4% and 6% per stock. Therefore if they do this 100 times per year they make a pretty hefty chunk after compounding.

For example a $1000 start would pay out $131,501.26 like this over 100 iterations if they keep reinvesting the funds on their next spam crusade (using 5% return per iteration).

So this is not 4%-6% per year... it's 4%-6% per stock... considering they are only invested for a day or two it's entirely possible that they actually bring home

Re:

[Clover_Kicker (20761)]

A return of 4.9% *over a few days* is damn lucrative, you could do a couple of buy-spam-sell cycle per month.

Re:

[Red Flayer (890720)]

as opposed to 6%-8% in a month (or a year) which is what most "safe" investments claim.

Actually, no "safe" investment would claim even 6-8% annually. They can talk about past performance all they want, but they'll never be stupid enough to even project a figure... and all the quotes of past history will include the disclaimer that past performance is not a guarantor of future performance.

-1 Duh

[SanityInAnarchy (655584)]

I actually get more like 50% stock stuff. It simply amazes me that no one's caught these fuckers. I mean, the money has to go somewhere, right?

Re:

[fm6 (162816)]

So how do you prove that somebody who made a 5% profit turning around a penny stock is the same guy who sent out the "we have a runner!" spam?

Re:

[jfengel (409917)]

Identifying pump-and-dump stocks is easy: you just look at the spam. It shouldn't be too hard from there to narrow down the list of suspects: people who bought just before a surge and sold during it. But if the stock is heavily trafficked, the spammers may hope to hide among the crowd.

And connecting those people to the spam, however, may be tricky. Raid their houses, look on their computers, and hope you find something incriminating.

There are ways to launder that money. If they're using accounts opened wit

Re:

[jfengel (409917)]

I assume the AC is baiting me for proposing draconian tactics. But you shouldn't be able to get a warrant to do that without probable cause. A suspicious pattern of stock purchases isn't sufficient evidence for a courtroom conviction, but it is sufficient for a warrant. I'd hope that the judge would hold a pretty high standard for granting such a warrant, but I'd consider a pattern of a dozen or so stocks all bought and sold right about the same time as a spam (in particular, bought just before the spam) t

Re:

[Amouth (879122)]

I am wondering about the 75,000 spam mails.. i personaly filter for 3 domains and it totals on average 1 a sec which is 80-90,000 a day.. i am sorry but if your going to say what is with use a true sample for the base.. as for the % that is stock stuff i have no clue.. and dev null doesn't see to answer me when i ask

Re:

[kripkenstein (913150)]

I am wondering about the 75,000 spam mails.. i personaly filter for 3 domains and it totals on average 1 a sec which is 80-90,000 a day.. i am sorry but if your going to say what is with use a true sample for the base..

If your issue is the timeframe, then the article says that the spam was sent over a 1.5 year period. Seems ok.

If your problem is with the size of the sample, then that isn't the issue. A sample size of that size is far more than enough, if the sample is random. Now, according to the art

Stupid scammers...

[eln (21727)]

The stocks they pick are always crap. Unlike XFGW, that sucker is ready to POP! I'm talking 30,000% return in just a few months! Yah, baby!

Re:

[B11 (894359)]

I'd invest in XFGW, but I have my money tied up in helping a former government minister in Nigeria get his millions out of a bank.

Re:

[Hoi Polloi (522990)]

XFGW refinances mortgages and makes penis enlargement pills and V1agra doesn't it?

That's 6% in 2 days

[by Anonymous Coward]

Folks, that's 6% in 2 days, not 1 year. That's about 33,000% anually.

Publicly traded companies and their spam

[amichalo (132545)]

I wonder if it is against NASDQ/NYSE/etc exchange rules for a company to knowingly engage or have a 3rd party engage in unsolicited spam to promote the stock.

If it is NOT, then I think it should be. I could see how a spammer who is long or short on a stock could do this without the company knowing, but if it could be proven, perhaps it would be analogous to issuing a public statement by the company.

Thoughts?

Re:

[Billly Gates (198444)]

I was thinking the same thing. I remember an 18 year old kid being put on trial after he scammed over a million dollars by hyping his stocks in internet chatrooms and on yahoo. Sadly his parents supported him and told him how proud they were.

If your broke this certainly does have an appeal.

If its not illegal it better well should be. Imagine if all the financial institutions in the world began doing this? if its legal then why not? They would make so much money.

Re:

[bluprint (557000)]

By making this activity illegal, you validate people who go on message boards and tout a particular stock. Due to the fact that it is illegal to "pump and dump", people then are more likely to believe stuff they read on a message board. On the other hand, if it were legal, and everyone knew that, then people would be less likely to believe some crap about a stock on a message board. So, while there might be more people doing it, by making it illegal you have empowered those who are willing to break the l

Re:

[Marauder2 (82448)]

"I wonder if it is against NASDQ/NYSE/etc exchange rules for a company to knowingly engage or have a 3rd party engage in unsolicited spam to promote the stock."

It is against SEC regulation (read Federal LAW). It's called "Pump and Dump" or "Microcap fruad"

http://www.sec.gov/answers/pumpdump.htm [sec.gov]
http://www.sec.gov/investor/pubs/cyberfraud.htm [sec.gov]

I predict this story will go through the roof!

[ScentCone (795499)]

It's set to explode!

Will it be a big mover?

Don't let the inside investors beat you to it!

Ugh. It simply astonished me that language like that, which is repeated over and over again, verbatim, moves enough people to bid up stocks to the point that someone can actually see gains that matter enought (without getting them arrested instantly).

Amazing. But, 4%? Unless you're doing a LOT of it, couldn't you just mow lawns or something and make the same money while also being less fat?

Re:

[slashkitty (21637)]

That's 4% in a couple of days. That is a huge return. If you did one scam a week, you'd get 200% return a year. If you put $100k in, you'd make $200k in one year!

Re:

[Hoi Polloi (522990)]

Now think about it, these are the same people who figure the road to wealth is scratch tickets and sitting in front of a slot machine all day. Are you surprised that they would gamble on an email out of nowhere on something they no nothing about?

I wouldn't act on it unless it came from my old inside contact at Enron. Shhhhhh!

bandwagon?

[Un pobre guey (593801)]

Then the next time you get one of these, you should buy the stock ASAP and also profit, along with the original spammer. This can really get out of hand.

Re:

[Billly Gates (198444)]

... and you can get a free IPod too! Just tell 5 other friends and have them tell 5 more. The more it trickles down the more money you can get.

Please dont give anyone any ideas here? After the free Ipod craze 2 years ago I dont want another one with stock options.

Gotta love spammers

[MobyDisk (75490)]

I know this is off-topic, but you gotta check-out the picture in the article. The young hacker spammer guy in that "Scooore!" pose is hilarious! And the older non-geek guy behind him with the bewildered look emphasizes the point.

Perhaps this will inspire many would-be advisors to send spam about how to make money fast by sending spam emails about stocks. If it works, then it will inspire more spammers to send spam about how to make money sending spam about how to make money fast by sending spam emails ab

stock returns

[by Anonymous Coward]

So the US stock market hisorically has returned over 10% a year, current yields on low-risk money market funds is over 5% and US Treasury funds historically have generated at least 5% a year as well.

So you can invest in a cheap index fund in any of the above and beat what these guys are doing. Or, you could run a pump and dump stock scam and risk huge jail time instead. This also doesn't include paying taxes on all your stock transactions which will lower your return even further. Sounds like a great deal t

Not a problem

[MaelstromX (739241)]

Maybe I'm out of the mainstream on this but I don't see this as an issue at all.

I don't like spam any more than anybody else does here but it's an unfortunate fact of life that is here to stay as long as we are using the current e-mail system. Getting mad at people for spamming under this system of total anonymity and lack of accountability is like getting mad at your cat for eating the food you left on the kitchen table before you left. All we can really do is find a way to deal with the spam while we think of a new way to go about things.

That said, compared to other spams this is relatively benign. Who is hurt here (besides the fact that it clogs our inboxes and spam filters, which as I said is a fact of life and is going to happen anyway)? Are we afraid that people will be tricked into buying these stocks and then lose money when they plummet? Because that sounds to me like a good way to teach people not to take financial advice from complete strangers. The law is not for babying people and shielding them from all discomfort; sometimes people need to take a lesson or two at the school of hard knocks.

long term

[by Anonymous Coward]

While it is interesting to see the return for the spammer, check out the return for the sucker that buys them. http://www.spamstocktracker.com/ [spamstocktracker.com]

Several BILLION counts of stock manipulation...

[D4C5CE (578304)]

...should be able to trigger a rather thorough search for those responsible (who can hardly not leave quite a significant paper&data trail), and land them in jail for ages - so where's the prosecution? Their case can only be helped by identity theft typically additionally committed by many spammers.

Going after these subjects also beats confiscating Jaguars and digging for spam gold... especially if they're actually making 6% in a few days, per campaign.

Who cares that spam may not be a crime in some places - securities scams of these proportions certainly are, and no less if perpetrated by eMail.

Re:Wait, you mean it works?

[TigerTime (626140)]

After watching these a few times, I actually tried buying one of the stocks. The best chance is if you look at the stock and it hasn't risen any yet (meaning you get the email before everyone else).

I bought about $100 of a $.20 stock and wound up selling it for $.55. I've stayed away from them though usually as I seem to only look at them after the price is moving.

Yeah, I've done it too

[alexhmit01 (104757)]

One morning I got my email right after the market openned, saw no movement... on a whim, bought a few hundred bucks worth, figuring, people stupider than me had to fall for it... Made about 20%-30% on the deal after commissions...

Haven't tried in a few years, been to busy, but it was actually pretty funny... Thought about doing that with some small money... I mean, the annual percentage gain is really impressive if you actually acted on all these and got some fast run ups...

The problem is, it's all short term, which means major taxes... Alternatively, you could do it in an IRA or other shielded account, but that means keeping in cash except when you make the play... no margin means you need to keep cash sitting around when you aren't playing, which cuts into returns... If you have margin, you can always move the cash in 2-3 days later conveniently.

Alex

Re:

[Daverd (641119)]

And if the price has risen recently, sell it short. It's gonna go back down to its true value eventually (probably after the spammers sell their shares).

erm, no

[BitterAndDrunk (799378)]

As stated above, it's 6% in a day, not your annual return. Rather major difference there.

Re:

[KokorHekkus (986906)]

With the kind of captial investment -- not to mention criminal activity -- required to generate that level of spam, you're better off taking the same investment and throwing it in a CD or Money Market account. 6% is fairly pathetic. Schwab

Ehum? Did you really think they meant by yearly basis? No, they meant per "spam high" incident. Now, do a handful of fast ones (in a few months perhaps since it takes the regulators a while to catch on) then it might be very profitable considering the risk and punishmen

Re:

[King_TJ (85913)]

As pathetic as this is, I can believe it actually does work. Not that long ago, I did some on-site computer work for a guy, who in turn referred me to a couple of his friends. They were all getting into online stock trading, using some "training CD" of questionable merit.

All of them bought new computer systems, apparently with this stock trading as their primary purpose behind them. (One guy even asked me at length about his options for buying multiple flat panel monitors, thinking it would help him with

Re:

[slashkitty (21637)]

No.. you do the opposite. You sell short the stock pumped. It's sure to FALL since they already bought it low. This would also help stop the spammers because they wouldn't make as much.

Re:

[angusmci (850386)]

Except that if you read the story you'll see that while the spammer makes money, buyers of the stocks usually lose. It seems that stocks typically lose 4-7% of their value on the days after the spam run. The spammers make their money by buying the day before and selling the day after; buying the spam on the same day that you see the first spams is unlikely to give you the same return.

Some people have considered shorting the stocks they see advertised on the assumption that the stocks will go down in value (