How to Determine Pump & Dump Scams

Video Transcript

"Hello everyone this is Chris Markowski, president of Markowski Investments and host of the watch dog on Wall Street radio show. Here to talk about pump and dump brokerage scams. Yeah this was my foray, this was my first foray into the whole scam world in trying to educate people about it. And actually the great movie believe it or not to go see in regards to how this went about and how they operate it, is the movie Boiler Room which was actually a really good movie that came out many years ago. Basically a pump and dump scam it could be operated in many different ways. Big brokerage firms operate pump and dump scams too. They just don't go to jail for them. A lot of penny stock operators that are called the boiler rooms would take small companies with very small floats of stock and they would get their army of cold callers and brokers to drive the price up by getting everybody out there to buy it and bring it up to a level where it quite frankly didn't belong. They use all sorts of nonsense like oh this company is going to merge with Disney or this company is got the next cure to cancer and they are basically lying to people on the phone about it. Stock would go up,people would get excited and they often buy more. But there really was no value behind the actual securities. What happened when it reached those heights is the insiders, the actual owners of the brokerage firm would unload all of their shares, all the insider stocks in the position,driving the stock down to nothing. This operates in many different ways, we actually saw this happen with the penny stocks in the mid nineteen nineties and also you can think that the dot coms were a bit of a pump and dump as well. Getting the insiders out and the big players at the brokerage firm out at a much higher prices. You need to understand this stuff people and you need to have a long term investment plan. You need to try to avoid any of these things with these hopes and dreams and just wait one more day and the stock is going to go up. This is how you really get burned. I cover this stuff extensively at our website, watch dog on Wall Street dot com. This is Chris Markowski your watch dog on Wall Street."