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InvestWELL Report |
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Question: In investment terminology, what is pump and dump ?
Answer: Pump and dump is an illegal and unethical scheme which relies on artificially inflating the price of a stock or other security through promotion, in order to sell at the inflated price. InvestWELL receives many e-mails every day announcing various wonder stocks. Unfortunately, people who are promoting these stocks are only trying to create artificial demand in order to dump their own holdings.
As part of our membership package, we provide members with stock recommendations. We do not buy the stock ahead of time and then promote. We give our members an advance notice and tell them the limit price we are willing to pay as well as the time period. We are also investing our own money which results in fully aligning the interest of our members and InvestWELL. |
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You have received an urgent e-mail telling you that the stock of ABC is about to explode upwards.
What should you do ?
A) Place a buy order
B) Put the stock on your watch list
C) Tell your friends about this stock
D) Delete the message and forget about it
Answer to the Quiz at the bottom of the newsletter |
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(Cumulative %)
Investment Strategy - MEMBER SECTION
InvestWELL Picks has benefited greatly from taking advantage of the buying opportunity presented on July 18 th. Overall, our portfolio has been outperforming the S&P 500 index by nearly 800 basis points since May 1, 2006.
Chart 1.
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- During the last month, the US equity continued to recover from the correction which culminated in the middle of June (Chart 2 & 3). The recent strength is quite impressive, given the talk of the "hard landing" for the housing market and possible recession. In August, the job growth in the US picked up and the unemployment rate approached a five-year low, the latest in a string of reports validating the Federal Reserve's forecast that the economic slowdown will be gradual. In addition, the price of oil declined to its two-month low.
Charts courtesy of StockCharts.com
- During the last month, the Canadian equities have managed to hold its gains (Chart 4 & 5). We believe that the upcoming decline in commodities (as evidenced by the downward sloping cumulative advancing-declining ratio) will likely have a negative impact on the Canadian general market. The Canadian Employment Data will be released next Friday.
Charts courtesy of StockCharts.com
- The US housing market is in serious trouble, following a surge in prices during the housing boom, which has made home purchases less affordable than at any time in almost two decades. In addition, the stock of unsold existing homes is the highest since 1993. Although the outlook is grim, it need not be fatal. Two other countries that experienced housing booms, Australia and the UK, have emerged from the experience with little real damage. In both cases home prices stagnated but never fell much.
- Federal Reserve officials may be prepared to live with a pickup in inflation over coming months as they consider the housing market and the employment situation. Based on the minutes of the recent FED meeting, the officials appear more worried about a property downturn versus the dangers of accelerating inflation.
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(see explanation)
Charts 6 - 8: Advancing/Declining Line, AAII and Equity Put/Call Ratio
Charts courtesy of StockCharts.com and DecisionPoint.com |
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D is correct. The e-mail is most likely a pump and dump schemed aimed at luring naïve investors. Stay away from it. |
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Thank you for reading InvestWELL Report.
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The contents of this publication are the property of InvestWELL Financial and may not be summarized, reproduced, or rebroadcast in any fashion without our written permission.
InvestWELL Financial's first priority, as a provider of independent and unbiased financial information, is to educate our clients. Not only do we provide practical information about securities, but we also coach our clients to become successful independent investors. As such, InvestWELL Financial does not assume any responsibility whatsoever for the use of any information from the website or related publications. Although all sources of information are vetted and the information is believed to be reliable, it is not provided as investment advice. Past performance is not an indicator of future performance in securities. Each portfolio must be balanced and based on personal circumstances. High-risk investment decisions should be made in consultation with an investment professional.
InvestWELL receives no commission or benefit of any kind from the companies whose securities InvestWELL Financial showcases. We do not necessarily own shares in the showcased securities, but if we do, these shares would only form a very small part of widely-held and publicly distributed companies. There is no intention whatsoever of profiting in a manner where the price-impact of trading or holding of a security might arise. The website and related publications of InvestWELL Financial are intended to only be used for educational purposes.
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