Re: This Stock's on Fire!!! - Internet/Web/Online Service Information

Millions of investors go to online message boards to chat about companies and search for trading tips. Here's a good one: Don't take financial advice from strangers.

It was late on a Wednesday morning, and the discussion board for Yahoo investors on Ragingbull.com was definitely raging, though not exactly bullish.

"I'm going bankrupt," wrote "NO_BULL_TRADER." "Hang in there," replied "Sheahunter." But it was too late. Yahoo had reported third-quarter earnings the previous day, October 10. The portal had met its own projections, but its caution over advertising worried analysts. Now Yahoo was sinking fast -- by the closing bell shares were down 21 percent from the previous day.

That evening, the discussion board was going berserk. One poster predicted "will work for food" signs in the streets. Another seemed to relish the decline: "Now that it's over, can we finally agree that the 'brilliance' of Yahoo-board posters turned out to be a complete and utter fantasy by misguided retail investors?"

Over on the Silicon Investor chat board, the Yahoo-related commentary was more staid. "CookiePuss" was taking things in stride: "I hate losing money, but hey, the world isn't coming to an end yet. I'm still holding out for a year-end rally."

Such is life on the boards. Well, some of them, anyway. Discussion boards for heavily traded stocks like Yahoo differ markedly from those for smaller issues trading on the over-the-counter market. While the mainstream boards offer a running dialogue of desperation, greed, spam, politics and motivational speeches, the OTC boards seem to be a haven for something a bit more sinister.

Take Raging Bull's board for Sportsprize Entertainment, an obscure Los Angeles-based company that's lightly traded under the symbol JOCK. Who, I wondered, could possibly be interested enough in Sportsprize -- a sports contest and e-commerce site -- to care much about its stock price, which in late October was languishing at 8 cents (and falling)?

Well, somebody named "Scrotcher," for one, who regularly posts on this and other Raging Bull boards. Some posters have accused Scrotcher of working for Sportsprize, and that doesn't stretch the imagination. Scrotcher has predicted the stock price will hit $100 within five years.

"Print this message, roll a joint with it and smoke it," shoots back "Gecko-wannabe" (as in Gordon Gecko, the ruthless financier from Wall Street). "That's the only high you'll ever get with this dog."

It's hardly the sort of erudite discussion you'd hear on Wall Street Week, but this is how many investors communicate about the market and individual stocks. With millions of people posting on thousands of boards on dozens of sites, you'll find every sort of trader -- including company bashers, stock touters and pump-and-dumpers whose attempts to boost or deflate stock prices flirt with illegality. For others, the chats seem to serve as support groups for gambling addicts.

Silicon Investor, owned by InfoSpace, boasts a total of more than 14 million messages posted. Alta Vista's Raging Bull has 600,000 registered users for its roughly 13,000 stock boards (some companies have more than one). And that's just the beginning. Yahoo's thriving finance channel contains thousands of boards. The Web is replete with private and public boards; free boards and paid boards; boards sprinkled with killer tips; and boards clogged with sniping and spam.

Some posters visit message boards to glean valuable information. Others simply want to gauge the market's temperature. Many Net stocks, for instance, are traded largely in retail circles, rather than by pensions and mutual funds, so their boards may suggest how the stocks will perform.

As they bop around the boards, investors are bound to run into folks like Phillip Franklin, a 49-year-old publishing consultant who lives in Solona Beach, Calif. While he posts regularly on Raging Bull and Yahoo Finance, Franklin insists he doesn't have a dime in the market. So why post? "I just enjoy it," he says. "It's like a daytime soap opera."

And Franklin treats it as such. He posts under various pseudonyms (he prefers to call them "characters"), and each has its own personality Two of his characters post on Yahoo's Interactive Pictures Corp. (IPIX) message board. One writes in broken English and admonishes stock bashers: "When the stock sell price go way back up high we will all laff Ha Ha and make fun of those bashers cause they will loos the money in the jail."

Franklin says he occasionally pumps the stocks, figuring his posts will be taken as satire. He might not want to be so cavalier. Though most illegal posters go unpunished, law enforcement officials have been scrutinizing the boards lately in an effort to stem fraudulent trading behavior. "When someone commits a hoax, it's common that they will crow about it on the boards," says a Securities and Exchange Commission official, who requested anonymity.

In September Jonathan Lebed, then 15, was nabbed by the SEC after netting $272,826 from 11 trades. Lebed allegedly bought stocks low, used Yahoo's boards to pump up the price and then sold his shares at a profit. In a settlement with the SEC, Lebed agreed to turn over his gains, plus interest, to the government. (He was allowed to keep $500,000 from other, similar trades.)

In October, a Florida appeals court let stand a lower-court ruling that required Yahoo and AOL to identify posters who wrote critical missives about Eric Hvide. The former CEO of Hvide Marine is now suing the posters for defamation.

While some posters are certainly looking to manipulate prices, others simply want to make an honest buck. Among them, inexplicably, are plenty of people who make investment decisions based on the postings of complete strangers. One former Sportsprize employee would scour the board for messages like Scrotcher's $100 prediction in order to shoot down their hype. "It's so easy to get screwed that I feel bad about it," says the poster. "People don't think twice about investing their retirement money in stocks based on an anonymous message."

Indeed, a gullible investor might be heeding the advice of not just a stranger, but a fictitious one. "Look for our price to be in the mid-50s by this time next week," writes another of Franklin's IPIX characters. "When Swanky Jimmy P talks, people listen. Swanky Jimmy P sez, 'Buy!'"

And to think, I nearly bought on his recommendation.

Jim Evans (jime@thestandard.com) is a staff writer at The Industry Standard

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