Avoiding Stock Scams

The following article, courtesy of Gerri Willis of CNN

Don't give into e-mail from unknown senders who claim it is in your best interest to buy a stock.
By Gerri Willis, CNN
NEW YORK (CNNMoney.com) -- The stock market has been breaking records. And wouldn't you know, scam artists have just come out of the woodwork.
The National Association of Securities Dealers is warning people to watch out for stock scams via e-mail.
1: How it works
So you open your e-mail and find a letter from Chris or Jessica or Fran. The e-mail touts a specific investment opportunity and it seems to have been sent to you in error.
Here's an example of what you may receive: "I was pleased to meet you the other day. The deal I was speaking about yesterday involved a company known as [company name]. It's already heading up, but the big news isn't out yet, so there's still time."
Compelled by your good fortune to receive such a good insider tip, you buy the stock. The price rises because maybe a few people have gotten this same e-mail. But lo and behold, the scammers sell off their shares at this inflated price...and you (and everyone else) is left with worthless stock.
2: Look for the red flags
Usually these e-mails contain misspellings, they're unsolicited. Why would a complete stranger send you an e-mail about a great investment opportunity?
Find out if the stock trades on the Pink Sheets rather than on the New York Stock Exchange or the Nasdaq Stock Market. The stocks on the Pink Sheets don't have to meet as many listing regulatory requirements.
You can go to Nasdaq.com or NYSE.com to see where it trades. Avoid e-mails that encourage you to do something immediately and never trust the "Guarantee." It's anything but.
3: Keep on your toes
Stock scams generally follow the news beat. Right now there are a lot of scams involving energy, oil and gas and ethanol, says John Gannon of the NASD. After Hurricane Katrina, stock scams may have revolved around construction companies or oil stocks.
The bottom line here is that you should never rely solely on information you receive from an unsolicited source - whether it's in the form of an e-mail, a fax, a text message or a phone call.
4: What to Do
If you are suspicious about an offer or if you think the claims might be exaggerated or misleading, contact the SEC Investor Complaint Center at http://www.sec.gov/. You can find out if the firm is registered with NASD by calling the BrokerCheck hotline at (800) 289-9999.
If you've received one of these e-mails, forward the stock spam emails to spam@nasd.com, where they will be reviewed for possible investigation.

GM Being Smart?

Latest news out of GM, is that a portion of their '07 models will have a price increase. Given that the price of a new car does fluctuate with available rebates, to categorically state that there is going to be an increase won't bode well with consumers and investors alike. What this does, is resign to the fact that it's costs per vehicle are fixed, and being passed on to the consumer. What this does, is give the public the perception that the costs per vehicle (hint - read UAW benefits) will not change.

I realize that GM has done some cost cutting, but more needs to be done with the labour and benefit costs. The legacy costs with GM, and the others, will not go away, and will not sit well with consumers.

I would be suprised if they are successful in passing along the increases...GM's stock price won't be doing much, and with analysts giving it a target of $40, I think this is over-optimistic. The overall cost of the vehicle must be reduced, in conjuction with downsizing the production to market share. Wagoner still has a long road ahead, and these issues are not being addressed.

Same will happen with Ford and Chrysler. Toyota seems to be the big buy, as the price gap on vehicles get closer. Look for Toyota to gain with the latest GM pricing.

Spotting Troubled Companies

Interesting article, courtesy of CBC news...spotting troubled companies.

Some highlights of the article:

Danger signs include:

-Companies run by family and friends. Sugarman points out that when you have a CFO who is related to the CEO, that's not a good thing - same if the chairman is related to the CEO: "an investor should really start to wonder why, and wonder who is watching the henhouse."

-Companies that go on a buying binges, because if they're doing so great in core businesses, why make acquisitions in other areas?

-Look at Byzantine business structures. As Sugarman says, "if you can't figure out what the heck is going on, and why they need to set something up with such a concentrated fashion, you should assume that there is something that they're trying to hide."

-Listen to skeptics. This chapter features our infamous made-in-Canada mining scandal surrounding Bre-X, the company that in the early 1990s claimed it had discovered a huge gold find in Indonesia. However, the results were fabricated.

Here is the link to the book on Amazon.