DON’T BUY STOCKS BECAUSE RAPPERS RECOMMEND THEM ON TWITTER
Of all the stocks for dummies stories, this one has to be near or at the top.
Apparently rapper 50 Cent owns about 30 million shares of H&H Imports which is a penny stock. Right away warning signals should be going up for any knowledgable investor because penny stocks are very risky, especially ones that sell for between 5 and 10 cents.
Over the weekend the rapper started pumping the stock on Twitter to his 3.8 million followers. He was telling everyone they would double their money and that he owned the stock and they should too. In response to this, the stock at one point was up more than 240% all the way up to 39 cents. That equated to a gain very nice gain in the millions of dollars for 50 Cent.
The stock is down today more than 25% and he has now backed off his recommending it. Now he is telling everyone to do their homework before they buy but for those foolish folks who didn’t, it’s too late and many of them have gotten burned.
I’ve always said that penny stocks are for dummies but a story like this one is better than I ever thought I would find to illustrate it. It goes to show how gullible people are and how much influence celebrities have over their fans. It is really sad that so many people would buy a worthless stock just because a music rapper told them to. In reality, it is hard to feel sorry for those folks that have lost money on this bad penny stock.
You can read more about this story here on MSN.
WILL THERE BE AN OBAMA STOCK RALLY IN 2011?
An interesting article can be found here about the 3rd year of Obama’s 4 year term and the possibility of a stock rally. It seems that history shows (see chart below from that article) that the third year of each term for the Presidents Reagan, Bush Sr., Clinton, and Bush were good years for the market.
The author of the article speculates that the reason for this is because the first two years, a new President is trying to get his agenda enacted and is not concentrating as much on the economy. After the midterm elections he is then more focused on getting reelected which means he will do more things to boost his approval ratings and to boost the economy. A good economy going into an election means a greater chance of getting elected.
While the new Obama tax package was just passed one might argue that things are already happening along those lines. With investors and companies knowing that their taxes are not going to be raised for the next two years, things are already looking good for the business environment.
But wait a minute.
Didn’t Obama already throw everything he had against the wall trying to stimulate the economy in his first two years? What about a little thing called the Obama stimulus bill in the amount of 787 BILLION! How much more can he do to try to stimulate the economy? Seems to me like he’s got very little left and that new Republican House is not going to let him get away with other reckless spending like that.
No, Obama was trying his hardest to stimulate the economy in the first two years and he clearly failed. He gave away our tax dollars and flushed them down the toilet like all Democrats seem to do. Whatever happens from this point will be more of a result of the Republicans who are there to put a stop to all his shenanigans.
If there is an Obama stock rally in 2011, it shouldn’t be called that. It should be called the return to sanity rally.
