How do we spot bashers? Sept 23, 2004 22:18:55 GMT -5
Post by fastwalker on Sept 23, 2004 22:18:55 GMT -5
Spotting bashers..101 (Read 1 times)
Ok..take your time and read this post ... and prepared for an onslaught of them (bashers) in the not so distant future...FW
Whether you are fairly new to online investing or a seasoned veteran, you've probably seen the message boards and chat rooms that focus on stocks. Many of these boards make tabloids look tame, churning out rumor after rumor 24 hours a day. Some of the more popular boards are getting up wards of 10,000 posts daily. Here we look at how the practice of bashing takes place on these boards, and how you can handle bashers when you encounter them.
The Advent of the Internet
No technology has changed the financial industry more than the Internet, which has allowed individual investors from every corner of the globe to meet and talk about the prospects and risks of companies. The free flow of information has changed the very way we invest, but this mass communication does not come without a price. The anonymity of the Internet has allowed unscrupulous people to distort and control artificially the price of a stock--these people are the bashers.
What Is a Basher?
A basher is a person who lurks in the shadows of investment chat rooms spreading calculated, and almost always unfounded, confidence-shaking news about a stock. The basher's purpose is to instigate a sell off that will in turn drive the stock price down, either for his or her own benefit or that of his or her employer.
This practice may seem fairly simple, but there is a science behind it. Supposedly, reputable companies and investment firms sometimes hire bashers to help make the conditions for a takeover more favorable. You see, when one company wants to buy another, stock price is king. If the stock of a multi-billion dollar target company changes even by one dollar, the difference in the price of the takeover can be millions of dollars. A basher who successfully pushes down the price of a stock may receive a very lucrative compensation.
How Bashers Get Paid
Bashers may also get paid by the number of responses they get from their postings. They act as catalysts, hoping to spread a firestorm of bad news about a stock. Due to the highly unethical and, in some cases, illegal act of hiring a basher, employers almost always remain anonymous.
Bashers' employers will want to depress a stock price usually for one of two reasons: to increase their position in a company for a lower price, or to profit on the short side of the stock.
Here are some basher tactics that on line chatters should be aware of:
Bashers lie! –
Bashers have no ethical code that prevents them from lying. They will lie blatantly and often.
Bashers usually bash stocks that are more volatile –
Bashers usually only go after stocks that could show a large increase or decrease in price. There's a low probability that a basher would ever be able to influence a company with a huge float like General Electric, for example.
Bashers will use any news –
Bashers will not favor recent news over old news, or vice versa. They'll take information out of context if it will help depress a stock.
Bashers exploit investors' lack of knowledge –
Most bashers rely on the notion that most investors don't check their facts and, as such, will use false information to sway people.
Bashers post frequently –
Bashers are a persistent bunch. Through the use of repetition, they attempt to wear down those on the long side of stocks.
Bashers can travel in packs –
It is common for a group of bashers to enter a chat room quietly and carefully and feed off each other's posts to dominate subtly the sentiment of the room.
Who Are Bashers' Prey?
As you can probably gather from the above list of tactics, bashers do not target well-informed investors but those who are easily persuaded. Bashers know that "green" or rookie investors are inherently wary of the market and oversensitive to bad news.
Anyone in a chat room who claims to be your friend and have your best interests in mind is likely a basher--after all, why would anyone give good advice for free in a chat room ? It's doubtful that experts such as Warren Buffett and Peter Lynch frequent these rooms. (Read more on Peter Lynch here.)
Levels of Bashers' Skills
The most effective bashers have strategies that are very well thought out. They often develop a character who draws attention and builds trust from others on the chat board. Good bashers try to appear sophisticated: they never use profanity because that would cause people to ignore them. Quite often, these bashers will respond condescendingly to their questioners for asking such "stupid" questions.
The purpose is to get a reaction from other posters: the more reaction, the more the room will be disrupted. To throw yet another wrench into the works, bashers often send in another person to side with the longs of a stock. Again, the idea behind this is to distract people, and to spread rumors and confusion throughout the room.
Not all bashers display such proficiency and dedication. Like any profession or sport, the bashing world has participants at different skill levels. It helps to know how the experts operate differently from the novices, so here is a list of the skills displayed in the different "leagues" (to use a baseball analogy) of bashers:
Major League –<br>
The major league bashers are excellent at what they do. The better the bashers are at their game, the tougher they are to spot. They are on line constantly, always attacking and attempting to make positive postings look unreasonable. Those in the major leagues are masters at manipulation, knowing how to convince other chatters that a particular stock should be sold immediately.
These bashers are able to twist the meanings of words, phrases, quotes, and press releases quite compellingly; however, they do not have the same influence over others as those in the major leagues.
These bashers are still learning the subtleties of the art of appearing like a trustworthy, sophisticated fellow investor. For example, a AA basher may react over zealously to comments that question his or her perpetually bearish attitude.
Bat Boy –
Although this level of basher knows the profession and has known some major leaguers, he or she is utterly useless in the ways of bashing. The bat boy bashers make themselves obvious, using profanity, name calling and irrational arguments. These bashers are easily identified.
How to Handle Bashers
There are basically two ways in which chatters can handle bashers. Firstly, you should simply ignore them because they want and feed off attention. If they aren't getting any, they'll likely slink away and attempt to prey on more receptive victims. But sometimes the tenacious basher invading a good chat room needs to be confronted. Here are some tips that, if you must confront a basher, will likely help:
Do your due diligence. The phrase, "knowledge is power" is no more true than in this instance. Try to post a number of well-researched messages that confound the premise of a basher's arguments.
Do not engage bashers directly, but instead post general and open-ended messages disputing bashers' posts.
Remind those in the chat room that the mere fact that something is in writing does not make it the truth.
Bashing is always happening, so it's important for you to realize there are people out there who make a good living out of manipulating investors. Participating in a chat forum can be both enjoyable and insightful, but always remember to look at each message with the knowledge that its sender may not be sincere.