stocks is illegal; buying into such hype looks stupid. But getting one of the
world's major news organizations to do both for you? Perhaps that counts as
starts to build, investor pay attention...
"China World Trade Corp. Recent news has stirred investors. Volume
jumped 2274%. Big news expected. Getting in early is the key..."
Or so the latest batch of junk-and-pump emails to hit our servers here at BullionVault would have us
believe. Ramping stocks is illegal, of course. Buying into the hype is
stupid. Getting one of the world's major news organisations to do both for
you at once...well, perhaps that's genius.
financier Edward Pastorini may lead a bid for Gold
Fields Ltd, the world's fourth-largest gold producer, to profit from the
rising price of bullion," reported Bloomberg yesterday morning.
"The LBO firms, corporate raiders and I feel that gold is going to rise
to over $1,000 an ounce over the next two to three years," Pastorini told the newswire by email from San Francisco. Only he
wasn't in San Francisco
by the time Bloomberg spoke to him by phone. He was in Florida.
Or rather, somebody was.
"I prefer to stay private," Pastorini
explained, "which is what I have managed to be for over 25 years in the
mergers and acquisitions business. That's how my partners and I like it. I
keep my name out of things and simply do the work behind the scenes."
Pastorini's high-and-mighty discretion also seemed to
explain why Bloomberg couldn't confirm his identity with any US stock
market filings, its own database, or even Google. He's so secretive, the
journalists guessed, he's invisible!
But the story did check out with a second source, giving the newswire the
green light it needed. Bloomberg was also sent a 3-page document,
apparently from one of Gold Fields own executives, outlining details of the
So Bloomberg published; now it's damned.
"It happens [to] all media organisations," smirks
the Financial Times online – "the FT included. Whether it’s
high market jinks or financial skulduggery, the fact is people make up
stories and sometimes newswires and newspapers swallow them."
But swallowing stories – hook, line and sinker - can stick in the
throat if you also buy into the shares. Gold Fields' stock jumped 11% on the
story as some 10 million shares changed hands. That added $940 million to GFI's market cap. But by the end of US trade,
once the scam had been spotted, the shares were back down to the day's open.
Why fool Bloomberg and Gold
Field shareholders? The stock's options prices, according to one blog, warrant investigation. Bloomberg now faces legal
action from GFI shareholders, or so today's press reports would have us
believe. Now the newswire's No.1 rival, Reuters, adds that the South African
stock exchange regulator is going to look into "a possible contravention
of section 76 of the Securities Services Act that prohibits false and misleading
information being published."
Gullibility is its own
punishment, of course. Bloomberg itself now admits that the Florida
phone number used during the "Pastorini"
interview was previously used to ramp a hoax takeover bid for Zapata Corp., a
fishing company, in 2003.
Ramping stocks through email is an inconvenience to most investors. Ramping
stocks through the respectable media, however, can really hit the jackpot. Last
weekend, the Sunday Express reported a potential $50-billion bid for Dow Chemical.
The UK tabloid isn't known
for its US
business scoops. But Dow's stock rose nearly 5% on Monday regardless. Volume
was more than four times the daily average.
Back in 1987, as the Toronto Globe & Mail recalls, Dow Jones got a phonecall saying the retailer Dayton Hudson Corp. was
about to receive a bid for $7 billion. "Hours later, after the company's
stock soared," says the paper, "Dow Jones reported that the
circumstances surrounding the bid were 'cloudy'. A bid never surfaced."
Two years later, Reuters said that an "unknown group of investors"
was bidding for US airline giant, Pan Am. The newswire's proof? It had
received a fax! Trading in Pan Am's stock was
suspended. Reuters let the story drop, unable to verify it.
Fast forward to April 2007, and "this is evidence of the frothiness of
the market," says John Turner – head of Fasken
Martineau DuMoulin, the mining group – of
yesterday's Gold Fields sting. "People have been making so much money
for so long that they are getting careless."
More money – careless or otherwise – really is pouring into
gold-mining M&A, however. Last year saw a record $17 billion spent by
gold mining firms digging for ore on the stock market, rather than in the
ground. The upshot, however, isn't quite what you'd expect.
Fresh from buying up Bema Gold, for instance, Kinross just gave fresh 2007
guidance for output and reserves. KGC now expects to produce 1.65 million
ounces per year, up from 1.5 million as previously announced. Yet Bema itself
was producing 230,000
ounces of gold annually.
What happened to the difference? Perhaps, as with most corporate activity,
the whole simply doesn't equal the sum of its parts. Just ask anyone still
holding GlaxoSmithKline, six years after it was born of the greatest merger
(then) in history...and six years after the stock topped out.
Still, at least the story stacked up at the time...unlike Edward Pastorini's Gold Fields sting.
By : Adrian Ash
Head of Research
correspondent for The Daily Reckoning in London,
is head of research at www.BullionVault.com
– giving you direct access to investment gold, vaulted in Zurich, on $3 spreads
and 0.8% dealing fees.
Current gold price, no delay | FAQ | Detailed outlook for 2007
Please Note: This article is to inform your
thinking, not lead it. Only you can decide the best place for your money, and
any decision you make will put your money at risk. Information or data
included here may have already been overtaken by events – and must be
verified elsewhere – should you choose to act on it.