The Flow of Consciousness

It’s all over the stock world today that top executives, accountants, and others related to Spongetech Delivery Systems (SPNG) were arrested by the SEC, charged with securities fraud.

The top executives of Spongetech Delivery Systems Inc. (SPNG) were arrested and charged Wednesday in an alleged scheme to defraud investors by reporting falsely and grossly overstated sales figures.

According to a criminal complaint filed Wednesday, Michael Metter, Spongetech’s chief executive and president, and Steven Moskowitz, the New York pre-soaped sponge maker’s chief operating officer and chief financial officer, were charged with conspiracy to commit securities fraud and obstruction of justice. They each face up to five years in prison on the conspiracy charge.

The article, and others, go on to reveal that SPNG overstated its sales by up to 99%, the percentage of which its sales were to entities which don’t even exist.

SPNG down 83% on news its execs were arrested for securities fraud

SPNG ended the trading day today at .0069, an 83% drop.

I rode SPNG through the pump-and-dump scheme last June (SPNG dropped 27.66% yesterday, or how I learned many lessons about the stock market, Out of SPNG, 7% profit, back in and holding).

I bought back in shortly after and have been holding since. I added a small position in November, bringing my average from .15 to .095. I bought a tiny position today for $75, bringing my average to .08. I somewhat regret this decision, as I probably could have bought and sold more intraday if I had more cash in my account.

Timothy Sykes has a fantastic article on the mess: The Biggest Penny Stock Pump & Dump Ever? Possibly $250+ Million, SEC Alleges SpongeTech Scheme Sold 2.5 Billion Shares, Suckering Sports Fans Everywhere, What Do You Think?

If what the SEC alleges is proven true and SPNG executives did sell 2.5 billion shares, this may go down as the largest penny stock pump and dump in history (the stock rose from under a penny/share to 30 cents/share so you gotta figure an average selling price of 10-20 cents/share would yield $250-$500 million in allegedly illegal profits)…pretty amazing considering SPNG is getting sued by half a dozen sports teams like The NY Mets, NY Islanders, Chicago Bears & NY Giants as The NY Post recently pointed out (nope, they didn’t ask me for my opinion, I am simply linking to a published article FYI) for mere six figures (where did all the money go from these 2.5 billion share sales?)

I, to this day, which that I had listened to @_TheDean when he warned me the morning of June 12 that he thought SPNG was a pump and dump and that I should take my profits (~99%) and run. Considering my goal of stock trading is to risk a little bit of extra, unplanned income to help pay off my student loans, I’d have been more than 2/3 of the way there had I followed his advice (and perhaps that of Sykes).

Live and learn. Risk is risk.

Anyway, worst case scenario is that I lose the couple thousand dollars I have in SPNG and get to perhaps partake in a shareholder lawsuit. Best case scenario? Current execs serve their time and someone else comes in, and takes this .0069 dollar stock to a 1.00 dollar stock in a few years. No matter what, I’m in for the ride. Profits or bust on this one.

Ironically, I just watched Wall Street last night.

I didn’t blog as much as I would have liked to this year, mostly because of my crazy busyness.

My article on how to install Gears on 64-bit Linux continues to see quite a bit of traffic. I even host a copy of Gears, even though it’s likely out of date. Also in the Linux vein, my articles on how to buy DRM-free music online with Amazon MP3 on Linux and Android were moderately popular. I wrote an article on how to add CACert root certificates to Chromium on Linux and it sees more traffic than most of my other posts combined.

I wasn’t as active in the open source community as I would have liked, but I did make some contributions to Gwibber, Astrid, Celtx, and Lernid. I mentioned the first three in my Launchpad activity update. The latter is a newer development by Jono Bacon. I contributed the entire Esperanto translation less than two days after it was available on Launchpad. I have no way of verifying it, but I think that the Esperanto translation was the first complete non-English variant translation available.

I recently wrote two brief articles on how to automate some tasks on Facebook. One was how to rapidly expunge friend suggestions, and the other was how to select all friends in a friend select dialog.

I met Tom Dickson of Will It Blend? fame at CES last year. He was really cool and friendly.

I also wrote a few articles on politics, my favorite being A Comment on Socialism Defined, a comment left on a friend’s blog, Strike the Root!. I’ll not go into how much I think Obama and his friends have screwed up the country already (it’s not all been bad—he has done some good things). That’s something for another article.

A new hobby this year for me has been stock trading. I’d saved up some money and decided to use some skills I learned in middle school to make a buck or two on the stock market. Ironically, not 12 hours after I blogged about my flagship stock being up near 200%, that stock, SPNG, dropped 27.66% in one day, costing me $23,000 of value on a $10,000 investment in 65 minutes. It recovered, and I still made out with a profit, but I learned a very, very valuable set of lessons. I still kick myself occasionally because of this and probably will for a long time. My goal of getting into stocks was to generate enough money that I could pay off my student loans really quickly. I could have paid off more than 2/3 and I didn’t cash out when I should have.

I did meet many, many new people in the stock world, especially Stockguy22 and the Bulls on Wall Street crew. I said goodbye to StockTwits after I was temporarily banned for cheering on Vonage (VG) when it was less than 50 cents, riding it to 80 cents, and cashing out. They called it a worthless, crappy penny stock. A few weeks later, it spiked to ~2.20 and has been above a dollar since. HA!

I got some neat advice from friends while considering the purchase of a MacBook Pro (which I got and love) and the acquisition of a PS3 (which I did get).

The biggest changes in my life were in my location and work. I got a new job in March at Vivísimo, a search platform maker in Pittsburgh–I even wrote a post on the corporate blog! I moved in with some friends in May, but realizing we were a little cramped, I moved into a new apartment in July (I didn’t write about that!).

I wrote more than 28 articles for Bob Buskirk‘s ThinkComputers. My favorites were the Masscool MP-1371RS Media Player and QNAP TS-809 Pro network attached storage device. I use the former alongside my PS3 for video formats my PS3 can’t stream from the latter. The NAS has become the central storage hub for all of my computers, replacing the QNAP TS-109 Pro I reviewed two years ago.

BIOS LEVEL was fairly inactive this year, largely because of a major server outage from May to August. I did write an article on the Orbita Mouse, which I still use to this day at work. I did record and post several videos from Ohio Linuxfest 2009, including Linux Journal editor Shawn Powers’s keynote, Jorge Castro‘s talk on building a community around an open source project, and more on licensing, making money from open source, democratized design, and talking to policymakers and legislators about open source. All Ohio Linuxfest videos with a write-up are available on BIOS LEVEL, or on BIOS LEVEL’s Blip.tv channel.

Jon Daniel and I spend most of November cranking out a beta version of Profyle.at, a personal profile directory service. We’re not entirely finished yet, but sign up for our Profyle.at beta and you’ll likely get in! We want to help people find you on the Internet so your friends and family can follow you on whatever sites and networks you like the most. We pitched for funding and didn’t get it, but were cordially invited to present again during the next round in a month.

Brigette and I are still together, and going strong. We’ve spent most of her winter break together, driving throughout western PA to be with friends and family, too. She’s been working on her web site for her beagle and vizsla show dogs, Glade Mill Sporting & Hound. She’s come a long way, from using a completely WYSIWYG editor to redoing it with a mix of code and WYSIWYG with Adobe Dreamweaver. I’m eager to see what she’s planning for it.

This morning, my former flagship stock Spongetech Delivery Systems (SPNG) continued to fall after a brief higher start. I wrote Saturday about the massive hysteria and price massacre SPNG holders faced on Friday when a pump-and-dump dumped.

My holdings averaged around $0.112. I decided at open to put a stop limit at 0.15/0.14, but when the price hit the stop, it didn’t execute. Granted, I was selling 112,160 shares, so I figured that no one was looking to buy my sizable lots. By the time I refreshed the page corrected the stop limit to a limit, the price had dropped to $0.11. Crap, I thought to myself.

Keeping in mind my lessons from Friday, I held, but illogically kept my limit at $0.12. The order executed at $0.1201, and I found myself with a ~7% profit.

I can sit around and moan about how I could have had ~$16,000 more if I would have sold on Friday morning. I can beat myself up over my admittedly greedy decision not to take a profit to help boost my gain percentage. I can, and I will. I tend to learn from my mistakes, and no one can be more critical of me than myself.

However, a profit is a profit, no matter how much it is. Stock trading is not my livelihood; I have no quotas or needs to meet. @stockguy22 once said something similar to “Some people don’t make $100 in a day in hard labor; you made that much in a morning with the click of a mouse.”

This whole debacle has left me a little listless and depressed, and a few people have noticed and inquired. Most of my friends don’t have spare money they can throw at the stock market and make an extra few hundred dollars in a month. I’m trying not to moan too much, as I know it’s like someone complaining about getting a B instead of an A when everyone else is getting Cs. I’ll recover.

I think I owe a great thanks to Brigette for enduring my doldrums and taking my mind off of things when I can’t do anything about them except worry.

But hey, tomorrow’s another day on the market. I took another position in SPNG at $0.15 and plan to hold that for a while. It’s unlikely that I’ll take a larger position until I’m more confident that the stock is no longer being influenced by pump-and-dumpers. I’ve gotten a few other recommendations, and I’m cautiously listening and filtering, trying to find that wave again.

Yesterday, Friday, June 12, 2009, was a day that I learned a lot about the perniciousness of the stock market and my own threshold of nervousness and composure.

The stock for Spongetech Delivery Systems (SPNG.OB) opened the day at $0.235, peaking at $0.29 somewhere around 11:45 I acquired Thursday an additional position at $0.2399, but only got half of what I wanted because I had the order on the table since .22 and feared that perhaps my order was too large at that price to be filled. I decided to acquire the remainder at $0.285, but managed to get it at $0.2801 near 10:45. This put my average position at $0.12, as I had nearly approximately 72,000 shares below $0.10.

Near 12:30, a massive sell-off began. The price dropped from approximately $0.285 to $0.26 in just a few minutes. It bounced back up to $0.27 around 12:45, but continued to fall after that. Idiotically, I decided to put another $500 in at $0.24, think that the drop was just a hiccup back to the opening price. Boy, was I wrong!

It nearly immediately spun out of control, dropping fast, sometimes by more than a cent between page refreshes. The ticker went red at approximately 13:15.

When it hit $0.22, I figured it was funny business. I had read some articles posted by @_thedean and some others earlier in the morning which warned of a major pump-and-dump scheme going on, and had set a stop at 20 cents in order to protect my profits, but stupidly and without real reason removed it when I saw the stock hit $0.26. I was unfamiliar with the people who posted these articles, and in my naiveté ignored them.

When SPNG hit $0.18, I knew I was in trouble. I set a stop limit at $0.13/$0.125 so that I wouldn’t go into the red (remember that my average position is $0.12). I hoped it would stop around $0.15, as that had been a level of support days earlier, but it didn’t stop there. $0.13 came and went, and my limit order never executed because the stock was at $0.11 within five minutes. I felt nauseated as a I watched my healthy green profit become a blood red loss.

SPNG dropped ~73% to $0.075 in 65 minutes. It bottomed out around 13:55. My holdings in SPNG lost $23,770 in value in 65 minutes. My nearly 200% gain dropped to a nearly 40% loss in 65 minutes.

I decided against taking any loss, as I couldn’t afford a loss of $12,000. I decided to hold on–chasers would bring the stock back up before the end of the day. Lo and behold, they did. SPNG ended the day down $0.065 at $0.175, a 27.66% loss.

I learned several lessons from this experience.

When you read troubling news, set a stop and stick to it. This was my number one error of the day. Had I adhered to this, I could have preserved profits of my sub-$.20 positions and participated in the massive buy-in which occured during the two hour rebuild of the price. This leads me to the next lesson…

If you think it’s going to tank, sell high, buy low. This is especially true for penny stocks like SPNG. Selling at $0.20 and buying back at $0.10 would have DOUBLED my holdings, and I could have had some excellent profits selling those shares at $0.175 at the end of the day.

Hope is worth nothing on the stock market. Hoping that the price will come out of free fall is like hoping that a disease is going to go away untreated. It might, but more than likely action and/or preparation is better than inaction and/or unpreparedness. Thanks to @travolto and @kosovar for reminding me of this.

Take a profit more often, even when you’re long. I’m a long trader most of the time. I hold for weeks, SPNG is no different. However, I admittedly got greedy as I watched my gains hit 100% then 200%. My initial position was at ~1400% gain at the peak yesterday. Turning ~$400 into ~$5500 is pretty awe-inspiring. However, I should have been taking profit occasionally and buying back on dips. I really should have taken a profit at the major support levels of $0.10, $0.15, $0.20, and $0.25. I may have made even more money had I done that, and I wouldn’t have been hit as hard by this fallout.

Do your own research so that you have only yourself to blame. I do this and have always done this. I rarely accept on faith anything anyone I don’t know personally tells me. I did my own research on the pump-and-dump thing, but fell to my own inexperience. This leads me to my next lesson…

When others warn you about something, listen to them, because they probably know more than you. They might be right; they might be wrong. Nonetheless, when money is involved, caution is paramount. The guys I follow on Twitter and StockTwits certainly know more than I do, but I chose to haphazardly embrace their warnings and I got burned because of my own inexperience.

If you start to go negative on a massive sell-off, it may be wise to hold. I can’t find who said it, but “you never lose until you sell.” Be careful when applying this philosophy, because once a stock hits $0, you’re screwed if you’re still holding.

Use discretion when twittering about stocks; don’t give away your stops. Someone else (@stockguy22?) said this before me. Never give away your stops. That’s private information which someone could very easily use against you. What very well may have happened yesterday is that someone with a lot of shares sold them very low, triggering enough other peoples’ stops that there were a ton of shares available on the market at a very low price. A few people made a lot of money yesterday, and lots of people lost a lot of money or didn’t get the profits they wanted yesterday.

Don’t panic. Set a goal and execute. I should have kept my stop, and when I didn’t, I should have set it higher with the clairvoyance that the stock was going to keep falling. Buying back even a penny lower would have saved some profit somewhere along the line.

What was the cause of this mess? All fingers point to profit taking. Someone on Google Finance’s SPNG board has another theory.

I invite you to check out my Twitter stream while using Nested Twitter Responses to see responses to my inquiries in my panicked state. I’ve included relevant portions below for your enjoyment. Remember that it’s in reverse order, so read bottom->up. Also, ignore the “# hours ago”, it’s valid as of the time I copied the posts from Twitter.

1. $SPNG hovering around .18 right now. If it closes above .20 after the nearly mortal wounds it took after lunch, I’ll be ecstatic about 22 hours ago from Gwibber
2. Well, if nothing else, my stock panic today will make for an excellent blog post over the weekend about 22 hours ago from Gwibber
3. @FlyingUrchin Thanks for the headsup. I’m all in on $SPNG right now, steadying my stomach after it dropped 50% at lunch, rebounding now about 22 hours ago from Gwibber in reply to FlyingUrchin
4. EVERYTHING IS FINE, NOTHING IS RUINED #FB about 22 hours ago from Gwibber
5. @HisRoyalDoognes thanks for the headsup. I’m currently all in $SPNG and hating myself for ignoring warnings of a pump and dump today about 22 hours ago from Gwibber in reply to HisRoyalDoognes
6. @cpruette profit taking. check out @_thedean as well as a few tweets earlier I made. someone called it, I ignored it in my newbosity about 22 hours ago from Gwibber in reply to cpruette
7. @cpruette I wish I had some spare cash to buy it this cheap. Contemplating selling $INAR and $ONFI for a loss and putting the money on $SPNG about 22 hours ago from Gwibber in reply to cpruette
8. I uploaded a YouTube video — Jane’s Addiction – Jane Says – Pittsburgh – 6/10/2009 http://bit.ly/RpeBG about 23 hours ago from Google
9. OK…looks like $SPNG is bouncing back up a bit. meetings for the rest of the day. getting my mind off this vomit comet for now about 23 hours ago from Gwibber
10. . @travolto so profit taking = folks sell much lower than the stock is currently worth? selling high and buying low on the way down? $SPNG about 23 hours ago from Gwibber in reply to travolto
11. Folks, I’m hitting losses on $SPNG. Explain to me the newb trader the logic behind selling a stock at 1/3 of what it’s worth and tanking it? about 23 hours ago from Gwibber
12. $SPNG my stop loss just triggered. I knew I should have kept it at .20 when I set it earlier today. @_thedean looks like I got burned about 23 hours ago from Gwibber
13. . @mikeklass yes. you can hate me for tweeting too much. Gonna be quiet for the rest of the day, though–meetings for eternity about 23 hours ago from Gwibber in reply to mikeklass
14. dammit dammit dammit $SPNG is tanking HARD HARD HARD. setting a stop at $1000 profit..will buy back in if it corrects later about 23 hours ago from Gwibber
15. crap crap crap crap crap $SPNG just nosedived. “should I stay or should I go now” this company is still sound, I think I’m staying about 24 hours ago from Gwibber
16. . @cpruette crap crap crap I just got another position at .2403 and I’m spent on cash…dunno if I can offload others fast enough to get in about 24 hours ago from Gwibber in reply to cpruette
17. uh oh…who sold $SPNG at .26? THIS IS NOT PROGRESS, PEOPLE. I don’t like being down this much on new positions…. 9:57 AM Jun 12th from Gwibber
18. @KoSoVaR and I realized that it’s your replies that mess up gwibber. I don’t know why yet, though… 9:49 AM Jun 12th from web in reply to KoSoVaR
19. @KoSoVaR negative. I ended up sticking in :-\. I’m out at 50% loss, otherwise I’m staying long. 9:48 AM Jun 12th from web in reply to KoSoVaR
20. . @cpruette moreover, I don’t think we’ll see another sub-.30 opening 9:47 AM Jun 12th from Gwibber in reply to cpruette
21. . @cpruette my trick is that I’m long on $SPNG. I salute the shorts, but I’m in until .55 or greater 9:42 AM Jun 12th from Gwibber in reply to cpruette
22. . @cpruette I don’t see SPNG slowing down anytime soon. I took a position at .2399 and .281. I should have gone bigger at .2399 :-\ 9:42 AM Jun 12th from Gwibber in reply to cpruette
23. don’t hate me ’cause I’m makin’ money. hate me ’cause you’re too lazy to try it yourself 9:33 AM Jun 12th from Gwibber
24. new $SPNG position drops my sellout price to .55 to cover my student loans. please please please let it happen. 9:15 AM Jun 12th from Gwibber
25. Ugh. I should’ve put the money I put in $SYMX and $ONFI on $SPNG instead 9:09 AM Jun 12th from Gwibber
26. taking another position at 0.285 in $SPNG. I wish I would have done that yesterday at 0.24! 8:52 AM Jun 12th from Gwibber
27. @wallstreet1929 I saw that and retweeted it. I’m watching cautiously. 8:32 AM Jun 12th from Gwibber in reply to wallstreet1929
28. Excellent article on investing in $SPNG http://is.gd/ZTLT 8:21 AM Jun 12th from Gwibber
29. ♺ @shawnp0wers: In ~4.5 years, the aliens near Alpha Centauri will wonder why they can’t watch I Love Lucy on their analog brain implants… 7:56 AM Jun 12th from Gwibber
30. $SPNG at .61 is my goal. At that price, I can sell and pay off my student loans immediately, saving $300/mo for 20 years, plus $27k interest 7:53 AM Jun 12th from Gwibber
31. $ONFI what the hell? what the hell? what the hell? Probably going to dump it if it hits 50% loss 7:31 AM Jun 12th from Gwibber
32. seriously. who just sold $ONFI for .09? This stock is probably worth .25 if peoples’ analyses are correct. 7:04 AM Jun 12th from Gwibber
33. $SPNG is my hero, but I’m not blinded by the dough it’s making me. Cautiously proceeding, hopefully we’ll see $1 soon 9:55 AM Jun 12th from Gwibber
34. @_TheDean that’s very troubling…I think I might be setting a stop today… 9:39 AM Jun 12th from Gwibber in reply to _TheDean
35. Amagamated life and stock update for June 11, 2009: I’ve been incredibly busy these past six weeks or so s.. http://twurl.nl/gizlub 8:25 PM Jun 11th from twitterfeed
36. ♺ @liberty_76: Major PA Legislative Victory Scored! 3 privacy bills passed out of committee
    http://bit.ly/vLb3X 5:14 PM Jun 11th from Gwibber
37. @lionsharevc @marxiey what’s your rationale behind $IVOB? 5:00 PM Jun 11th from Gwibber in reply to marxiey
38. currently at 179.06% gain on $SPNG on all positions. REALLY kicked myself that I didn’t go all in last Monday at 0.039 4:59 PM Jun 11th from Gwibber

With any luck, SPNG will return to .30 and continue to climb. It’s a sound company with sound financials and great products. It might just take longer to hit my target of $0.55. However, I’m proceeding cautiously, and setting my stops along the way.