Last week I was invited to give my opinion on the current state of affairs in the world of investments on a talk radio station in Philadelphia, 900AM WURD, during my buddy's Nick Taliaferro's show. The subject of Penny Stocks was brought up, by a caller.

Ironically I get asked about Penny Stock pretty often. Everytime I hear the term "Penny Stocks" I want to pull my hair out. Too bad, it is already gone. My usual response which is, "Penny Stocks are subjected to manipulation, which happens quite often and could lead to an investor losing all their money." Short and sweet, right? Well, that was the PC version. However, the thoughts that were really running loudly through this mind of mine was -"Penny Stocks are the SPAWNS of the DEVIL! PURE EVIL! Like Rosemary's Baby".

A bit extreme?
Well, I have been told I can be a bit overzealous.

To clarify, a penny stock is any stock that is below $5 a share(not all of them trade for a penny). Penny Stocks are pretty unregulated and their owners don't usually offer much information about the overall business operations. While it is possible to make a fortune with Penny Stocks, you might have a better chance to hit the Powerball Lottery.

Ironically this week, The Wall Street Journal(WSJ) reported about an SEC investigation of Cynk Techology Corp. "A social network that reports zero assets, no revenue, and one employee soared to a $6 billion valuation. Translation: It owns nothing. It makes no money, but it is some how worth $6Billion.

On June 17th Cynk Tech Corp stock was trading for a meager $.06, by July 9th the stock surged to $14.71. That's a 24,000 % return! Allegedly, the reason for the massive raise in stock price was due to aggressive Twitter promotions. If you would have made an $1000 investment last month it would have netted you a cool $24,000,000.... But since the SEC halted trading on that stock you would have never seen that much profit and if you were lucky enough to sell out early, there is a high probablity that you would lose those profits, because the SEC would deem them illegal or "ill gotten gains" and kindly help themselves to a cash withdrawal from your bank account.

Unforunately, this is not an isolated event in the world of penny stocks. A few years ago, the famous hip hop artist, actor and businessman "50 Cent", invested into a company called "H&H Imports" which was a penny stock that was losing money. "50 Cent", brought about 30 million shares, the price he brought them at is a little unclear, but it was below $.10. He then Twitted about the company to his 3.8 Million Twitter followers and the stocked jumped to $.39. 50 cent profited about $8.7million bucks and a week later the H&H imports stock price fell off a cliff, never to be talked about again(My stock market nerdiness doesnt count).

Can you see the trend here?
Twitter and companies that are not profitable. Bad combination.
If you come across that combination I would advise you to run for the hills, quickly.

Have you ever thought about investing in Penny Stocks before?