Bonus FeaturesUnderstanding Penny Stocks by Peter Leeds

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Past Penny Stock Trends

In the quest for easy money, society has continually put themselves on the line.

Despite the fact that they get burned almost all of the time, people seem to purposefully forget past lessons. Perhaps they are just that forgetful, but I doubt it. More likely they are willing to take the gamble for the fun of it, or are afraid of missing the boat that others are piling onto.

The dot-com bubble which burst in the first quarter of the year 2000 was a prime example. Many penny stocks were exploding in price simply because they were penny stocks.

Here is a prime example of how penny stocks were spiking in the first three months of 2000.

spiking penny stocks

In a four month period at the end of 1999 and the beginning of 2000, I personally realized over a 100% gain in my total trading portfolio. On January 4, 2000, I published a report to subscribers of entitled "NASDAQ Warning Signs" to warn them of the coming collapse. I must admit that very few people listened to my comments.

However, I certainly don't blame them. With every top-notch analyst and brokerage house screaming about the next amazing IPO, and even your grandmother calling you up to tell you her latest hot penny stock tip, how could you, or anyone else, sit out of the frenzy?

Now, the dot-com bubble was not contained to penny stocks, and in general actually applied more to mid and large-cap stocks. Here is a famous example, Nortel, which sank with the rest of the market when the bubble burst, and never recovered.

nortel became a penny stock

However, the trickle down effect was even more evident in penny stock shares, and the bursting of the bubble just as calamitous.

It was not long until the bubble burst, but it was still two months later than I had expected.

Had a lesson been learned? I say no. Perhaps in the short-term people will avoid getting burned again in the same way, but years from now I would not be at all surprised to see a repeat of the fiasco.

Will it all happen again?