e.Digital Corporation (fka EDIG)

[Cassandra]

CONSIDER THE SOURCE, PART III
June 20, 2000

The Message Is The Medium

Back in the 1960's Marshall McLuhan wrote that "the medium is the message." These days, it seems the situation has been reversed.

Internet message boards and chat rooms have become "society's front porch." Neighbors, from around the globe, log on and exchange ideas, opinions and information. In one sense, these chatters have found a modern version of the old country store, or its urban counterpart, the coffeehouse. With one significant difference. When you share a cup of coffee, a coke or a beer with a neighbor you get a chance to look them in the eye. You know right away whether you're talking to a man, a woman or a child, and you get an opportunity to observe their demeanor and assess their credibility. Do they look you straight in the eye when they talk, or do they avert your glance?

The Internet affords no such safety net. Most members elect to remain anonymous and use pseudonyms when posting messages. They may choose to identify themselves as male, female, an e-commerce executive or a dog groomer - and you can never be certain whether they are telling the truth. If you are going to play the message board game you simply have to take the other participants at face value. Of course, so must they.

Internet Message Boards can be seductive. At their best they provide valuable insights and information. At their worst, however, they can serve as a vehicle for deception and stock scams. The problem, of course, is distinguishing between the two.

When they started out, message boards attracted mostly tech-stock fans who gathered to swap ideas and information in a friendly collegial fashion. Today, the communities are populated by a broad range of professional and amateur investors, whose passions sometimes tend to run high. So high in fact, that the vigorous debates among chatters can become quite personal, even vicious at times. That's understandable. After all, there is money on the line.

If they want to follow the fast paced dialogue on the boards, investors need to talk the talk. Members have developed their own lingo - a hi-tech version of "street talk." They communicate with a unique style and cadence. Proponents of a company are sometimes called "boosters" or "pumpers." Opponents are often referred to as "bashers" or tools of the "shorts." Market makers are simply "mm" and investors are urged to perform their own "dd", due diligence.


Community Affairs

Not all message board communities are alike. Web sites like Yahoo! Finance; Raging Bull, Silicon Investor, Motley Fool and AOL have much in common, but there are important differences. For example, while membership in most of these communities is free, Silicon Investor charges a monthly fee. There is also an important distinction in the categories of messages permitted by each host site. For instance, Raging Bull permits message board to be established for Over The Counter Bulletin Board stocks, while Yahoo Finance, and Motley Fool do not.

With millions of messages being posted, investors are left with a troubling dilemma - how do they separate valuable information from specious rumors, outright misrepresentations and self-serving scams? Investors can begin by recognizing some of the most obvious ploys and pitfalls.

1. Does a member suddenly appear on the board and repeatedly post messages encouraging others to buy a particular company's stock? Does that messenger disappear just as suddenly, only to be replaced soon after by one or more other fans of the company who pick up the same theme? Such passion may signify a "pumper" - someone who is trying to drive the stock price higher. These all may be signs that the company, or one of its significant stockholders, is looking to pump up the price of the stock.

2. Is someone predicting that the company will soon be releasing important news that could result in soaring stock prices? Have they posted rumors of these new business developments, even though no news is coming directly from the company? Investors should try to verify these developments independently by contacting the company, its public relations firm, an established investment analyst, or even a broker they know and trust.

3. Does the message writer try to discredit everyone who questions the company's prospects? Is every critic of the company labeled a "basher" or a tool of the "shorts?" Why discourage honest debate? Investors should ask why anyone would seek to silence a dialogue. One answer seems obvious - someone does not want anyone to interfere with a plan or scheme to promote the company.

4. Does someone claiming to be a company insider "reveal" secret plans that will enhance the value of the company? Remember, it is unlawful to trade on inside information. Do you really believe someone who has that information will "leak" it to a group of strangers? Or is it more likely that the "news" is really fiction, crafted to induce unsuspecting readers to jump on the company's bandwagon - usually while the perpetrators of the fraud are leaping off.

5. Does someone try to reassure other board members by confiding that he or she (you can never really tell which) just spoke with the company's president, or some other key employee [RP?], and was told that news would be released imminently? Keep this in mind: it is not common practice for companies to make selective disclosures of important business developments to random inquiring shareholders.

6. Does the poster have a hidden agenda? As you can imagine, this will always be hard to determine. Only the vigor and passion of the postings are likely to betray the member's commitment to a position.

The actual identity and objective of a poster may be impossible to discover. Take this example from the NetSol International Message Board on Raging Bull. A member who identified himself only as "3diesels" posted over 100 messages, consistently lauding the company, predicting positive developments and encouraging investors to buy, buy, buy. As reporters subsequently discovered, "3diesels" was actually an individual named Jonathan Iseson who, when he wasn't busy posting messages on Raging Bull, acted as manager of the Blue Water Partners hedge fund. What possible connection did Blue Water have to NetSol? The Blue Water hedge fund, as it turns out, acquired over 24% of the NetSol stock, much of it while "3diesels" was busy touting the company.

Would investors have wanted to know that "3diesels" wore these different hats? That certainly would have been a useful piece of information for anyone deciding how much weight to give to the "3diesels" posts.


Whom Can You Trust?

There is no foolproof formula for distinguishing fact from fiction on the message boards. How can investors protect themselves? We offer a few thoughts:

1. Never base your decision to buy a stock solely on information gathered on the message boards. Do your own research. Review the company's public filings if they are available. If possible, speak directly to a representative of the company. If that information is not available, or if company contacts prove elusive, you might be well-advised to resist the temptation of message board boosters.

2. Ask the message poster to provide credentials. Then check out those credentials if possible. In practice, most posters cherish their anonymity, so they will not respond to requests for personal information. Try anyway. You never know what you may turn up.

3. Try to contact the poster by e-mail. Some members reveal their e-mail addresses. When you e-mail that member is your message returned as "undeliverable?" If so, it may signify that the member does not really want to communicate and has posted an inaccurate e-mail address.

4. Ask specific questions. If a poster claims to have insight or information, ask for details. Then ask how they obtained those details.

5. Be skeptical. Message Boards are cluttered with "noise," rumors, misrepresentations, irrelevant banter - and some good facts and information. Try to ignore the noise. As for the misinformation, we can only relate our own recent experiences. In recent months we have seen references to Stock Patrol that claimed we (i) short stocks (Read our disclaimer. No one associated with Stock Patrol is permitted to buy, sell or short the stocks featured in our articles); (ii) pay individuals to promote our publication on message boards (We don't); (iii) gather information on visitors to our site and then utilize that data to invade the privacy of our readers (We have not and do not intend to); and (iv) are a "consumer protection agency" (We appreciate this one but we are not - although we do hope that "consumers" find our articles informative and helpful).

Investors are left with a seemingly daunting task. An overwhelming amount of information is now available - just turn on your computer. But how do you separate the wheat from the chaff?

Start by considering the source.

EOM (That's message board slang for "end of message" - or in this case, end of story.).

http://www.stockpatrol.com/buyer/articles/considersource3.html