For some time now I have been referring to a phenomenon known as Pink Sheet Gravity that only exists on the lower exchanges. Roughly defined, pink sheet gravity is the market force that pulls down the share prices of the public companies listed on the OTC:BB and the Pink Sheets. It is likely the cumulative effect of several conditions varying from dilution of the company stock, the social environment of the lower exchanges, and the mysterious (but commonly blamed scapegoat) naked shorting process .
Pink Sheet Gravity is the most influential operational distinction between the lower exchanges and the upper exchanges (NYSE, NASDAQ, AMEX, etc). From a historical standpoint, the stock market (upper exchanges) has maintained a steadily growing upward momentum over the long run. Were one to look at a comparable study at the lower exchanges, we would see a trend very much in the opposite direction.
It is for this reason that investing on the lower exchanges has always been an avoided practice. Like putting coins in the slot machines of several casinos, diversifying a portfolio on the lower exchanges leaves the odds of long-term success low in your favor. Yet with meticulous research, comprehension of the lower exchanges, and self-control, choosing the companies that can succeed in beating the house can be reduced to an informal “science”. Just as well-known poker players annually find their ways back to the final tournament table, a penny stock investor who knows the game is likewise able to overcome the Pink Sheet Gravity through the undervalued companies primed for take-off.
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