NovaStar Collapses, In 'Saunders Rally'

In the past I've recounted the sad story of Novastar Financial (NFI), a subprime lender that was hyped by an anonymous Internet guru called "Bob O'Brien," who runs a stock market conspiracy website called "thesanitycheck.com."

"O'Brien" was identified by the New York Post some months ago as Phil Saunders, a former used medical equipment salesman in Irvine, California. It always struck me as weird why anyone with half a brain would take the advice of a former used medical equipment salesman on any subject unrelated to used medical equipment, if that.

Confirmation of that point came in abundance Thursday, as Novastar fell through the floor -- declining 55% -- on word that a bankruptcy filing was possible.

The stock began the year at just over $106, adjusted for a reverse split, and ended the day at $2.08.

In future years this will be known as a "Saunders rally."

In addition to mercilessly hyping this doggie stock on Internet message boards, and personally attacking critics of the company, Saunders founded a website devoted entirely to advancing the cause of Novastar. That site, and "thesanitycheck.com," pushed nutty "stock counterfeiting" conspiracy theories. Supposedly Novastar was a victim of nepharious market forces, and not its own lack of merit.

It's hard to feel much sympathy for people who buy swill pushed by stock promoters, particualrly anonymous ones, on the Internet.