Jonathan Lebed grew up in Cedar Grove, New Jersey, a suburb of New York City. In 1997, His father, Greg, was working as a manager for Amtrak, a railroad company. His mother, Connie, was working as a secretary for a drug company.
Jonathan was eleven, and he was spending a lot of time watching baseball and professional wrestling on television. He was also spending a lot of time on the family computer and had even built a website about his favourite wrestler. Besides all that, Jonathan was starting to get interested in ‘stocks’ — shares of companies that can be bought and sold in the ‘stock market.’
His father had some stocks and Jonathan knew their names. When he got home from school he would sit and watch the stock ticker on TV. Sometimes, when he saw the name of one his father’s stocks, he would phone him at work to tell him the latest price.
Before long, Jonathan wanted to own stocks himself. On his twelfth birthday, he got $8000 from his parents, money they had put away for him when he was born. He asked his father to buy some stocks for him. He invested in America Online, an internet provider, even though his father said this was a mistake. In the next two weeks, the value of the stock rose quickly. Jonathan sold it and made a lot of money. He continued buying and selling, and in eighteen months his $8000 had turned into $28,000.
Jonathan had real skill as an investor. He learned a lot from TV and the internet. He learned how to get information about companies and how to use that information to decide which stocks to invest in.
He chose the companies he invested in by using three criteria. First, the company’s stock had to be ‘undervalued’. Second, it had to be a kind of company that was popular among investors. Finally, it had to be a company that investors were still not very interested in.
Jonathan decided whether a company’s stock was undervalued by looking at its financial reports to see how much money it was making and whether its profits were going up or down. He made his decision on the other two criteria based on what he learned from financial chat rooms and message boards on the internet.
In the chat rooms, investors ‘talk’ to each other about stocks. On the boards, they leave messages for each other to read. By spending most of his free time hanging out online, he learned a lot, and he used his knowledge to transform his original $8000 into $28,000. But while he was doing this, he got an idea about how he could make more money more quickly.
He realized that one of the reasons why the values of some stocks went up very quickly was that these stocks were being promoted online. He also realized that people were promoting their own stocks to push the price up and then selling the stocks and making a good profit. He decided to try this himself.