In a move that boggles my mind, AOL has launched Blogging Stocks, where bloggers will write about individual stocks. Further boggling is the fact that the bloggers are not only allowed to own the stocks they write about, they are encouraged to own them.

Are blogs becoming the new message boards?

I am having nightmares of the Yahoo stock message boards of the mid-nineties. Visions of all those people who don’t know a PE ratio from a bullfrog either bashing or praising a stock based solely on whether they are short or long.

Sure, there’s a code of ethics in place and I suspect that most of the bloggers will comply with it. But one thing you can count on is that some people, be they bloggers or commenters with a hundred aliases, will try to game the system. At best it will be a chaotic blend of legitimate attempts at writing, infighting and position talking.

Steve Rubel says Blogging Stocks will drag more companies into the blogosphere. I think that’s probably true at first. But once the inevitable chaos begins, companies will write off these blogs just as they wrote off message boards long ago.

To begin with, if I don’t take financial advice from some guy who cold calls me early in the morning, tries to sound familiar by calling me “Jon” (Kent is my middle name; my first name is Jonathan) and tells me how he wants to do me a favor by letting me pay him to tell me what stock to buy, why am I going to listen to someone I don’t know who is blogging about a stock they likely own?

This is such a bad idea, I can’t believe it’s really happening.

The Stalwart shares at least some of my concerns and says:

For one thing, people who are interested in investment stuff are really concerned with credibility. They may be willing to take advice from a guy that throws around chairs while blaring heavy-metal, but they want him to be a successful hedge fund manager. Looking over bloggingstocks, you’ll instantly see the credibility problem at work.

I am not saying that the stock market should be completely off-limits to bloggers. To the contrary, I have mentioned the market here once or twice. I read Henry Blodget every day. Fred Wilson (who isn’t all that impressed with Blogging Stocks, but thinks stocks and blogs are a “perfect fit“) mentions the market from time to time.

But a network specifically designed for and devoted to bloggers blogging and commenters commenting on individual stocks they likely own (or in the case of the commenters, may own or short) is a recipe for chaos.

In September 1999 I was quoted in Money Magazine about stock message boards. I said that I would absolutely not look to them for stock ideas or strategy and that I believed doing so was very risky. I feel the same way about stock blogs.

Some will undoubtedly argue that as long as the network blogs only about huge companies and stays away from the penny stocks, where most of the manipulation allegedly occurs, there is little or no danger of gaming the system. While I agree that a few people blogging and commenting about Google or Microsoft is not going to affect the stock price, I don’t see a benefit (other than another stab at the almighty ad dollar) that supports a step down this slippery slope.

And that’s just it. Like every other internet-related business venture we read about these days, this one is chasing the online advertising dollar that many think is both permanent and infinite.

Also problematic, of course, is that the AOL association will lead many to believe, rightly or wrongly, that this information is more credible than some post by some anonymous poster on a message board.

Maybe it will be, maybe it won’t. And that is the problem.

The combination of individual stocks and a blog network is, in my opinion, a train wreck waiting to happen.