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Caveat Emptor, Buyer Beware
A book dedicated to abused investors and forgotten shareholders
Caveat Emptor or Buyer Beware You may call yourself an investor, shareholder, trader, customer, check writer or stock picker. Whatever your title of choice, at the end of the day it is you, the buyer, writing the check to buy a security or other financial instrument. I have sold many of you many shares of stock for many, many years as both a stockbroker and investment banker. And now I have written this book for you, the stock buyer. In these pages, I have encapsulated almost every conceivable warning sign, trick of the trade, rule of the road, all of your rights as a shareholder, answers to questions you were either too embarrassed to ask or answers you feared to hear. Nowhere else can you get the inside look into the secret world of what happens to your money once it enters into the uncompromising abyss known as the stock market. Regardless of whether you are paying ridiculously close attention to your account(s) or leave that to your stock broker, financial advisor, wealth manager, CPA or other professional, it is time to uncover the absolute truth and go behind the veil created by Wall Street. It’s what we used to call lifting up the skirt. I will unfurl the mythological den of inequity disguised as the wall between Wall Street and you, and we’ll peek over the Chinese Wall between trading and retail. Becoming aware is the first step in protecting your financial interests. You know what you know, you know what you suspect, you know what you comprehend. But you do not know what you do not know. This is where I come in. I am here to offer you new hope and to do it quickly. There are ways of choosing the right investments. During my career on the street I have trained and managed hundreds of brokers and stock
traders. I had thousands of active retail clients whose goal was to make money on Wall Street. Caveat Emptor is about you managing your money correctly. Although our past president couldn’t get it right on the Street, you can. Remember these words: screw me once, shame on you. Screw me twice, shame on me. Let me help make you shameless. Let me help you drop your guard so you can ask any question you like, no matter how stupid it may sound. Let me teach you how to deal with risk, how to avoid stupid mistakes. My specialty is low priced emerging growth companies, penny stocks, and microcap stocks. Although I know the ropes, you do not need me to show you how to buy preferred stocks that pay a nice dividend or how to write covered calls on the most voluminous NYSE stocks that have options. I will focus on the largest stock market in the world: the Over the Counter (OTC) US stock market, which includes NASDAQ, the Bulletin Board, the OTCQX, the OTCQB and the Pink Sheets. No matter what you think you know or understand about the OTC, I will open new doors, clear up old myths, and shed light on the heretofore unknown world of behind-the-scenes activities that have cost you money. We all know you have lost money in the market, but do you really know why? Can you think beyond the fact that it is expected and happens to everyone? Are you ready to stop asking yourself, “Why me? Why do I keep making the same mistakes?” How well do you keep track of the details? Do you know what time the US stock market opens? Do you know what time it closes? What is after-hours trading? Can you buy a stock on the bid and sell it on the offer? Can you short penny stocks? I look forward to answering these and tons of other questions. It is an ardent ambition of mine to hold seminars for clients that have been
burned and scarred in the stock market and not only show them their mistakes but teach them how to avoid such mistakes in the future. I don’t mean guaranteeing profits; that’s impossible. But just as sure as I am writing these words, there is a heck of lot to know before traipsing into the market. I am not saying it’s easy to make money, but rather that it is easy to lose money. This is about hedging your bets and using common sense to protect yourself from continuous losses, staggering losses, and also about teaching you a way to make some money in the market without cowering in fear of the losses. But first you must know yourself. Are you disciplined? Are you able to take a loss when necessary? Can you control your greed? Who is Shelly Kraft? Oh that’s me. Here is some early background information on me. I began my career on Wall Street in April, 1984, when I was 34 years old, just three years before the crash of October 19, 1987. I walked onto Broad and Wall Streets thinking I would manage my own money and perhaps handle some clients as a registered representative stockbroker with my Series 7 & 63 licenses. During those early days on Wall Street, I didn’t know the difference between IBM and a penny stock. After I passed my tests and became registered, my comedic friend and boss Mike Leeds gave me his promised list of leads to call, which was a telephone book, along with a two-line hold-button telephone and a sheet metal Steelcase desk with a phony formica top. There I was, fresh meat, ready to learn on the job. Sharing an 8x10 office with two other guys, I began my career as a stockbroker. I had no Quotron machine, no screens of any kind to check stocks; just a month
old Pink Sheets stock quote pages, about an inch and a half thick, that I shared with my office mates. Computers, cell phones, CNBC and cable TV had not yet been invented. The first stock I recommended was an IPO house stock that the firm had just taken public. This house stock was Nastech Pharmaceutical, NSTK, a company that had the patents on the nasal administration of drugs such as progesterone, vitamin B, testosterone, and 14 others. The deal went public at $.01 per unit. The unit consisted of 1 common share, an A warrant exercisable at $.03, and a B warrant exercisable at $.05. The IPO units began trading on the Pink Sheets at $.01 to $.03. I began selling the common at $.03 with a $.015 spread, a big spread. I sold millions upon millions of shares of Nastech Pharmaceutical to hundreds upon hundreds of new clients and to clients I already knew from business, friends, associates, and family. After all, $20 grand bought a bunch of stock and the only risk was that the investor could lose all $20 grand. The common stock steadily crept up to $.04 and in a few months it reached $.10. Quite a big move for a stock, any stock, but it is much harder for a $1 stock to go to $10 than it is for a stock to go from $.01 to $.10. Then one day Nastech Pharmaceutical appeared on the front page of the New York Times science section and the stock was off to the races. By this time I had bought more than 50 million shares, about 10% of the common stock float, for my clients, and some for myself, and one of the biggest winners of my entire career was born. Nastech Pharmaceutical unit went from $.01 to $1.84 and still trades today, 27 years later. Can you imagine that was the first stock of my stockbrokerage career? Obviously I was smitten! Major beginner’s luck. I sold stock for my clients and they in turn bought new homes, new
cars, and new boats or went on huge vacations. They hosted lavish weddings and big Bar Mitzvahs, which of course I was invited to attend. They paid in full for their children’s college educations. Let’s just say I had hit the jackpot. My own personal net worth and my business soared alongside the rising Nastech stock and the growing IPO and OTC markets. Even Dr. Tepper, a NY shrink, insisted on taking me to dinner and he bought. I have to thank a friend of mine, Marc Tow, of Newport Beach, California. He and I have been friends for a number of years, dating back to my days on Wall Street. Marc has always been a voice of reason in my ear. He calls me, sometimes with a purpose and sometimes for no reason at all, just to see how I am doing. He is an attorney, author, speaker and entrepreneur who I think only practiced law to pay bills. I remember one day in particular when Marc and I went to lunch in Orange County and he says to me: Come on. We’re going to Office Depot to get you materials befitting the person you should be. He picked out a loose leaf notebook, five reams of paper, and proceeded to explain how I needed to take notes, every day, every hour, in every meeting, at every lunch, in company, and when alone. He retaught me how to always jot down my ideas in this trusted book. He insisted on paying at the register; it was his gift to me. I still use that same book today and have given this same gift to several others along the way. So thanks, Marc, for making me more organized than I ever dreamed I could be. See, that’s just the type of person Marc is. He is also brilliant. Marc is Mensa, with an IQ so high that any conversation we have has the earmarks of anything from world change to business acumen 1090 to
looking up who’s in trouble on SEC.gov. His thinking is so advanced it needs to be bottled. Imagine having this man as an influence? He now knows that when his days are long gone and he is seemingly forgotten, I will have immortalized him in this book. Because it’s been his influence, guidance and notes that have helped shape this subject matter into a better read for you, the investor. Jackie Ernst is my editor. She is a Craig’s List special find of mine and boy did I get lucky with her. She is part Max Ernst and Jackie Robinson, although that’s completely my interpretation. I have known many editors, writers, proofreaders, playwrights and even script doctors and for me it comes down to effort, time put in, constructive criticism, quick response and understanding my drift. Her gentle push and comments to draw out my best were welcomed and for her overall care and tenacity I give thanks to Jackie an up and coming “great editor.” Her bio follows. Thanks Jackie! Jackie Ernst is a Queens born and bred fiction writer, editor, and teacher. She has studied literature and writing in NYC, Maine and Ireland, and has taught creative writing to homeless youth in Los Angeles. Jackie’s fiction has been published in the Hamilton Stone Review, and recognized as a finalist in the 2010 SLS Unified Literary Contest. She is currently working on her first novel.
Table of Contents
Preface .................................................................................................. xii Chapter 1 Are You an Investor? ............................................................................ 1 Chapter 2 Born to Trade ....................................................................................... 4 Chapter 3 Series 7 and Stock Education .............................................................. 10 Chapter 4 What Are Your Financial Goals? ......................................................... 13 Chapter 5 Are You Suffering from Financial Battered Wife Syndrome? .............. 14 Chapter 6 Can I Make Up for the Money I Lost? ................................................. 16 Chapter 7 I Just Won’t Take It Anymore ............................................................. 19 Chapter 8 Commissions ...................................................................................... 20
Chapter 9 Is My Broker Someone I Can Trust? ................................................... 27 Chapter 10 Should I Sell What I Have and Start Over? .......................................... 30 Chapter 11 Is it Possible to Learn How to Trade? ................................................. 37 Chapter 12 Shorting in the Market is Okay with Me! ........................................... 45 Chapter 13 Who Are You Going to Call? Shortbusters! ......................................... 70 Chapter 14 Establishing Buy/Sell Parameters ....................................................... 75 Chapter 15 Buying Special Situations .................................................................... 79 Chapter 16 How Much Time Does It Take to Manage My Own Account? ............ 81 Chapter 17 The New Dilemma: Email Blasting ...................................................... 84
Chapter 18 No Earnings? Give Good News ......................................................... 110 Chapter 19 CEOs ................................................................................................. 149 Chapter 20 Interpretation of Press Releases ...................................................... 153 Chapter 21 Management Compensation, Cash and Stock Disclosure ................. 167 Chapter 22 Penny Stocks, Pink OTCQX, Pink OTCQB, NASDAQ, Pink Sheets, MicroCaps ............................................................................................... 170 Chapter 23 Filings: Fully Reporting Companies 13D, 14D, 10Q, 10K, 8K, 15c211, 144, Form 3, Form 4, Form 5 and the Manning Rule ..................... 173 Chapter 24 FINRA, Rule FD, Sarbanes Oxley, SEC.GOV ....................................... 177 Chapter 25 Private Placement, PIPES, Rights Offerings, Warrants and Direct Investment .................................................................................... 181
Chapter 26 Wall Street Disasters ........................................................................ 189 Chapter 27 Protect and Defend Your Money ...................................................... 202 Chapter 28 When Do I Need a Lawyer? .............................................................. 208 Chapter 29 What Should I Do with My Money? ................................................. 210 Chapter 30 I Can Do This! ................................................................................... 214 Chapter 31 The Commercial You Have All Been Waiting For .............................. 215 Glossary of Terms ............................................................................... 219
Preface This handbook is dedicated to you the investors and shareholders of the world, both large and small. You know who you are. You, who have disregarded warnings of total loss. You, who do not read the small print. You, who have been led into an investment without consulting with an expert, yeah you who want to believe that your stockbroker does his job for your best interests. You who put your money where your mouths are and you, who sacrifice your retirement savings, vacations and college education annuities to take a shot on an idea which may or may not even be your own. I feel for you. You, who buy common stock on a long shot possibility. You, who pay retail at any price not to miss the burning hot opportunity. You, who can be sold by an aggressive stockbroker over the telephone. You, who are trying to make up for all of your previous losses on one trade. You, who do not know when to sell even when you have a profit and you, who have made so many bad choices you now ask your wives, husbands or significant others what they think, finally! This book is dedicated to you, who are at your wits’ ends, and you who have financially tapped yourselves out. You who have had enough, whose only potential solution is to resort to an arbitration or class action lawsuit against anyone in order to get something back, at best pennies on the dollar, after many years of aggravation, just to save face. How many times does the federal government need to announce in the press that your GM stock is worthless? Or even worse, you line up to buy the new GM IPO even though the chairman resigned a week before going public. Talk about chasing a trade. What course of action is left for you as a shareholder of Bear Stearns stock, if you want to recover
any money as a result of the Bear Stearns failure and the ultimate acquisition by JP Morgan Chase for $2 dollars a share? This is GM and Bear Stearns for goodness sake, not some pump and dump scandal of the day. How many thousands of penny stocks and OTC companies went belly up with you holding the bag? That’s where the expression “enough bad stocks to wallpaper the bathroom” comes from.
Who better than me? When I set out to shed light on some of the more despicable actions occurring on a daily basis in stock promotion, I realized that I am perhaps the most qualified person on the planet to do so. The SEC, the Justice Department, and the CID of the IRS sued me in the mid 1990’s for stock fraud and manipulation and won as I took a one count felony plea and cooperated with the Federal Government. The Wall Street Journal referred to me as the “Mastermind” in the Systems of Excellence, or SEXI, case, which was the landmark case in the very first occurrence of using the Internet for promoting stocks. I was an investment banker at M.H. Meyerson Securities and worked directly for Marty Meyerson, chairman. SEXI was a $.20 cent stock trading by appointment until a reverse merger of ICMX took place. The post-merger company traded under the symbol of SEXI. The stock rose from $.20 cents to $5.20 in the span of 6 months while the shares outstanding increased from 18 million to 68 million, as the CEO of the company, Charles Huttoe, issued restricted certificates without legend, making them free trading shares, to himself, to me, to his lawyers, private placement investors, investor relations and stock promoters
from around the globe. His ill-gotten gains were used to pay his investment bankers, salaries, professionals etc., putting us all in the soup. I watched my successful Wall Street career end. My life has never been the same. I wrote a check for $3.2 Million to settle with the SEC. I cooperated as best I could and ultimately received a sentence of 6 months home confinement and 3 years probation. My testimony resulted in four individuals being incarcerated for as much as 46 months in Federal prison. Accordingly, I would consider me an expert from soup to nuts in the nano-cap, micro-cap world of stocks, after all the regulatory authorities do. I can spot a fraud a mile away. Touting stocks is not new. Pumping and dumping is all too common, while clever fraudsters devise ways of disguising their actions but not their intentions. Similar to the Leonardo DiCaprio character, Frank Abignal, in the movie “Catch me if you can”, I can detect and identify stock fraud and manipulation when I see it. I was a stockbroker from 1984 until 1998 in the middle of Wall Street’s Penny Stock boom. I have written this book with the intent to share my experiences with you, the reader, so you can learn from me, an expert in the field. My disclosures and advice are priceless, whether you abide by my suggestions or not. This information is from the inside looking out, while most of you are on the outside looking in. Reading this book should be educational as you navigate through the murky waters of email blasts and modern day stock promotion and pump and dump schemes.
No thank you to me is necessary, as writing this book was a cathartic experience. With that said, my wish and hope is to prevent you from incurring tragic losses from the abusive individuals perpetuating crimes at this very moment!
Chapter 1: Are You an Investor? I am going to start here. I didn’t ask if you were a smart investor, although just being an investor begs the question: have you made more money than you have lost? I guess if you have made more money than you’ve lost, you must be a smart investor. Well, not necessarily. Lacking confidence in yourself, you think it’s better that you are lucky rather than smart, and that idea sometimes bails you out of your self doubt. Have you ever asked yourself how much money you have left on the table in your life by selling too soon? Have you made the habit of being a Monday morning quarterback and playing the second guessing game of, “Darn, why didn’t I sell when I could have, with a profit or before I lost everything I invested? I wish I could learn when I should sell.” How many times have you asked, “Why do I need my broker when I can lose money all by myself?” Another common question: “My friend told me to buy a stock and I did; now what? When do I sell? How high will it go? Should I buy more when it goes up? That’s what I heard about doing, that thing called cost averaging up.” Or maybe you are wondering, “How do I cut my losses before I lose everything?” I have heard all of these combat stories and more too often, more than I care to mention. How about you? What’s your story? I am not sure that there is a longwinded right answer or a wrong answer to all of this but I do know one thing: cutting losses and taking profits is always right when trading, but not necessarily when investing, such as when you have a plan to hang onto your buy while building a portfolio because you are a believer. Depending on your age, wealth, time commitment, job status, tax bracket, financial plan, monthly
expenses, and assets, being an investor is hard work. It requires a serious degree of discipline and trust in yourself, in your parameters, and most of all, trust in your own decisions. Do your research and make a commitment for all the right reasons. And here’s a hint: learn from your experiences. What did you do that was right, so you can repeat it? Or what have you done wrong, and how can you avoid repeating the mistake? It may not be just luck! Not at all. The stock market has huge sex appeal. It boasts money and power and that draws people in. All of the stories published about Wall Street, whether truth or fiction, are like fish stories. They get larger as time goes on and the stories are repeated. These stories generally stem from big money windfalls on Wall Street. See, most people think winning on Wall Street is like winning the lottery. They think you take a shot and if you’re, lucky you make a bunch of money. I just hope the first time you buy a stock that you don’t make too much money because if you do, you may think it’s easy and that you can do it every time. Like in gambling, beginners luck can create a monster and help amass tremendous losses over a lifetime. Although I despise the programs that you can buy to simulate having an account and practice buying and selling, at least you can use them to learn the basics. When I was a stockbroker on Wall Street, I would interview my clients and figure out their intentions, what they hoped for and what they expected of me. I adopted the practice that I was taught: the client and stockbroker relationship is based on mutual trust with clearly established goals. The discussion of these goals was imperative. I treated the relationship like an attorney treats his client relationships; our discussions were private and privileged. Younger clients with many
years of earning ahead of them were candidates to take on more risk than a client whose earning years were more behind than ahead of them. In the latter cases, risk aversion and protection of capital was more of the game plan. I would still recommend some risk, just gauge it as a percentage of all money invested in the market, usually 20% of the total. My specialty on the street, however, was risk. I was a penny stock broker, which meant I handled everybody’s favorite: IPO’s, or new issues. Of course, once you decide whether you are an investor or a trader (an investor buys and holds and/or writes calls, and a trader buys and sells or sells and then buys), there are infinite variations and choices to explore.
As their only child. skills and financial knowledge. I wanted to get my hands deep in the green. And when school let out in June. And I loved it. Don’t get me wrong. from Red Sun Sportswear on Canal Street in Manhattan. My parents were very involved in my life. I would have learned earlier but the handle on the manual machine was too hard for me to move. abilities. and Dad was an industrial sewing machine mechanic. work would really heat up. While in school my classmates struggled with long division. They cared. I could use an adding machine by the time I was five. fix sewing machines. Every day I was nagged about doing my homework. My mother and father owned their own small businesses. or I was just a set of hands passing the vegetables and the bread at the table. I went to work with dad.Chapter 2: Born to Trade In many ways. I loved to tell my father that he was getting too deep in his account receivables and that he should collect money from his customers sooner. with business and money in my DNA. and then go to camp with the other kids in August. I was evaluating balance sheets and financial statements with the folks. Mom was an accountant/bookkeeper. He used to tell a funny story about one of his customers. I would spend the first half of my summer doing the inventory for my mother’s blouse company. I was literally born into the stock market. I had to be up to par on my accounting terms. too. hand Jimmy a bill and Jimmy would turn around from his desk and write on the wall under my dad’s name the date and the amount. Jimmy Ying. He would go to Jimmy’s factory. But dinner in our house was different. This would go on for a month and then Jimmy would add up 4 . the talk was all numbers. At the table. and how long I had spent practicing the piano. engineer and inventor.
Had America listened to your philosophy the massive losses of 5 . her investment wisdom would have been considered quite conservative but then again. One month the bill was amounting to a lot of money. She used to buy stocks like Telecredit and Con Edison. and her buying. and capital appreciation and trading. At 14 years old I was spending long hours pondering and studying the stock market. Jimmy of course made good. no risk. My dad went to see Jimmy and fix a few more machines and when he was finished he went in to hand Jimmy the bill only to find that Jimmy had painted his office and all of his bills had been painted over. where I was into making money fast with more risk. She was a big influence on my affinity for investing. hold them for their return. In today’s market. but that story was a classic in the Kraft household. and her ability to grow money fascinated me. she would be invested safely and building a nest egg. Mom was conservative in her investments to a fault. just like the mavericks in the Wall Street Journal. Mom. I hear you still in my ear today. her not much selling. my interest in all of this endeared me to my mother. She was into dividends and interest. This is where she and I kind of differed. Of course. largely due to my mother. and sell for capital gain. I guess my mother was the first investor I ever met. collect dividends and interest.the amounts on the wall and write a check and pay off the amount. always trying to impart upon me her simple investor mantra: buy high-quality companies at low prices. She loved collecting interest and dividends back in the days when people actually had flush savings accounts. only sell if the returns drop below your estimates and projections. although I was Doctor Kraft from birth.
Even the Brooklyn Eagle was fairly easy to get my hands on. The Tribune. losing some. My hobbies were collecting baseball cards and comic books. My mother was so sharp. I was so young. As a youngster. I never considered myself an investor because I had no formal finance education. and selling at a profit was a great motivation for me. Her adherence to this analysis was unquestionably what differed between us. The numbers seemed to speak to her.2008-2009 would have been avoided and many old line familiar Wall Street firms would still be around today. All I knew was what I read in the papers and magazines. or anything that even remotely resembled Cramer or Motley Fool. While I was full of excitement and exuberance about companies that had new products coming to market and how sales were growing. Fox Business. She would make money slowly and steadily while I loved taking risks and taking shots. But then I started a scrap book of business and finance stories that I found exciting. It was easy to get the Daily News. It was almost too much information for me to digest in one gulp. Many an article was historic and I used to believe that every writer was a true genius. or The New York Times. She was a professional bookkeeper. I used to wonder where her smarts came from. only the numbers mattered. But the Wall Street Journal was the best and not every news stand had it. In fact. Winning some. thank you Charles Dow for creating the Wall Street Journal in 1889 because as a kid. that newspaper was my Bible. her eyes were so focused on the numbers that I knew to her. I didn’t realize that these business stories were having such an incredible impact on my thinking. 6 . Bloomberg. Back then there certainly wasn’t any CNBC. CNN.
he invented the industrial diamond chip sharpening stone to sharpen the carbide. My father’s interest in medicine and pharmaceuticals was beyond the ordinary. I used to read Popular Mechanics after him and I would love to quiz him about which widgets and gimmicks and unusual inventions he was interested in. Then. including weekends. He was as familiar with pharmaceuticals as any druggist or pharmacist. just as a side note. I always imagined that dad was sitting on the toilet one morning reading Mechanics Illustrated when he thought of that one. He read two publications religiously: Popular Mechanics and the Physicians’ Desk Reference. He was even smart enough to sell his inventions to Union Carbide and the Carborundum Corporation. As a hobby. and was in the USN reserves for both the Korean and Vietnam Wars.My father was more the Renaissance man. out of necessity. He loved working with his hands as much as he loved to invest time and money into creating new devices and patenting them. He tinkered in the basement for hours every day. until one day he invented the first carbide knife for sewing machines. He once invented a new toilet paper holder which made it much easier to change the roll of toilet paper. Oh and by the way. I read up on those public companies at the time and made sure my father was engaging in smart business maneuvering. He had attended Dartmouth University in New Hampshire and ran track before enlisting. he would study the characteristics and side effects of different drugs and then devote himself to creating cocktails with this information. and more familiar than most doctors. My father had served as a Chief Pharmacist Mate in the United States Navy through WWll. so he was no dummy. known as the PDR. When my mother was diagnosed with 7 .
my father entered her into the El Dopa experimental drug treatment program. I was just a kid. but it was 1965 and SYN 8 . but I give my father credit for making her time on earth longer and more comfortable. He researched drugs himself to treat the side effects of the El Dopa until he found drugs that corrected her side effects from the prescribed experimental drugs.725. Patent Number(s) 2. Colton. My mom passed away on April 29.028.Parkinson’s disease in 1968. I could never have braved it if my mother criticized my decision. how about Mr. Frank B. I read magazines. Plus. although I didn’t call it that then. I know you are all waiting with bated breath to know what I finally opted to buy so here goes. I realized that I could potentially lose all my Bar Mitzvah money. the inventor of Estradiene Compounds Oral Contraceptives. Why. How surreal. and 2. you ask. It ultimately required the right answer to the question of whether or not the stock I wanted to buy had the huge upside potential necessary to make me a lot of money. To me this decision required research. I would have been crushed.691. 1982. I asked her for a week to do my due diligence. I bought a company called Syntex. and price comparison. which in those days was very real money. After all. The symbol was SYN NYSE. especially ones that had information on companies creating new technologies and developing new drugs. I remember it like it was yesterday.389? That’s right. comparative thinking. but my final decision was Syntex Corporation. Now that I have told you all about my upbringing. you won’t be surprised that when my mother asked me what I wanted to do with my Bar Mitzvah money. The birth control pill. I pounded the books. for me this was no small decision.
In fact. 9 . I had intended to hold SYN and not sell until it had a huge big payday. I would have spent weeks lamenting about how much I could have made. and at the end of the day I knew one thing: I had become an investor. and mulling over how much money I had left on the table. I look back on this experience in life as a serious education process. I had put all my eggs in one basket. Syntex did incredibly well. Not that I was so disciplined back then. I am still working on that.owned the manufacturing right to the birth control pill. Of course mom was right all along. I was on my way to becoming a very wealthy kid. at least in my mind. and was also the first stock I owned that had a two-for-one stock split. but it really worked out. I would have sold it with a nominal profit and moaned about how well it did after I sold it. but not necessarily a smart one. so in all actuality I was not at all a good investor yet. I held the stock until it surpassed all of my expectations. Had I just traded the stock.
The rest of the 10 . let’s get into what is on the Series 7 test.Chapter 3: Series 7 and Stock Education Before you begin to invest. it is wise to get yourself a stockbroker’s education. It is not simply knowing when to buy and when to sell but how to do it. and is required to know each and every new regulation as it becomes a rule or law. Knowing how to trade is knowing the mechanics of the market. but margin and options sank him like the Titanic. Of course there is a separate set of questions and an entire section on insider trading. The test also forces the candidate to understand the math involved in calculating margin. Just for giggles. I knew one guy. Nicest guy in the world. This isn’t the learner’s permit test at the DMV. because they ask tough questions about what is allowed and what is illegal. The test includes virtually every element of the stock market and demonstrates the interrelationship of the different components for investing or trading. This demands memorization. Bud Rosenblatt. Each candidate for the broker’s license is then tested on the specifics of regulatory rules and regulations. if you don’t know the material you are done. and are the sections responsible for most of the multiple-time test takers’ laments. The test taker faces a series of problems that he must complete in order to actually understand the process of how options are used. and certainly before you begin to trade. The best course to take before investing with the intent to trade is to study for the Series 7 stockbroker’s test. The Series 7 tests a candidate on his ability to calculate and his knowledge of how to trade options. who had to take the test seven or eight times. Margin and options are the toughest parts of the test for most novices.
which does not pertain to our use of the information. You are likely realizing about now that your education can directly correspond to your profit and loss in the stock market.test is stuff like what a broker can say. the embarrassment. If they pass. what he can advertise. a fee you are charged each time you buy or sell. and a new component that tests candidates on how they should and should not use social networks. including commissions and ticket charges. the greater your chance of making real money. Each program 11 . Shouldn’t you possess the same education? Try and get your hands on the Series 7 study materials. the humiliation. you should at least be educated. and this money is called commission. In other words. including buy/sell trade by trade. win or lose. Save your money. So whether you figure out that you are an investor or that you are a trader or both. it is the knowledge that qualifies stock brokers and financial advisors to take your money. they receive a license and are registered with FINRA so they can begin gaining real world knowledge of the stock market through the best teachers: practice and experience. or worse. Look for a program that has a running portfolio accounting system. You cannot learn correctly without including all the charges. If you think you will learn by doing it yourself. The more you know. In every trade you will ever do. pack up and go home now. It’s like the cowboy who sits down at the blackjack table and splits tens. profit and loss. and running total cost average of each position. Mastering the fundamentals that are on the Series 7 test is tantamount to a complete stock broker education. if you think you will learn from your broker. remember that the guy or gal doing it for you makes money regardless if you do or not.
If you learn well enough.has its own competitive edge over another. Some discount brokers have simulated trading accounts for you to learn on. 12 . your knowledge will aid you when you trade.
but keeping the premiums and dividends. keep dreaming. Always make sure that the leader. and Writing calls each quarter without stocks being called. has a personal stake in the business and possesses the abilities. Give me a B-quality guy and an A-quality company and there could be a problem. I will repeatedly remind you to dig deeper and deeper before plowing your money into a situation. 13 . Selling calls every quarter of your financial life on the same stock. the CEO. the man or woman in charge. passion and vision the market requires.Chapter 4: What Are Your Financial Goals? Making money with no risk. ride the quality of a great leader. Let’s get down to reality. I always ride the jockey. Give me an A-quality guy with a B-quality company and I am good with that. Each time. Getting a large piece of every hot new issue imaginable. This is a great wish list. Buying low and selling high. Increasing your interest rate on fixed income. Taking ordinary income as a long-term capital gain. Maintaining a permanent put against your financial advisor and his bright ideas. If you want to meet those goals. know who you are working with. In theory.
had you fully invested in funds (maybe his firm’s funds). that loss is as legitimate as the guy who loses a million or more. Your money in the 14 . it hurts. After all. flying to the Mexican Riviera for long weekends.000 in the market and you lose it thanks to the advice of some dummy broker.A. high interest mortgage paper.Chapter 5: Are You Suffering from Financial Battered Wife Syndrome? You may not even know you are suffering financial battered wife syndrome. because you would be in a completely different category of battered if that were the case. Your guy and your account went into limbo overnight.. Here’s what I mean: If you have as little as $10. if not wealthy. Unknowingly. account at say Lehman Brothers. Really. and wondering if you should go for the Lamborghini or the Ferrari. but once I describe this condition. it’s all relative. suddenly you had nowhere to turn for advice. F. it has nothing to do with how much money you lose because on Wall Street. Let’s just say you had a few million bucks in the market in what you and your broker believed were safe instruments. We won’t even suggest you had any money with Bernie Madoff. You would be something like pummeled to unrecognizable bits. You were sleeping well in your five-bedroom house. This sucks. you may find that you fit the definition. and an assortment of other really “safe” product. it’s painful and it makes you feel battered. you may have had a healthy. what could ever happen to the House of Lehman or The Bear? But once the hammer started to pound on your accounts. Your guy. or Bear Stearns. enjoying your beach house on holidays. All in all it can happen and happen repeatedly.
” I am engrossed in news and press releases and how they affect stock price and liquidity. So let’s remedy your battered financial wife syndrome with our own personal prescription for your success. you can take some shots to win.market should not be the money you need to live on. You will witness some of my personal fun as you read on. start doing more. In fact. especially when I track some of these newsletter email blasters. MicroCap. The more years you have left to earn a living. Wall Street and Mr. and doing more on your own. Once you learn the ropes. Let’s have several wins in a row. I created my own stock index called “stock news index. the more risks you can take. Get into the research world. What a cure for what ails you! 15 . in certain circles I am known as Mr. right? Therefore. This weekend I am doing comparative analytical research on stocks in the ETF small-cap Russell funds.
” Or. but there is some hidden truth in that joke. I have lost money in the stock market and I was told that you could make me a millionaire. I can even see getting market direction wrong.” Okay I can see guessing wrong on interest rates. “Maybe the next broker can fix my account. 16 . Just send me 2 million dollars! This is not really a true story. “Maybe if I switch firms and philosophy I can outperform the market and make up for some stupid mistakes and losses in cold hard cash. I was referred to you by so and so because you made so and so a bunch of money. just an old joke from the street. This is where my experience as a stock broker really comes in handy. even if those losses were beyond my control. Mr. Every investor has made the mistake at least once of hoping. Let me start off with a good. what do I have to do to get started with you? It’s simple. Is that true? Yes that it was absolutely true. The conversation went something like this: Hi are you Shelly Kraft? Yes I am. But throwing money at the stock market is like doubling your bet when you’re losing at the blackjack table: it is insane. One day I got a telephone call from a referral. I can make you a millionaire. Well. true story.Chapter 6: Can I Make Up for the Money I Lost? You never will. Kraft.
I hate to be picky and I am certainly not recommending you take your guy to arbitration (unless he did not listen to you and did not obey your directions and did his own thing with your money without your permission every step of the way. Should you sell or should you buy? Or should you buy more and then sell? Or sell short. how much more? C. How do you feel about doing that? Ask yourself these questions: A.000 plus fees). You need to be able to analyze what went wrong first. And of course if you self-directed your account without advice or direction from a professional then you only have yourself to… I was going to say blame. unless your guy had full discretion in writing over your account. that’s a different story).00 ($5. How does additional buying affect your cost average? 17 . the pros? Remember: track record of the driver is key when going Greyhound. What went wrong? Did you have control over it? Or did you lose control? After all.Let’s go back a few steps before we move forward. If you want more. the ball was in your court the whole time. I would rather couch it a different way. rather than waste time playing the blame game. There are points in every transaction at which you have choices.000 shares of WXYZ at $1. but that may be too harsh. Let’s say you buy 5. Stock moves up and you want more shares. or even sell your long position and additionally sell short? Or is it time to use the Greyhound method of investing by leaving the driving to them. Do you feel you missed it when it was cheaper? B. Hopefully you don’t incur any serious accidents or asleep-at-the-wheel driver mistakes.
a cool wild ride from research you did on your own. discretionary income is not play money. but you are young enough to continue to earn more money so a loss here won’t kill you. Where is your comfort level? G. 18 . Last year you earned $250.000 compensation and you have about $100. married with one kid and one on the way. Start believing in yourself. Would you rather trade the stock rather than accumulate as an investor? H. So long as you understand going in that you can lose every penny you invest.000 discretionary income available. To me. let’s ride this bad boy! Or there is always Greyhound… Let’s assume you are 35 years old. How does additional buying affect your ability to sell due to illiquidity of liquidating a larger position than originally purchased? E. It’s time to use your age and your discretionary income to take some risks in the hope of some big fat returns. Is the volume increasing? I. Is there any news? Now we’re getting into it.D. This is fun isn’t it? Tracking your money and watching an idea of yours permeate itself into a big money payoff. Is there something else you want to buy to create diversification in your portfolio? F. Yeah.
One day all is well in your life and the next day. It’s gone. This is critical. the money is lost. from licking your wounds to your lack of trust in general. your lifestyle is completely different. From self doubt to having your confidence shaken all night long. I devoted an entire chapter to the battered wife syndrome because the end result is loss. where the TV executive yelled out from high above the street crowd: “I am mad as hell and I won’t take it anymore!” Well. Make it a part of your new mantra. after all hell broke loose in the stock market and your account. losses have a way of causing personality changes. Yikes. 19 . Your leisure time has shriveled. Your spending habits have been altered and have probably shrunk. but we have all been there). And the disrespect accorded you during the process of clarifying how the losses occurred is both disheartening and psychologically damaging. Your dependability for having the necessary money for your kids. I empathize with all of the BS you have had to endure and all of the frustrations that have impacted your life like a wisdom tooth or an inflamed infected root canal (oh gross. either at your own hand or by paid professionals. Now deal with the loss. Keep a diary and make notes to yourself. Write them down and never forget them.Chapter 7: I Just Won’t Take It Anymore Remember the movie Network. Learn from all your mistakes. your spouse and your own future is totally demolished. I feel your pain. The bottom line is education.
the lobby is amazing.Chapter 8: Commissions Ladies and gentleman. Now let’s compare this opulence to say. It is harder and harder to trade on 1/8ths. On a losing trade you just want to scream. You feel you have just entered the actual Taj Mahal. Most brokers split 50/50 with their firm. Even if the broker or discount brokerage firm charges the minimum. These offices were built with our commissions. Or after we realized we had a sports coach as a stockbroker. Here is a good comparison: When you walk into a casino in Las Vegas. it’s not about winning or losing it’s about how you play the game! Well. with expensive furnishings from chandeliers to ridiculous oriental rugs and gorgeous lighting. losses at the gaming tables to commissions. this may be a wishful thinking and a very liberal sports coach’s greatest expression and legacy. Needless to say. I am comparing casinos to Wall Street. In other words. You see. as we used to say before regulators forced the market to give up fractions for decimals. Let me repeat myself: win or lose. or Caesars Palace. It is less hurtful on the winning trade but has an effect on when you make your moves. all in incredible opulence. or the Luxor. it still stings. the house always wins. House wins no matter what! 20 . I probably helped pay for some of these chandeliers myself. but it certainly wasn’t what we wanted to hear when we signed up with our stockbroker to make money in the market. these casinos weren’t built to lose money. Goldman Sachs’ offices or JP Morgan’s or Merrill’s main office. Series 7 boy is collecting a commish! His firm is collecting ticket charges and who knows what else.
but you are still charged the minimum ticket charges. and also on how much you earned if it all worked out.Let’s suppose the stock market operated like this: when the stockbroker was right and his stock pick worked out so that you gained a significant profit of say 30% to 40%. and all bets are off. Can you imagine the efficiency within the market if salesman-stockbrokers only earned when they were right? This earth shattering premise will never fly. then your stockbroker could charge you a 10% commission (more than currently allowable) when he sold the stock. Here is my next question as your investor advocate (by the way. he receives no commission (unheard of). there is no commission until the stock is sold at a set minimum profit. in fact I probably over use it: “Earning money should be based on you eat what you kill. you should just find the least expensive commission at a discount online trading firm and go with that. it would get shot down quickly. In that case. But figuratively speaking. In fact. I like the sound of that – investor advocate): What is your stockbroker’s batting average? How many times has your broker been right with his 21 . In this second scenario. Seems like a win-win situation right? Let me tell you this . I believe a stockbroker should earn on what he recommends when it is successful. it’s a different story. There is an expression that I use. Call me prehistoric. and no commission at all on the buy side if it’s your stockbroker’s or the firm’s idea and it loses.” I know. When it’s your idea and choice and it loses. it’s gross when taken literally. but one that we would love to see. It will probably remain until the end of time that the stockbroker will earn at your expense. whether right or wrong. But if his stock pick breaks even or loses money.that is just a fantasy.
Asking the rep is always worthwhile if you have spare time. customer complaints and legal history. so long as you are winning more than you are losing? You still walk away with a much fatter wallet then you started with. in all areas of life. I quote Eric: “Okay Ray. can’t you just win once in awhile?” Follow me here. even if he is your wife’s cousin or your best friend’s wife. 22 . don’t you? Sure. and I understand that there are difficulties to deal with. Who says you should trust him blindly and be led where he wants to lead you? I think you need to know more. Eric was discussing the recent outrageous bill we received from one of our law firms. until he or she proves that they pick more winners than losers. and even overpay. even with your current professionals. Do your own research away from the broker to see what the rest of the Street thinks. Any broker can get hot really quick. But if you’re going to charge us this much. don’t you want a lawyer that wins more than he loses? Just get his choices and write them down and watch them before acting on them. to find out the registered representative’s license standing. After all. you can go to FINRA and SEC websites. Most brokers worth their weight will base decisions on research. so make sure you get the same research as they get from their firm. but he can also cool off just as quickly.ideas out of all the times that he’s traded? You want to know as much as you can about your stockbroker. But no where will you find any information about his or her track record. I understand that you bill by the hour. Ask about track record always. My partner Eric and I were on a call with one of our SEC attorneys. or even Google. I remember a funny story about winning and losing. Why not be willing to pay the going rate.
too. he is the middle man between you and your money. Firstly. He is the middle man between you and the professional who will be investing your funds. He. Secondly. He isn’t selling you his ideas or his firm’s recommendations. This increases the firm’s ability to invest in more assets. but rather turning over your assets to his so-called expert. By them gathering your money into their firm. would have a share in both the fees and the returns if included in a yearend bonus. an asset manager. enabling the firm to have access to more cash from lending sources like the FED window or clearing firm. In other words.Another major warning when you are choosing your broker: make sure he or she is not an asset gatherer. Brokers do this asset gathering at the urging of their managers. the broker is buying house product. Asset gatherers work incredibly hard to convince you to use their firm’s principal analyst or fund manager to manage your account. So would the fund manager. and so on and so forth. Measuring gathered assets is a valuable gauge for firms that pay bonuses each quarter. a favorite technique of every brokerage firm at every level. And don’t forget the broker who turned you over to the fund manager in the first place. Securities firm management loves asset gathering above every other broker recommendation for a number of reasons. size and tier. Yearend bonuses are very big business and have an impact on how each client of the brokerage firm is treated. You would then have a share in the expert’s gains or losses. Every day the broker comes in and does the same thing: he finds assets to 23 . the broker is less of a risk to the firm in that he is not using his own ideas and risking customer dissatisfaction. and is therefore avoiding every firm’s worst nightmare: a customer complaint. the firm’s assets grow.
Commissions are a variable cost depending on quantity of shares bought or sold. look for signs that the good times are soon ending. it may be time to sell them!) I hope that you are making so much money in the market that you couldn’t care less about paying commissions. and charge for the time that you are in them. For those of you throwing in the towel. It reminds me of certain country tariffs when traveling overseas . huh? Some successful asset gatherers work fewer and fewer hours as they make more money from your gathered assets. Pretty important stuff. and additionally due to exchange fees. 24 . as those assets are deployed. You will. and ticket charges. your assets for instance. ask all of the right questions before you open the account. ETFs are quite hot these days. and certainly more intriguing than the mutual funds that charge fees going in. Even the $7 trades have additional costs attached.they get you coming and going. I have been in power lunch meetings where guys from Hollywood brag about how much money they have in ETFs. Unlike tipping the blackjack dealer for giving you blackjack even though you’re down ten grand. pick a good Exchange Traded Fund (ETF) and pump your money into the ETF. clearing firm’s fees. going out. of course.bring into the firm. (Now that I have said this. So before you lose your mind paying commissions because things are so good. Every registered representative or financial advisor checks his assets under management amount before he drinks his first cup of coffee. and when you receive the paperwork you will read the small print and clarify all the costs per trade for the future.
The next day I liquidated my biggest positions and ran like hell to the sidelines. because the government needs to pay for the healthcare bill and some other ill conceived expenses. and when he told me that he was watching his stocks. but there are signs of topping out. Right before one market crash. No glory here but I was right. Sometimes there are indicators of a topped-out market. I am twittering like crazy about “window dressing. Well. it clearly meant the top of the market to me. even GM is trying to pay the government back as quickly as possible. Stockbrokers and investment bankers are raking in big commissions in the fourth quarter and making up for the first three miserable quarters. and that’s no joke. cash in hand. Like retail businesses. very big. I asked him what his handheld device was for. All the managed money is pumping its cash into the market because it would be a sin for them not to be fully invested at a time like this. This may end up being a pretty good year for the Street 25 . And they better. in the second half of the year.Nero fiddled while Rome was burning. folks were on cruises in the Aegean Sea while Madoff was making off with their money. it went down significantly. the Street loves and depends on a great fourth quarter. and I locked in profits and watched the market correct (I hate word correct). I am writing this chapter in mid-November. Although the Obama administration is antibonuses and anti-high payouts. Now they are crying in their champagne rather than beers. The market is screaming higher up.” The Dow is up 1500 points and so are commissions. I remember a UPS driver delivering me an overnight envelope. 2009. He had a UPS handheld computer in one hand and in his other hand he had a market watching device.
that’s why there are more than 600.” Stockbrokers have job security in that they earn commissions. after all is said and done. So in summary. 26 . raise profits and make earnings look better. It does say something about the stock market that public companies get a higher share price reward by firing employees and participating in the creation of a modern day record for the number of unemployed.000 registered representatives earning commissions in these fine United States of America.commission-wise. being a broker is a great business. Except that in the US market. Cut jobs. this means real discounts on “Black Friday. not salaries. where retail consumer spending makes up 2/3 of the economy.
it is true as well as funny as heck. Trust Company of America or. i. You expect no surprises. I would say that I want to trust. Money Manager is having a few good quarters in a row and building up a firm trust between the two of you. after all. This is a dangerous trap to fall into. My cynical repartee is not from my being naïve. financial trust. but I am going to clean it up a bit: How do you say screw you in Yiddish? Trust me! I know. Trust in your spouse. Okay. as they say in Brooklyn: Trust Dis! How can one word in our society cost us so much money? Maybe the founding fathers of our country had it right: In G-D we trust.. smart planning. ladies and gentlemen. deep concern. Trust can be substituted for laziness. I love that one too. and that I believe trust is something built up over time. Another old retail joke: In G-d we trust. First National Trust Company. that I need to trust. and assume you will always be told the absolute truth. must be wisely conferred. too. Trust in your family and close friends. It is founded on experience. All others pay cash. so Mr. he is having a few 27 . Making important decisions on your portfolio carries obligation. The reality is that you do have to have some degree of trust with someone managing your money. I enjoy the way the word “trust” ends up in the names of well known brands: Bankers Trust. trust is just a five letter word and that is it! The best definition I have ever heard of the word trust comes from an old joke and it goes like this. You begin to rely on your money manager’s judgment and pawn the critical calls on what to do on his advice because.Chapter 9: Is My Broker Someone I Can Trust? In the world of Wall Street. and sound judgment. Unfortunately.e. But that kind of trust.
What should I do? I don’t want to piss him off. But you were used to more conversation. and not because you have stop limit trades which trade automatically – this is a terrible sign. Your manager’s financial upswing relaxed you. if Mr. you guess. He picks up on this and feeds your jovial mood. It is that crowning moment when you realize that your control. You know what I am talking about. Time goes by and here comes your monthly statement. Now how do you feel? I would get nervous. You made money. This is called discretionary authority. He did something that was unauthorized! But it worked out. The problem is that you awarded your trust too easily. but it worked to my best interest. do I? Should I be confrontational? Maybe he knows better than me. Still no call. He is busy telling you that he saved you. too. He must be helping his other clients. or that it could have 28 .” You get confused. Money Manager. You begin to think. your trust and your absolute value system. He has taken the liberty to do something without your knowledge and this lack of discussion is to me the greatest breach of trust possible. Money Manager continues to make trades but your discussions start to fade. and put your antennae at ease. and not because he tried to call you first and couldn’t get you. “I know he did something without my approval. you’re winning on Wall Street. when you regularly did what I call visiting with your money. If you are not aware. Your comfort zone was satisfied when you knew every maneuver of your every penny. you fell into the trap. have been completely violated. You have to recognize the critical point in this relationship when you start to turn over the reins and control to Mr.real good quarters. But then the frequency of the calls rapidly diminishes and the closeness of your rapport begins to wane. made you comfortable right away.
been worse. That means the company has sales and revenues and should at least have good top line results. Sometimes it hurts to be right. if you do not want to have as much control as I am talking about. At the end of all of this addition and multiplication and guesswork. when you walk up to the roulette table. 29 . Your guess is probably as good as the guy doing it for you. too. Project it out over a year’s time and then multiply that number by the amount of families that do the same thing. If you do. you. it is still almost 50-50! Just watch out for 0 and 00. don’t. This is about you and your money. Go and find the right someone to do it for you. let’s look at Kraft. I used to tell investors to open their fridge and look at the names of the companies on their shelves. Money Manager. or it was lucky you had him to take care of such matters. and countless other products manufactured by Kraft. and not necessarily original ones. Kraft products include cheeses from cream cheese to American slices. Chances are. trust your thinking. The final answer in the category of trust really comes down to whether or not you trust yourself. red or black. can call yourself a financial analyst. That said. Remember. caramels. Add up the cost of these products and calculate how often you buy them. Anything here beginning to sound familiar to you? No need to tell me I am right. So conjure up some of your own ideas. As an example. too. Go to your other cabinets and you’ll find the marshmallows. be it you or Mr. you’ll find the same names on a whole lot of other shelves. and once you have that number calculated multiply that number by the amount of countries that sell Kraft products. but to me it is certainly better to know where you stand in the market than to leave everything in the hands of someone you think you can trust.
formal and informal. blogs. I have known clubs and groups. that would meet up every so often just to discuss what they should do and have done in the stock market. so the client had more money to put in the market and thus had a fighting chance to get back in the game. and they can still help shed some light on your rather nasty situation. after doing all your selling and paying commissions. Are they short term or long term capital gains or losses? Add up interest earned and paid. when I inherited accounts. and just great places to seek advice and meet with like-minded investors. But they are still out there.Chapter 10: Should I Sell What I Have and Start Over? Suppose I just say yes? Where does that leave you? Does selling everything and starting over leave you with a profit or with a loss? Do you need the loss? Don’t laugh! One thing is for sure. after you sell. dividends. you could have some money left. and can be incredibly useful and helpful. I always reduced the sell side sales commissions to clean up the account to very little or almost nothing. when a new method of communication develops that is useful and helpful. Many are viral. Another factor involved in starting over is knowing your profits and losses. the unscrupulous manage to set a new standard for barbaric stock market behavior. If not. These groups have multiplied over the years and have morphed into information gathering and sharing websites. warrants that moved into the 30 . why bother unless you need the losses? As a broker. venture capital clubs. One method of finding an answer to this difficult question is to seek out advice from others who have been through it all before. The phenomenon is spreading and as is usually the case.
margin fees. equaling $10. exercising in the money warrants. etc. This is real basic and this formula gets more complicated as you determine the time value of money (the cost of the money you used to purchase the stock. you also have to sell the stock… 1) $10. benefitting from previous losses that can carry forward. You buy 1000 shares of ABCD at $10.360 3) $10. even legal advice. Total cost is $10. first determine your break-even price. So what is your break-even price? Hint: remember. seeing an $11 stock price on ABCD would thrill you. The commission is $300. you think you just made 31 . ticket charges are $60. you will determine what options are available to you.money. commissions paid. phantom income from limited partnerships. On a share by share basis.00. On every investment you make. the CPA. ticket charges. For many of you.360. the share price break-even point is $10.72.000 2) $10. There are ways to prepare for these kinds of disasters.). Once you calculate your financial position. such as: taking losses to offset gains. To do this you must add all of your costs including principal cost(s). and real estate valuation changes.720 And #3 is a winner! How much is $720 divided by 1000 shares? Seventytwo cents is the answer. Your professional.000. For instance: You buy a $10 stock called ABCD. should be advising you in this area. and locking in a profit rather than paying taxes on phantom income. But don’t surprise him in the month of April when he is overwhelmed with the madness of tax season. and anything else imaginable connected to that purchase.
All set with the 40% profit. I knew there would be no happiness. and I could never reach him whenever I did call. to the $11 total. Good. If you had placed a good until cancelled order at $15. or $4. there were a few positions sitting in the account which had dwindled down to a percentage of what they were when they started. There was no 32 .40 with a 40% profit. you would know that if the stock went to $16 per share. Add a profit margin of 40%.” to “I want to sue the broker and the firm because the broker churned my account. Not that you would ever sell it after only making a $1000 bucks. including buy and sell commissions and ticket charges.40 unless you are double jointed and very limber. “I forgot I even had this account. At what point you buy or sell has to do with whether or not your established goal for selling or buying has been met.40. In many cases. Look in the mirror and ask yourself if a 40% profit is satisfactory to you.$1000 bucks.” and “I never knew what my broker was doing in the account to begin with.40 and a 40% profit above your cost.40. At $15. “I just gave up. Don’t leave the mirror until you are absolutely sure… Okay.40 you have a profit of $4.” I heard confessions such as. From. Because if the stock goes to $20 you cannot kick your own ass for selling at $15. What really went wrong in the first place that put you in this position of starting over? As a stockbroker. I inherited customer accounts of brokers that left and were no longer with the firm. For instance: You bought ABCD at $10 and the total costs “all in” are $1 per share. I heard every combat story from each person on each account about what had happened. you sold at $15.” I had to listen and I wanted to let them vent their frustrations. But where would you be happy selling? Aha! Now we’re getting into the nitty gritty! This is where you need to think in percentages.
After all. Many clients had been abused. Sometimes you can’t do much more than sell at whatever bid price is out there. and start over. but stocks that trade under a penny are seriously scrutinized by regulators. somebody is making money. It hurts. Just get out when you can for as much as you can and gather all of your cash into one account before you start buying anything anywhere. 33 . Obviously. If you are stuck in stocks that don’t trade. Often times a rebuilt account can become a happy account. but if the stock goes to zero. you are done with being able to sell it all. But regardless of market conditions.doubt in my mind that they would trust me right off the bat. take the losses in the account. There is a world of stocks out there that trade below a penny. they let me take a shot at growing their funds. Each time they had a choice of taking the money or letting me have a chance to make them some money. All I wanted to do was sell what I could. And I had a plan for how to invest the leftover money: invest it in new IPOs. Sometimes I would give these beaten up accounts their first profitable trades. the stocks in these accounts were purchased for these accounts by another broker and that broker was no longer at the firm. clearing firms and broker dealers. and you know you should sell and start over. things have changed in the market and IPOs are much harder to find nowadays. get as much cash in the account as I could. it may be easier said than done. or worse. neglected. churned. or have very little volume and no liquidity. The clients rarely wanted the money back. The OTC markets are known to be illiquid when compared with the NYSE or American or the NASDAQ.
or that he purposely wanted to leave you behind. Your only option is to ask. 2. Don’t be insulted if he didn’t mention that he was leaving his firm to you. Jones is no longer with the firm. 3. “What happened to Jones?” And all the new guy can say is. that you were a pain in his ass. Well. I need to know you more and get an understanding of what you are trying to accomplish within this account (this is the try to get more money under management). you inherited Smith. But I have X amount of years of experience and I can do a much better job for you than Jones did.One more story comes to mind which could happen to you unexpectedly. 34 . My name is Smith. But do know that his non-disclosure means that you were someone he didn’t trust.I know this like I know the sun will rise in the morning). and Mr.A. I just inherited your account. So you call in to visit and you get the following: “Hi. Let’s sell everything and start over (yikes). Your broker decides to one day leave his firm. that your account was too small and meaningless. Smith?” Here are a few things he will tell you: 1. let’s look over the account and see what’s going on.” So you demand. “What do you recommend I do with the account Mr. “Sorry I have no idea.” Gulp. now what to do? Jones is gone. I am your new contact. your new F. Do you have time right now? (He will recommend selling something and then buying something else .
5. Truth is he probably got a major bonus check to come over to the new firm that includes extra benefits like health insurance. no one will tell you where he went. 3. a parking spot. is when he or his assistant calls you to move to another firm with him. The only way you will find out quickly. He will volunteer to do a free assessment of your account and get back to you. Here come the questions: Do you have accounts elsewhere on the Street? Where do you bank? Do you own your own business? Kids in college? Do you have a financial planner? How much money do you have in the market? Does your wife have an account with this firm? Is there a joint account? (All of these questions are directed at getting more of your business. etc. Just sign the papers and we will handle the rest because your account will transfer no problem. He will set up a time to call you. not out of concern for your wellbeing). better deals. I switched firms to take advantage of their better research. and not something your broker would ever reveal to you. better syndicates. no question about it. It’s clear that once your broker checks out and leaves the firm. executive bathroom usage. Give me a break… 35 . assuming you care. but very important to the broker. Let’s open the new account now! 2. Such benefits to you are ridiculous.4. They will tell you: 1. IPOs. a paid-for assistant.
Remember money under management? Smith has been given the opportunity to keep your account at the firm based on his current production (as a reward for high production) and his persuasive skill sets. The larger the account is in terms of assets and commissions paid per annum. and keep both accounts active. or take it over yourself. Or use both of them. your account definitely means something to the firm it is now with.So here’re the choices: use Jones (the devil you know) or use Smith (the devil you don’t know). All exiting broker accounts are redistributed based on two criteria: the size of the remaining broker’s books (production of commissions and assets) and the size of your account. the bigger the broker calling you to remain at the firm. because this is how the game is played. Or just move to a third broker. Underlying everything I have explained. So grin and bear it. 36 .
It took me years just to understand the nuances and tricks that the professional traders use every day on the OTC market. They are worlds apart and even the rules are different. I examined and signed off on an average of 1000 trading tickets every single day the stock market was open. Let me share some basics. The middle is called the spread. each with their own level three machine. but the real issue is finding the right teacher. It is generally understood that the bid price is where you sell. Retail deals with clients. and traders deal with other traders. The high bid and low offer prices are known as the inside market. and the ask price is where you buy. Some of these tricks and tactics can be useful to you when controlling and self-directing your own account(s).Chapter 11: Is it Possible to Learn How to Trade? Trading stocks can be learned. I had 13 OTC stock traders. and a head trader who knew every trick in the book. Many of the nuances used by professional traders have been adopted by others such as private equity investors. At my firm. money managers and day traders. There are two worlds in the stock market: retail and trading. if I don’t share these tricks with you. We traded 300 OTC stocks with millions of dollars in the trading account. Believe me. Emanuel and Company. Knowing the difference between bid and ask is a great place to start. Trading starts with taking stock of how much knowledge you already have and how much money you want to put at risk. I learned them during my career on Wall Street. you will never know them and you will also have no clue what is going on 37 . I am referring to professional traders on Wall Street making markets in OTC stocks. and are still being used today more and more.
and size takes priority. and size takes priority. 1. You must have real-time time and sales or your entry prices will be off. and the truth is. Education is the key. 6. Stocks can be bought on the bid. 5. cash available. in the middle. 7. bar none! 4. even his own trader. In the introduction earlier. like can you sell on the offering price and buy on the bid? Looking in from the outside provides little or no insight. Your stockbroker has no idea about what I am telling you because retail and trading are as far apart as North and South Korea. Every retail broker thinks he is getting screwed by a trader. trades on and 38 . You need to completely by-pass the retail broker and try and eliminate the middle man. In order to prosper as a trader. he probably is. best accomplished electronically. 2. Stocks can be sold on the offer. And lack of knowledge ultimately means loss of money.around you. getting your trade done quickly (execution) and knowing it (confirmed) are key. Trading is a profit center in every firm. but getting the view from the inside looking out is another story. you need good execution and fast reporting. You need to spend on top equipment and trader software that updates positions. I asked you certain questions. 3. cash changes. in the middle. In other words.
changes in positions. One of my tweets was: “I bet shoppers found a shortage of lipstick in the retail stores during the holiday season. which creates additional opportunities to buy stock if covering a short position. and for the last week I had been tweeting on twitter that undoubtedly the Dow Jones is being window-dressed while yearend numbers are calculated.their designation. 2009. That’s because the market always has sellers whose reasons for selling range from profit-taking to shorting to being a dumper. All the money managers and hedge fund managers have been out buying lipstick so they can put lipstick on the pigs in their portfolios. Finding a buyer requires finding cash that is ready to be deployed. A Christmas Story: It’s Christmas Day. In general. Long is easier to do because shorting requires a few extra steps and as they say. is often hard to do for reasons ranging from no cash available. with the intention of buying it back. margin. outstanding shorts. Only fools don’t have the tools! So don’t say you can do it better without proving it to yourself first. to no interest in adding to an existing position. and derivatives. Strategic buyers wait and pick their spots to buy on weakness. buying stock is much easier than selling. Buyers are also able to buy if a short is being put on. So selling overhang needs buyers. or with the intention to sell (go short). your plan is to buy (go long). So between stock overhang and shorts. but you cannot always find buyers for a stock. you can always buy a stock. Putting on a position can be either short or long. Reaching a buyer. new or prior involved. or the price will drop until lower priced and finally a buyer surfaces.” Although putting lipstick on the pigs is an 39 . as a trader.
I also tweeted about cost averaging a short position up. You go in and buy another 1000 shares of ABCD @ $2. so therefore you intend to buy more.50. Every fund manager is judged by his final numbers in the fourth quarter. when the managers start re-directing their assets away from the Dow Jones 30 stocks and liquidate their positions for cash to cover new buys and potential redemptions. This accumulation will turn really ugly in the first quarter. The stock goes up.00 per share. To the money managers. and you buy another 1000 shares of ABCD @ $3. Let’s start with what cost averaging is.00. You still like the company. the fourth quarter is the spending quarter.00 per share. Sometimes this requires selling in the third quarter and having cash ready for the fourth quarter. especially as a trader. but is most meaningful when the “herd” buys in and they all start acquiring the same stocks.30 stocks is like putting lipstick on the index and it will certainly have an effect on the Dow Jones average. going into the market and buying the Dow Jones DJIA.expression used on the Street. This concept of cost averaging is very important to your portfolio.00 per share. promoting “the trend is your friend” mentality. Now you own 2000 shares of ABCD at an average cost of $1. This idea applies to all levels of investors. The money managers have been going to cash or sitting on cash just for this opportunity. The stock continues upward. You buy ABCD at $1. To keep it simple: 40 . because they cannot have cash under-deployed in the fund in the fourth quarter. You are long 1000 shares @ $1. They use the available cash to follow the trend.
you own 3000 shares. Now here is what you do not do: Never ever! This is an example of cost averaging down. What may have begun as a stock you wanted to trade may end as a stock you want to accumulate.00. you may have hit on something that will make you money. but as the price moves up and you like the news and volume. As we calculate the cash value we multiply the 3. Anything from an analyst report to a short covering can make a stock go up in price. which equals a $2.00 per share.00 per share. Never feel like you missed buying it simply because you did not buy more shares at $1.First trade: 1000 ABCD @$1. 41 .000 shares times $. we have to assume the bid is $2. You see.00 per share. We will soon touch on when to sell and how to establish sell price targets.00 Second trade: 1000 ABCD @$2.25 profit. but for now relish in having done something very right.75. and it last traded at $2.75. or as an investor. By paying $3.00 The average cost on 3000 shares of ABCD is $2. each time you buy the stock. We have all done it at least once. or because there is expectation of good news. It could move up because there is good news. this is precisely how you should accumulate a position. average cost is $2.000 and you have an average cost of $2. Not necessarily 1000 shares at a time. You invested $6.000 shares by $ .00 Third trade: 1000 ABCD @$3. This is called cost averaging up.00. it has moved up in price. Multiply 3. As a trader.75. Remember.75 and you are sitting on $2250 profit.
When you compare ABCD and WXYZ. for whatever reasons. so you go in and buy another 1000 shares of WXYZ @$2. YOU NEVER COST AVERAGE DOWN A LONG POSITION. The stock moves down but you feel that the selling pressure is wrong or the stock is oversold (you must be a genius) and you still like it. ABCD is going up. the news is good.00 1000 shares of WXYZ@$1.00 per share. and obviously there are others buyers besides you or you wouldn’t have paid higher. even at the lower price.00 per share. But ask yourself this simple question: Which position would you rather have? And why? Momentum is the key to the answer. starting with the trend is your friend. This method of trading has killed more Jews than Hitler and more roaches than Raid! This is wrong in every sense of the market. Let’s also compare the reality of how the stocks traded.00 The average cost of 3000 shares of WXYZ is $2. This is called cost averaging down. A week later. the positions look exactly the same at the end of the day.00 1000 shares of WXYZ@$2. The share amounts are the same.00 per share. it is heading higher. The volume is good. the money invested is the same. You had to be prepared to buy more shares 42 . To summarize these trades: First trade: Second trade: Third trade: 1000 shares of WXYZ@$3. NEVER. you buy another 1000 shares of WXYZ @$1.00 per share.Go into the market and buy 1000 shares of WXYZ @ $3. and the cost average of the investment is the same.
00 was paid the bid is obviously lower than $1. Volume may be good and going up.000 invested.00. Let’s look back at WXYZ. and I care even less about what the tipster or hypester is telling you. Although you bought WXYZ three times and the average cost is also $2.50 per share on 3. The stock was going down because there were more sellers than buyers.000 shares.000.00. that is selling pressure as opposed to buying pressure.as it went up. So all in all you have 3000 shares of ABCD and depending on the spread between bid & ask at least a $750 paper profit.00. You will need to unwind this position sooner rather than later.500 of the $6. the difference is your last buy was at $1. Depending on the spread between bid and ask. 43 .00.50. portfolio valued at $1500 I think the numbers speak for themselves. Remember the chapter about selling and starting over? This is probably as good a time as any to take that opportunity. Let’s compare: Cost averaging up: ABCD: Invested $6. You started your buying at $3. we do know that if $1.000 portfolio valued at $8250 Cost averaging down: WXYZ: Invested $6. even though you will probably only receive around $1000 after all is done.50. you are losing $1. and definitely before the $1500 goes lower. like we witnessed in ABCD. I don’t care what your broker is telling you. or a total of $4.00 and the bid is $ .00 and ended it at $1. So let’s say the bid is $ . If the cost average price is $2.
44 . the money you paid for this book will be worth it 1000 times over. If you are learning the dangers of cost averaging down for the first time.The lesson to be learned is to avoid cost averaging down entirely. and if you follow what is said about it here in these pages.
this is known as a short squeeze. In other words. which is only accomplished with a buy back of the short. The short squeeze is the short player’s worst enemy and the long’s best offensive weapon. When they sell the stocks they do not own they are short selling the stock. The idea is that the short player can cover and buy back the stock he sold after the stock goes down. your portfolio value is subject to attack by ruthless short side players. Now to really confuse you. The short player only makes money if the stock goes down after it is sold short. the only natural stock buyer on Wall Street is the short player.Chapter 12: Shorting in the Market is Okay with Me! Ladies and gentlemen. you do. so you are long. Investors buy stocks and hold them. As investors and shareholders. locking in a profit. This selling will make it appear that there are many more sellers and that the amount of shares in the float is growing. These shorters stand at the ready to sell the stocks you hold long in your portfolio even though they do not own them. Buying and holding is the opposite of shorting and covering. we take a directly opposite position and have a completely different philosophy than the short players. as investors and shareholders. When the longs mount an attack against the shorts. We are the longs. At some point. the short player buys back the stock for less money than the stock was shorted. 45 . the short position needs to be covered and closed out. thus placing selling pressure on the stock. Shorts sit and wait to buy at the right time. Shortbusters work hard to make sure the shorts have to pay more money to buy back their short position than they sold it for. Investors also fight off the shorts.
In fact. c) converting a warrant. option. your day job. most stock market professionals. other than traders. You must have spectacular record-keeping capabilities and access to realtime price quotes. Selling a Covered Short: Selling a security without owning the stock but with the ability to cover the sell by: a) borrowing the stock. have unlimited funds to lose. Selling Naked Short: Selling a security without owning the stock and with no way to cover the sale other than buying back the stock. or d) securitizing with a registration document. b) exercising a derivative or option such as a call or put. Once you make a commitment to short. Here are some basic but essential definitions if you want to sell short. You better have likeminded friends also shorting the stock. know exactly what you are doing. will have to take place before or after the market opens and closes. Shorting a stock is treacherous. and you must know what to do if you get squeezed. Most of Wall Street is made 46 . how you put the short on will determine how much free time you will have for yourself.Buying the stock for higher than it was sold results in a loss for the shorter. are leery of being short. Selling Short: Selling a security without owning it. Shorting stocks is certainly not for unsophisticated individuals. and your family. Do not short a stock unless you have traded for many years. such as your therapy session or your dentist appointment. or preferred. and have knowledge and access to professional execution of your trades. All of your activities.
When you add up your cost of shorting. Another reason why you better be right. This is a fee you pay to your brokerage firm. comprised of short players. There are two camps. the bulls believe that the larger the short the better the buy unless the shorts know something the longs don’t. and believe the market is going up. The minority of Wall Street is bearish. Have you ever seen the bronze statue depicting a bull and a bear tangled up in a wrestling match? That’s the way the Street sees itself. They profess the technical and fundamental reasons to buy stock and provide research and advice to do so. you are bullish. If you think the market is going down. remember that as a retail stock person. you must add 47 . you will have to borrow the stock you intend to short from the stock loan department. Good news is bullish. Bears hate stocks and sell them in the belief that the market is going down. you are bearish. In other words. Oh by the way. strangely enough. Pigs are getting slaughtered in the market by trying to make more profits than reasonably possible. What happened to the trend is your friend? Bulls and bears make money but pigs get slaughtered! Bulls love stocks. bad news will seem to follow. like the Hatfields and McCoys. Once the short is on. which is bullish. buy stocks. If you think the stock market will go up. the bulls and the bears. and this information is used to calculate the bullishness or bearishness of a stock. They profess the technical and fundamental reasons to sell stock and provide research and advice to do so.up of long players. bad news is bearish! There are measurements of short positions calculated and reported in the stock market.
Now there is $12. The money from the sale is cash. Your broker’s clearing firm can also shop your stock. so understand that you will be paying points to the brokerage firm for margin money. If you have a margin call it is because you have exceeded the limits allowed for leverage by the clearing firm. so you can rest assured that they will work overtime to find the shares to lend you. flat position or small loss in your positions. borrow it. you will not have a margin call. Margin is another word for a loan to you.000 in your account.000.the stock loan fee to the sell commission when you first sold short. You sell short 1000 shares of EFGH at $4. and significant income to the brokerage firm. or the bank. and loan it to other firms on the Street. They have access to all of the accounts in the firm and of course they do that first. Example #1: You sell short 1000 shares of EFGH at $3. Your third trade is to sell 1000 shares of EFGH at $5. you have just created cash in your account by selling. Stock loan is a very profitable event for the brokerage firm. Margin accounts are another major fee charged to your account. Instead of sending in a check to pay for your purchase. You also have to read your account statement inversely when you short stocks (cash is from short sales of stock to be covered later). By selling first at $3 and then again at $4. available cash to trade so long as you do not have a margin call requiring you to put up more money in your account.00 per share as you cost average your short sale up. 48 .00 per share. you have just sold 2000 shares of EFGH for $7. because your statement will show a sale of stock in your cash/margin account. So long as you have an overall net gain.
00 6. you would pay $6 per share X 3000.000.45 If you had to cover your shorts at $6 per share of EFGH. which you will see is $6. EFGH BID Jones Smith Lazar 5.000.000) loss 49 .20 7.80 5.000 -$12.75 ASK 6.000 $ (6. The mark to the market is $6 or $18. Your account had $12. Take a look below. $18. The mark to the market is the low offer when you are short at the close of the market. which equals $18.90 5.000 cash from the sale of 3000 shares.It will look like this: Bought 0 0 0 Sold 1000 shares EFGH 1000 shares EFGH 1000 shares EFGH (3000) shares EFGH Cash ($3000) ($4000) ($5000) $12.000 The value of the account is derived from the mark to the market on the bid side of EFGH.
90 2. You smile.45 50 .75 ASK 3. The day comes when you turn on the stock report and hear bad news on EFGH. your account will receive a margin call which will require you to place funds in your account. Rather. Here is what happens if you are right with your short. BOOM! BANG! BAM! Down she goes.20 3. It is also known as instantaneous gratification. Bad news is your very best friend when you are short. Cost averaging up by shorting more as the stock goes up is only for the strong at heart. Do not pass go. Today EFGH announced that their earnings fell below expectations due to lack of sales and lower margins. You watch the stock plummet.80 2. Example #2: EFGH BID Jones Smith Lazar 2.At some point in the very near future.00 3. go to hell in a hand basket. The next day you wake up and immediately check the market. like a stone in the ocean.
000.000. huh? Here’s a clue as to how I traded on Wall Street: LONG IS WRONG! As a trader. covering a short is always easier than finding a new buyer.com/asp/OTCE_Short_Interest. You sold 3.000.asp OTC Equity Short Interest Overview NASD Rule 3360 has been expanded to require FINRA member 51 .000 shares EFGH for $12. which totals $9. Not bad. Let’s have fun and track some shorts. Tracking the shorts: http://www. and margin.00 per share. Shorting stocks in a trading account does not require borrowing the security first. Once you subtract buy and sell commissions. Your profit is $3.Now let’s mark the stock to the market.otcbb. Traders with a trading account at a brokerage firm have a distinct advantage over all other traders. stock loan fees. I estimate the total profit net would be around $2500. You bought 3000 shares of EFGH at $3.
The short interest data is compiled and provided for publication on the 8th business day after the reporting settlement date. Publication Schedule Semi-monthly short interest information will be available on this site after 4 pm ET on the Media Date. 2007. Once the short position reports are received. If the 15th falls on a weekend or another non-settlement date.firms to report their short positions on all over-the-counter (“OTC”) equity securities to FINRA effective July 3. Effective September 7. 52 . The mid-month short interest report is based on short positions held by members on the settlement date of the 15th of each month. Please refer to the Short Interest Reporting Deadlines for the current reporting schedule. 2006. The reports must be filed by the second business day after the reporting settlement date. The end-of-month short interest report is based on short positions held on the last business day of the month on which transactions settle. the short interest is then compiled for each OTC security. Rule 3360 was changed to require firms to increase the frequency of short interest reporting from monthly to semi-monthly cycles. Pricing and publication restrictions are under consideration. the designated settlement date will be the previous business day on which transactions settled.
Publication Schedule. Eastern Time (ET). to 8:00 p. Page 1: List of new issues. The Daily Lists may be updated during the trading day from 8:00 a.m. symbol and name changes.. 53 . market data distributors should process each of the updated files for all Daily Lists. and deleted issues for OTCBB securities. Click this link to obtain explanations of the column headings in the data download. To have the most upto-date information during the trading day.m.
What was the short position before the big drop? Was there bad news.Checking short interest on the NYSE: http://www. NASDAQ and AMEX Stocks! Short Interest Site.com The following is a list of stocks that were the biggest losers on Friday.htm Current and Historical Monthly Short Interest Data of more than 8000 NYSE. We will select a few of these companies and check for several points of interest.wallstreetcourier. and when did the news come out in relation to the timing of the big price drop? What was the average volume for the week leading up to price drop? 54 . January 8. 2010 on NASDAQ.com/technician/market-indicators/nyseshort-interest.
Profile.17 (9.173 Chart. Profile.90 Jan 8 0. Hanmi Financial Corporation Elecsys Corporation Kent Financial Services. I Willamette Valley Vineyards Entorian Technologies Inc.31 (16. More 11.63%) 0.211 Chart.96 (12. NYSE Last Trade 1.23 Jan 8 0. Profile.000 Chart.145 Chart.69 Jan 8 0. Profile. Profile. Profile .13 (11.45 (11. More SAPX 2. Profile. Peoples Educational Holdings. Profile.15 (9. Inc. Patrick Industries.79%) 6.30%) 915.36 Jan 8 1.64 Jan 8 1.02 Jan 8 0.17 Jan 8 Corporation 0.901 Chart.400 Chart.526 Chart. Inc.66%) 0. Profile. Inc.17 (12. Profile.813 Chart. Microvision.32%) Volume Related Info 12.50 Jan 8 0.849 Chart.47%) 208 Chart.55 Jan 8 0. More HAFC 1.59 Jan 8 Change 0. US Symbol OLCB NASDAQ AMEX Name Ohio Legacy Corporation Seven Arts Pictures PLC Ameritrans Capital Corp. More ENTN 4. More ESYS 3. Voxware. Profile. More 55 .14%) 600 Chart. Inc.39%) 1.50 Jan 8 0. More PEDH 1.60 (11.25 (11.34%) 11.12 (9. Profile.40 (10. More KENT VOXW PATK 1.93%) 0.59 Jan 8 2.518 Chart.40 (13. More AMTCP MVISW 6. More EMMS Emmis Communications 1.27 (9.13%) 5. More 334 Chart.63%) 7.30%) 285. Profile.58 Jan 8 0. More WVVI 3. More 14.
28 (7.154 (7.278 Chart.49 Jan 8 0.551 Chart.108.358.45 Jan 8 0.14 (9.5001 Jan Bank Corp.634 Chart.FFNM First Federal of Northern Michigan Reeds.092 Chart. Profile. Inc.04%) 74.18%) 1.16 (7.30 Jan 8 0.52 Jan 8 Corp. More 0.60 (8.055 SNTA Synta Pharmaceutical 4.03%) 24. Inc. Profile. Profile.816 Chart. 2. Profile. Profile.20 (7. Bay National Corporation (Maryland) Community Central Bank Corp. More FCFL First Community 2.1935 (7. 2. Profile. More TIGR 3.43%) 9. Profile. More CCBD 1.13 (9.55%) 25. Escalade. 1.53 Jan 8 Inc.415 Chart.27 Jan 8 0.57%) 4.15 (8. More 56 .86%) 6.60 Jan 8 0.05 Jan 8 0.264 Chart. Lawson Software.21 (7.22%) 3.290 Chart.965 Chart. 0. 8 Frontier Financial Corp. More REED LWSN 1.885 Chart. More ESCA 0. More BAYN 1. Profile.968 Chart.29%) 8. More PABK 2. Incorporated TigerLogic Corporation PAB Bankshares.58%) 5. Profile. 0.94 (17.41 Jan 8 6.66%) 15. More FTBK 3.24%) 20.25 (7. Profile. Profile.806 Jan 8 0.39 Jan 8 0. More DXYN The Dixie Group. Inc.
Synta Pharmaceuticals Corp.6 Million Shares. Financial St EDGAR Online (Fri 9:18am) Synta Pharmaceuticals Prices $25 Million Public Offering of Common Stock Business Wire (Fri 8:43am) I. Other Events.com (Fri 7:50am) Synta Pharmaceuticals Announces Proposed Public Offering of Common Stock Business Wire 57 .com (Fri 1:05pm) Synta could raise up to $26.6M from stock sale AP (Fri 10:46am) SYNTA PHARMACEUTICALS CORP Files SEC form 8-K. went down $. Cyclacel Pharma: Early Volume Plays at TheStreet. Stock Sinksat Fox Business (Fri 3:54pm) Synta slated to sell up to $29M in stock at bizjournals.94 on Friday and made the following announcements: Synta Prices 5. Entry into a Material Definitive Agreement.D. Systems.
Today vs.45 % 2 .3 2.28 % 73. Average Earnings Per Share PE Ratio Record Date Sector Industry Exchange $ 4.581. 5 ) % From 52-Wk Low ($ 1.300 26. SNTA Short Interest (S hares Short) Days To Cover (Shor t Interest Ratio) Short Percent of Float Short Interest – Prior Short % Increase / Decrease Short Squeeze Ranking™ % From 52-Wk High ($ 9.20 % Fr m 200-Day MA ($ 3.471 3.Short Quote™ Synta Pharmaceuticals Corp.98 % 680.77 2.300 4182.916 3.52 -0.29 % -20.20 % 14.18 % 1. Trading Volume – Today Trading Volume – Average Trading Volume .35 ) % From 50-Day MA ($ 4.358.000 9.94 ) Price % Change (52-Week) Shares Float Total Shares Outstandi g % Owned by Insiders % Owned by Institutions Market Cap.068.978.9 74 .300 9.290 80.88 % -9.90 % -6 -11 .60 2009-DecB Healthcare Diagnostic Substances NAS 58 .30 % $ 153.40 % 25.
358. Jan 8) Lawson’s Stock Slumps After Cautious Outlook 59 . Having fun yet? Let’s try another one of these for giggles.39 Jan 8 0. Jan 8) Lawson Buys Healthvision for $160 Million Cashat The New York Times (Fri. Jan 8) Healthvision acquired by Lawson Software for $160Mat bizjournals. is an absolutely common practice and one in which almost every hedge fund on the planet partakes in.60 (8.290. 2010. Interesting that the shorts can buy stock.The glaring number to me is the increase in volume. news precedes volume. Holy cow! Obviously there was enormous selling pressure on SNTA.300 and on Friday. acquisition AP (Fri. In this case. LWSN 6. The stock was affected by the news because the financing price is contingent on the price of the stock in the market. The lower the price of the stock. January 8. Jan 8) Lawson shares fall on weak forecast.60 on Friday January 8. Lawson Software. mostly institutions. in the new stock offering and cover their shorts. Inc. Average daily volume is 80.com (Fri. the news was about a financing.58%) 15 Lawson Software. Indie Research(Fri. SNTA traded 3. This. As a rule. Inc. my friends. the cheaper the stock is to purchase in the secondary offering. went down .
235 Application Software NAS 60 .108.40 ) % From 200-Day MA ($ 6.50 % $ 1.800 465.16 39.53 % 46.300 3.300 1.76 % 0. LWSN Short Interest (Shares Short) Days To Cover (Short Interest Ratio) Short Percent of Float Short Interest – Prior Short % Increase / Decrease Short Squeeze Ranking™ % From 52-Wk High ($ 7.31 ) % From 50-Day MA ($ 6.6 3.887.79 % 1. Trading Volume .Today vs.51 ) % From 52-Wk Low ($ 3.25 % -2 35 % 40.759. 4 ) Price % Change (52-Week) Shares Floatof Tota Share Out anding % Owned by Insiders % Owned by Institutions Market Cap.415 1.72 % 3.39 -0.Today Trading Volume .945.172 5.153.096.49 % 5 -17.Average Trading Volume .291.60 3.Lawson Software Inc.40 % 73.90 2009-DecB 4 202.1 % 105.932 6. Average Earnings Per Share PE Ratio Record Date Sector Industry Exchange Technology $ 6.
all bets were off. An MBA or PHD could never work in a trading room unless they shed their ties. Yale or Princeton. fighting over a 1/32 or less or box position on the bid or offer.000. Surviving in this wild. and one of the analysts released an opinion that the acquisition was weak and probably dumped his position. The news was of an acquisition. these broker dealers were one or two hit wonders. only with each other.Lawson Software. They never have to deal with the public.” Traders were and are a different breed of junk yard dogs. Lawson Software. Inc. or will the old nag just come in last? The Nuance of Shorting IPO’s The IPO market of the late eighties and nineties was the quintessential underwriting era of new issues being launched by underwriters with unfamiliar names. wild. lost their manners. as the Internet was delivering news in real-time. there actually was honor among thieves. west atmosphere required tactics not learned in Harvard. They would wear this distinction as a badge of honor. In some cases.000 cash to buy a company. had news on Friday. January 8. Tracking shorts is like reading the daily racing form and trying to figure out which horse is going to lose. Will the jockey fall off the horse. but into the late nineties. had a quick trigger finger for moving markets and only cared about making money and not advancing up the ladder or having a “career. used $129. Inc. 2010. At one point. Markets changed in an instant and guess who changes the markets? You got it: the same 61 .
The way we saw the trading in new issues was that our retail clients owned the IPO and bought more stock in the aftermarket. we could buy the shares back for less than we sold them. If any selling occurred. so if the stock went up we would sell retail customers more shares to raise the cost average on the short sales. The firm had access to all the shares held by clients. That’s exactly why we did it: huge profits. The traders would get together and hang out with the same guys they fought tooth and nail with all year long.traders who are shorting you the stocks you cannot wait to bury in your portfolio. I remember one such conference in Vail. It is his profit and loss that matters. and then a profit in the trading account. which was the best way to protect a new issue. not whether you own X or Y shares. Even less important is 62 . Imagine that every share of an IPO that sold retail in the aftermarket was short in the trading account while the stock was moving higher and the firm was making lots of money. I managed the aftermarket trading of more than 50 IPOs. you are competing against a trader who could care less about you. I have a very jaded viewpoint indeed. Went to this one only and after that I never bothered to go to another one. It was as if intelligence was checked at the door. Trader’s conventions were really bizarre. thus locking in a trading profit. Colorado in the 1990s. but combat stories and recollection of monumental days and trades in the market were boasted about back and forth. So we made commissions in the underwriting account and syndicate account. because as an underwriter of IPOs on Wall Street. Every OTC stock is traded by traders who specialize in not losing money for themselves. As a retail customer. I also managed 400 stockbrokers and 13 OTC stock traders.
that S.50 bid and $6. You change your order to a market order. But here’s the real tragedy. change your order. but also that you just took the lid off how badly you will be screwed by the traders. you think Uncle Harold. which means your price is not set but openended. Firstly. Secondly. and miss it again as it moves higher because others are buying it as well. It is very amateur hour. no limit. You raise your buy price to a $6 limit. the stock has moved to $5. I do not condone this foolish behavior. just in case you were wondering how it works. Let’s examine another scenario. A market order means you are willing to be filled at the market price or any price the trader can buy your stock at.whether you make or lose any money. don’t go for it. Well. but unless you can afford to lose this money. Your next move is the killer where you put your life and limb at risk.O. and open order until filled at the market price paid. or good until cancelled (GTC) orders. You find out you own the 63 . Traders are everyone’s adversaries. and that is a death nail. You now know you will own your OHNO. went in and got it before you did. These are superseded by your directive of a market order to buy at any price. here goes.B. you really have to have it. You indulge yourself and decide that your brother-in-law could be right this time.00 offer. Market orders override your other orders such as: limit order. You know how you want something so badly when you can’t have it? Instead of walking away from the mess. It’s called chasing the stock. I understand that these things happen. And even if you can afford it. this time. and that you cannot wait until Monday morning when you can go running into your discount broker online and have him buy you 5000 shares of OHNO at $5 bucks a share. The market opens and your 5000 OHNO @ $5 did not get filled and it has moved up.
Don’t be a chaser. Here’s the rub. the stock will miraculously fall back down to $6 per share or lower. It was a great commercial but a real bunch of BS. If you are old enough. and that once the buying has dried up. She didn’t get information that ABCD was taking over WXYZ and she didn’t buy calls on WXYZ.5000 OHNO at $7 per share. sophisticated. Don’t ever panic buy or sell! You must learn to resist the temptation. cost averaging down killed more whales than the Japanese! The lessons here are numerous and not humorous. remember the EF Hutton TV commercial: “When EF Hutton speaks. Now what? Buy more and cost average down? Yikes. just illegal. Here is a good example that will help you understand. or rush to get in on a tip she heard from her hairstylist. famous. Martha Stewart. She goes to jail and loses tens of millions of dollars. Making money in the market is never done with scared money. No sir. There is always another bus coming into the station that you can get on. As they say. DO NOT FALL INTO THE TRAP OF CHASING A STOCK UNDER ANY CIRCUMSTANCES! And don’t blame Uncle Harold. She didn’t buy on the rumor. desperate money. Her broker whispered that a company whose stock she owned was going to have bad news. so she sold out her stock position before the news 64 . wealthy.” then silence as everyone listens to their words of wisdom. which would have been the right trade. gets a stock tip which ends up being construed as inside information. he fell off a truck onto his head when he was just a kid. or hot stock tips because 99 out of 100 times will lose you money.
why such high praise for such an undistinguished band of marauders? It is unconscionable that this group of slime balls does not get more credit. it is not the research analysts paid very well to find undiscovered gems. who all sold on the bad news becoming public. This is amazing but true. They are not the UC California and Stanford software designers of the electronic trading prowess. I recently had a reminder of who the smartest people as a group on Wall Street are. But Martha simply could not resist not acting. She sold in a panic. You are wondering. There is a lesson to be learned here but I want to get back to the relatively unknown world of shorting stocks. The reality is that this group is responsible for cleaning out the misfits and the injured animals.000. The smartest of the smart are their low-life brethren whose modus operandi is digging and digging more to find which stocks to short. They are not the Ivy League brains that created the derivatives which have ultimately cost the market billions. which led to the fall of Lehman. and the war in the market every day between shorts and longs. like on the planes of the Sahara desert. She didn’t want lose money so she ended up with more trouble than it was all worth. Think about the result had she not sold: so she loses maybe $500. the companies avoiding transparency. the companies on the regulatory watchdog lists. She got out before the immediate world. No. They expose the companies that lie through their teeth in their financial statements.came out and soon thereafter the stock went to hell in a hand basket. or the money managers who bought all the bust-out mortgages of the balloon payment era. and not only avoided losing money but locked in making money because she acted on the inside information. the convicted felons operating under 65 .
Let’s say. tireless. In some cases. The commodities markets are a little bit more policed today than in the past. leaving no stone unturned. Evaluation of trading volume and identifying where selling pressure may be coming from can turn up a mountain of information. to the ownership of the original shell. researcher of the highest reputation. much like commodities brokers. When examined.assumed names or hiding behind others. Valuable information to a short player begins by identifying the players in the deal. When they are right. because it stands to reason: the bigger the position the bigger the player. These players will spend real money to dig up dirt when finding that dirt could be the key to what they need. and the bigger the potential profit to that individual which also means these individuals have the most to lose. There is no archaeological expedition that comes near to matching the time and energy the short player expends digging to find the key to his profitability. Always begin with the largest holders of shares first. that the news reports out of Brazil stating 66 . or under assumed names. taking no prisoners. Short players are very creative. I am telling you there is not a long-side analyst. and ruthless. executives are operating without full disclosure. and they usually are. See. the shareholder lists can be extremely fruitful. they are incredibly savvy on playing the short card for the most money they can make. and they are not afraid to hire private detectives to uncover any crap they can. from the C suite officers and large shareholders. the act of selling illegally can be traced right from the shareholder list. for instance. or genius that comes close to the brilliance of a short-side digger. These short players are absolutely methodical.
Mr. 2010 provided by James S. Contrarian Investor Sees Economic Crash in China by David Barboza Friday. Chanos is the poster child for shorting stocks. but news like that would drive the price of orange juice down considerably. Can you imagine how damaging a news report like. in 2010 he decided to take on the biggest short of his career: China. Just this itty bitty little news story leaked through the Lauderdale Lakes Gazette turns into a limit down on the commodity. a wealthy hedge fund investor. Short players are known to go to extremes to benefit from little itty bitty planted news stories. As most of the world bets on China to help lift the global economy out of recession. James S. After years of success shorting companies. Chanos. “Company BBBB is under an SEC informal inquiry” could be? Shareholders run for the door and short players sit back and wait for the stock to come to them to cover some of their short position. Now Mr.that the orange crop was robust and going to reach record levels weren’t always telling the whole truth. Chanos is warning that China’s hyperstimulated 67 . Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other highflying companies whose stories were too good to be true. the reports were nowhere near the whole truth. is working to bust the myth of the biggest conglomerate of all: China Inc. In fact. January 8.
000 -. Because foreigners are restricted from investing in stocks listed inside China.economy is headed for a crash. looks like "Dubai times 1. Mr. I think shorting Chinese stocks in a bullish market you must be fearless. and then more at $60.Mr. He even suspects that Beijing is cooking its books. a little crazy. But he is certainly the most prominent and vocal. the stock could trade higher on you quite rapidly and then you are sitting with a loss. Most economists and governments expect Chinese growth momentum to continue this year. Chanos.or worse. You may short at $50. steel and iron ore. 51. meant to lift exports and consumption among Chinese consumers." he frets. based in New York. Still. Mr. rather than the sustained boom that most economists predict. Kynikos Associates. buoyed by a flood of speculative capital. its eye-popping growth rates of more than 8 percent. It doesn’t hurt to have uncovered some information which. betting against China will not be easy. Cost averaging a short up is a major tactic for a short player. Chanos’ narrative runs counter to the prevailing wisdom on China. If you simply put one trade on at a price. whose hedge fund. short more at $55. and way smart. among other things. buoyed by what remains of a $586 billion government stimulus program that began last year. if 68 . coal. including focusing on construction and infrastructure-related companies that sell cement. faking. has $6 billion under management. is hardly the only skeptic on China. Being short requires holding power and a ton of cash. Chanos has said he is searching for other ways to make his bets. Its surging real estate sector. As America’s pre-eminent short-seller . Your average short is $55.he bets big money that companies’ strategies will fail .
that is. would be detrimental to the company. 69 . bad for the stock but very good for you.exposed.
such as: is it the same broker out hitting bids everyday at the same time? 11. It took me a while to get things straightened out with my software and I thank Jeff and Dan over at the Sony store in the Westfield Topanga mall for straightening out my technical problems for me. terms of right Convertible debt instruments that convert into stock Time of day trading patterns (sells at the close). I am pumped to share some good stories about the topic of “finding the so called shorter.Chapter 13: Who Are You Going to Call? Shortbusters! I took a break between writing the long chapter on shorting and this chapter due to technical problems.” It all starts with tracking. Every CEO of a public company should know how to begin to track such things as: 1. 3. Alright with that said. 9. 5. 10. You guys are the best. 6. 8. Shareholder list (transfer agent) Transfer sheets (transfer agent) NOBO list (Depository Trust Company) All restriction removal information (SEC attorney) Broker dealer position changes Market maker adds and drops Warrant exercises or overhang Rights exercises. Actual short lists 70 . 2. 4. 7. Block trades (big size trading as a block) 12. Trades made after the close of the market 13.
but they usually are at a loss for proof.” says the CEO. But once they determine they want to sell. The key element to tracking down who is shorting the stock is to recognize that it might not be an abnormal seller or a professional seller. or board member with a block of free trading stock. or waiting for the stock to pick up in price. which trace the movement in and out of stock 71 . the seller is usually a real seller with stock to sell and not some fabricated son of a bitch with an ax to grind. its game on. like private detectives.I won’t mention names to protect the stupid. Sometimes it can be someone very close to the company who may have personal money issues and will disguise his selling while swearing to the CEO that it is not him doing the selling. “How dare they short my stock. such as a disgruntled employee. They usually stick around for a while waiting for their shares to free up. to uncover the dirty rat who is shorting the stock. There are specialists out there who actually build a business. not necessarily the innocent. and it is huge. Good productive hour after hour is wasted with banter of how this guy is shorting or that guy is shorting. If you look at the transfer sheets. Or the seller can suggest it must be someone else to distract the attention away from the actual seller. They want to sell and sell undetected by management so management and their attorneys cannot stop them or challenge their actions. officer. but a seller well-known to management. CEOs can be so trusting of their inner cabinet but the fact is. Can you imagine the thinking that must go on in public company boardrooms when the CEO and his genius cabinet are trying to figure out who’s shorting their stocks? I am asking this question because I know how much. They must be ex-IR guys who were exstockbrokers and so on.
these trades have names attached to them. Everyone piled into the conference room and found themselves an available chair at the shiny wooden conference table. digging deep to uncover actual ownership is a skill. The name of this entity is listed in the corporate books and records. On one wall was 72 . when the tour of nothing ended. investments trusts. Tracing a corporation is much more difficult than tracing an individual. listen to this true story. Finally. With the visit came a NASDAQ Vice President to speak to the group about the benefits of being a NASDAQlisted company. and I even got a photo op and souvenir picture. to hide his or her identity when selling. we were shepherded into a conference room for the inevitable pitch by the NASDAQ pitchman. Our conference host provided the group a special visit to the NASDAQ headquarters on Times Square. Although disclosure is the law. or trying to avoid tax in their own name. But make no mistake . which is a great method of disguise in terms of changing names on certificates. or other nominee names in order to disguise ownership. and it will always come up when tracked. Twenty business folks. Many insiders utilize placement of shares in their corporations. which is a no-brainer for most CEOs. Having said all of this. I will set the scene. creating equity distribution to an entity. kids’ names. Names stand out on the shareholder list. No matter how you slice it. Sometimes the names are corporations. mostly pubco CEOs. that even included picture taking.the shares undoubtedly are owned by a person trying to hide ownership. were in town for a financial conference in NYC. The tour went well. girlfriends’ names. all certificates are traceable back to an original dictate of a document. at the Penn Club. especially if they are insiders.positions.
I waited quietly and the roll call went without a hitch. But before we get into that. yada yada.a plasma screen. the market making system of posting trades in an orderly fashion. and poised myself for the pitchman’s reaction and then his answer. So the pitchman. obviously having heard this question before. Then the pitchman began and the audience was rapt.NASDAQ went public themselves. I was thinking. soaking it all in: the history of the NASDAQ trading system. so we should look at the conflagration of this question in that context. and from the opportunity for me to show up the pitch guy by asking questions he couldn’t answer. ready for use in the forthcoming sales pitch. A CEO in his infinite wisdom. “I know my stock is being shorted. and then it happened. can you help tell me who is shorting my stock and what I can do about it?” Oh my goodness gracious I had to control myself from spewing my drink out and spraying the contingent of jerks with soda. blurted. seemingly rehearsed to the second for a perfect delivery. Being that you are from NASDAQ. for 15 years during my career. I amazed myself in maintaining my control. I have sat with a NASDAQ Level 3 machine on my console. including Instinet. What can this guy show me that I don’t already know? My entertainment was going to come from the dunces surrounding me at the conference table. as everyone knew their own name. let’s not forget one major important factor . He seamlessly referred the dunce to where a CEO can go for information: the NASDAQ reports that show short positions based on 73 . or answering questions from a dunce that no one else knew the answer to. resorted to the rote doctrine of what is probably written in the NASDAQ guide book.
The irony here is that the bozo bringing up the short position of his stock to the NASDAQ suit tour guide ended up standing right next to me for the remainder of the tour. and the stock is naked short?” Well. these dudes don’t open up and tell the truth. the word naked emanated throughout the room and the hush made whomever was going to speak next very uncomfortable. I had openly spoken taboo. or most IR guys but not with me in the room. and whereby the standard short positions are reported for the public. Even offline. Remember.borrowed and reported shorts. Ohio tourists thinking there was a matinee after the lecture. “Suppose the stock is short with unreported non-borrowed shares. naked or covered. He now wanted to know what I knew about uncovering the guys shorting his stock. I wish I could have pulled this book out of my attaché case and handed it to this guy right there and then! 74 . Expert market guys are extremely uncomfortable talking about what goes on behind the curtain or under the skirt because idiot CEOs will say to others that they heard it from the NASDAQ guy in a meeting. uncovering shorts. Insight into the taboo can demean or lower the credibility of the professionals making markets on NASDAQ. The stuttering NASDAQ guy quickly changed topics but the room had suddenly focused on the fact that my question revealed that I had a deep understanding of the stock market and that it was certainly time to move on with the tour of the facilities. I raised my hand. is a cottage industry. and I said. Let me tell you right here and now. That puts him at risk and his job at stake. Perfect answer for college students. By this time I was bursting to say something to diffuse the confusion being manufactured every nano-second by the banter. I was called on.
it represents an obligation to BUY the underlying security at the strike price if the option is exercised. each contract covers 100 shares. For the writer (seller) of a call option. Novice traders often start off trading options by buying calls. but also due to the large ROI generated from successful trades. Buying Call Options: Call buying is the simplest way of trading call options. 75 .Chapter 14: Establishing Buy/Sell Parameters It’s time for me to give you some explanations to terminology I will be using in future chapters. it represents an obligation to SELL the underlying security at the strike price if the option is exercised. For the writer (seller) of a put option. The put option writer is paid a premium for taking on the risk associated with the obligation. For stock options. For stock options. The call option writer is paid a premium for taking on the risk associated with the obligation. Call Options: A call option is an option contract in which the holder (buyer) has the right (but not the obligation) to BUY a specified quantity of a security at a specified price (strike price) within a fixed period of time (until its expiration). each contract covers 100 shares. not only because of its simplicity. Put Options: A put option is an option contract in which the holder (buyer) has the right (but not the obligation) to SELL a specified quantity of a security at a specified price (strike price) within a fixed period of time (until its expiration).
and write calls. This risk can arise if the holder has done any of the following: borrowed cash from the counterparty to buy financial instruments. His advice to an investor was to own a very liquid stock.Buying Put Options: Put buying is the simplest way to trade put options. just what I love to do myself. collect a dividend. The collateral can be in the form of cash or securities. The other day I had a conversation with a newsletter writer and to my surprise his advice was exactly in line with what I would have recommended. a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of his counterparty (most often his broker or an exchange). When the options trader is bearish on particular security. I wish I had a dollar for every two bit ex-stockbroker turned analyst turned newsletter writer out there making recommendations based on how much he was paid or just the fact that he was paid by the company to make the recommendation. However. Margin: In finance. he can purchase put options to profit from a slide in asset price. sold financial instruments short. This led me to wonder. or entered into a derivative contract. and it is deposited in a margin account. He also recommended adding puts to exercise in order to buy stocks at prices he expected to go down. 76 . every now and then one of them makes some sense. The price of the asset must move significantly below the strike price of the put options before the option expiration date for this strategy to be profitable.
000 Minus commission of $450 Profit= $14. which therefore creates another opportunity to increase the stock 77 .000 dividend income Sell 10 calls of ABCD at $5 = $5. and write calls against the converted preferred? Let’s add up the potential earnings and mitigated risk. The calls yield a premium fee every 90 days.000 Minus commission of $400 Collect $4 per share dividend = $4. Downside risk is that the stock goes down and the call premium evaporates. collect an even larger dividend.000 profit Minus commission of $400 Stock called away at $45 = $45.750 Not bad huh? Can you imagine doing this 4 times a year? Each 90 day option period of time enables you to sell every 90 days like clockwork. If the stock is called away through exercising of the call option. Here is the formula: Example: Buy 1000 Shares of ABCD common at $40 = $40.250 Grand total= $12. But the stock still pays a dividend and is still marginable.why not buy convertible preferred stocks. the stock call price minus the stock cost price equals your profit.000 Minus $1.
stop loss orders may not get exercised. just do not do it. hang in there unless you can definitely get out without too much damage. Regardless. This includes every security/equity in your portfolio. especially options. this system is like printing money. the call option would be exercised or called away from you at the call option price). and stick by these numbers no matter what happens. 78 . Changing your order from a limit order to a market order is as dangerous as writing uncovered calls. But rather than maverick the whole stock market play. Stop loss trades are made expressly for this purpose. you assumed that if the price of the stock in the market place exceeded the exercise price of your call. Just remember this one crazy possibility: If the market tanks and stocks start dropping like bird poop. At any point the market could drop like a stone. It requires an incredible amount of personal fortitude and the discipline to refrain from any emotionally-charged deviation from your previously established buy and sell limits. which is absolute suicide. Isn’t it better than buying and holding and hoping the stock goes up and missing the opportunity to sell? I would hope the stock gets called away (when you wrote the call on ABCD. it’s far wiser to figure out both your desired profit margin and your loss tolerance before you sell. I would love to make $5 a share during a 90-day or 180-day stretch with little to no risk. Market orders will get exercised for sure. including options. Your stop limit sell order can get passed like a truck on the autobahn.position and perhaps go to 2000 shares and write 20 calls. This fancy prelude to setting limits of stock loss and stop orders is just about the most boring factor in the entire market.
or was it your mother or one of her friends? Was it your kid’s soccer coach or your financial planner? Was it the girls. Whatever it is. it has to be legal. or was it one of the boys in your golf foursome? Did you read about it in the Riverside Policeman’s Gazette. let’s establish what the qualities of a special situation actually are. Minister or Guru who introduced you to this gem. selling a product. Would you be willing to share it with others. and the reward must be worth taking the risk. Usually. or the guys in the card game. it is too good to be true.Chapter 15: Buying Special Situations I know some of you are itching to know: How do I find a special situation? And some others are saying to themselves: Oh no. Special situations usually require a commitment of some kind. and it has to undergo and pass critical due diligence. If it’s going to work. Rabbi. A special situation needs to be believable. if it seems too good to be true. If it’s so special why isn’t everyone taking advantage? Why me? Why am I so lucky? First. I personally like to know both my way in and my way out right off the bat. or it could require attending meetings. or guaranteeing a loan. it has to stand up to intense scrutiny by your professionals. or in the Wall Street Journal? You get the idea. That way. Was it your Priest. it must make sense. like best friends and family? Do you believe in it enough to protect others against a loss? There is also a value placed on how you found out about the special situation. I also know that my entire loss is 79 . It could be as simple as writing a check and that’s it. My advice is to avoid locking in to situations that require future payments with liabilities if you do not meet the date for payments. not another special situation.
you have an opportunity to take advantage of a special situation. 80 . If the investment is going south. I lose it.only the money that I invested and if I lose it. you already own a very good stock and you would like to own more. or doing a limited private offering to existing shareholders so that you have the opportunity to act. The special situation is from the company. It is doing a private placement. I do not want to be under obligation to supply more money to a loser. Rather than going out into the market and paying retail. I consider a special situation to be offered to the few. For instance. Key safeguard is to know the difference between a special situation and inside information. or a rights offering.
even if you trade 20 times a day? Obviously. You spend a bunch more money and time trying to repeat the feat. Here’s how it generally goes.did you ever see one go out of business? I didn’t think so. they do well. It’s very easy to go from an interested bystander to severely overwhelmed. The best part of the old bonds was that they were bearer bonds. from casual trader to active trader. followed by the crushing and most damaging blow possible. Trading is fun. intoxicating. how much money can the brokerage firm make. It’s just like a casino . along with extra fees for every other service possible. Bearer bonds were amazing. to someone fully consumed with trading. some trading companies give you 100 free trades. Each bond came with redeemable coupons attached. from margin charges to ticket charges. At $4 a trade. Heck. The discount brokers encourage trading. Managing your own account is a vast departure from what your parents did when and if they invested in stocks. they make their money by lending out yours and charging fees to borrowers.Chapter 16: How Much Time Does It Take to Manage My Own Account? Size matters. These coupons were clipped and brought to a bank 81 . Even in bad times. I promise you that our grandparents all bought bonds which were safe and which paid interest that they could later live on. You make a bunch of money early in your trading career. Sure. and addictive. They were purchased and delivered and held by an investor. But stop and consider. All it takes is a few bucks and the idea that you know what you are doing. especially in a trading account. Let’s first realize that whether our parents bought stocks or not. you have to open an account and put money into the account so the brokerage firm can make money on your money.
how clean. semi-annually.” I was feeling no pain at the moment he grabbed me under my arm and took me aside. how perfect? These coupons had real value. he got himself $10. and I understand that you are on Wall Street. his house cost next to nothing. no taxes. He said to me. or annually. For example.and redeemed for cash either quarterly. If gramps bought himself a $100. Why not? The interest payments were untraceable.500. Stocks were not the rage they are today. “Nice to meet you. when the end of the quarter rolled around. “Do you ever come across any bearer bonds?” I said. grandpa strolled right down to the local community bank and cashed in his bearer bond interest coupon. “Hi. His Cadillac cost him $3. Uncle Jackie. not by any means. gramps put his savings into 10% of a 1965 utility bond. When I got married in 1987. no questions asked. Even World War ll was financed by war bonds. one of my mother-in-laws wealthy relatives took me aside.000 face value bond. How simple. The bonds could go up or down and only rarely was the yield volatile. no recourse.” 82 . this is where the expression “real wealth is in owning bonds” comes from. but I got straight really quickly. I’m your Uncle Jackie. Regardless. Almost all construction of the United States of America’s infrastructure was bondfinanced. so folks. Can you imagine how fantastic that would be if available today? Market old timers loved bearer bonds.000 a year in tax-free interest. He asked me with a very serious face and serious tone of voice.
or expired. Just let me know. one hundred thousand or one million or whatever. call me day or night. collateralized by municipal revenues. Hey. no fuss. No hassle. Uncle Jackie had money alright. what could be bad? I look back on it now with a fondness for the old days. This was at my wedding. So I thought. They paid interest before dividends or payments to shareholders. 83 . I learned a very valuable lesson from old Uncle Jackie: look for value without heavy tax ramifications. How difficult could that be? I was counting my commissions. he was a buyer. The bond coupons were redeemed anonymously and paid by the bank in cash directly to the bearer of the coupon presented. or first lean against a corporation. he said he was real. They do not issue bearer bonds any longer and by now every bearer bond is probably cashed in. Bearer bonds may have been the all time perfect investment.Jackie was determined to give me a standing order for untold amounts of money if I could come up with some bonds for him.” Maybe I should have called over to Bernie Madoff. just cash. and interest was virtually guaranteed to a bond holder. he probably had the bearer bonds. As long as they were bearer bonds. called. They had safety. and it seemed like a doable chore to make a bunch of money. at home or in my business. I have the biggest client of my life all I have to do is to find $1M in bearer bonds. or general obligation. “Listen kid. Perfect. this was my wedding day. I asked my new father-in-law about Uncle Jackie and sure enough.
under different email addresses. or if millions are getting this ridiculous email maybe that alone is an incentive to buy the recommendation before all the other idiots do. minds that never get caught up in scam mentality (no way. not knowing where it really came from and worse. So why do you and I and millions of others read it? We read it because it has the almost supernatural capacity to cause highly intelligent stock minds like our own. Or maybe I should do more due diligence on this recommendation. I wondered if they all came from the same service. or what can I find out about these companies.Chapter 17: The New Dilemma: Email Blasting Has this happened to you yet? You open your email in the morning and right there staring you in the face is the latest email blasted to you from some service known as Bullish Hot Stock Picks. or maybe I should track these newsletter recommendations for performance. what have we become? This very morning I checked my email and I had at least 13 new messages from one emailer or another. or what’s a few bucks on a gamble when I’m not doing that great on my own picks. not us). Yikes. or Hot Stock This or Can’t Miss Making Money Penny Stocks or Bull This or Bear That? You open it and read it knowing full well it is a come on. liquidated instead of sold) into the frenzy of buying that these emailers plaguing the web are creating? 84 . How much did they get paid to send these out to me? How many shares are being liquidated (notice the word I used. knowing the source has probably been paid in stock to blast this to you and millions more like you and I. to ponder some very strange thoughts like: perhaps I should follow whether this emailer is telling the truth.
1. 4. 3. Next. let’s examine some of the potential culprits and possible scenarios behind the scam. Someone may simply hate the company. Let’s not completely blame the CEO. Instead. look at big stakeholders to whom the company has provided the paper in a money raise. a huge industry and a way for companies and insiders to either make big money. This email blast business is. the result of which created free trading stock for sale. or get out of an uncomfortable financial position. in fact. The company may want to exercise warrants and a higher stock price is essential as they lower the exercise price to receive ready 85 . He doesn’t always know what is going on.Whose hands hold the money that is being generated from all this stock purchasing? For sure the public company that hires these emailers has their own underlying and generally underhanded reasons for doing this. but I can’t leave it out. I know. We should always start with the company. because it is not always his fault that his shares are being pumped and dumped. CEOs always need money for an assortment of reasons. I belabor this shorting thing. The company stepped into a minefield and did a toxic spiral warrant with no bottom price attached through an unscrupulous financier. 5. 2. or maybe it’s the result of a desperate deal done under the table. both honorable and not so honorable. Perhaps it was part of a legitimate underwriting or private placement. Shorting. or some such loosely conceived notion.
Unless. like an inexpensive underwriting. not just the company. Let’s look at and laugh at some samples. Even 144 sellers have been known to play in these murky waters. Perhaps an investor is stuck in a stock with a large position and has a less than cordial relationship with management. sorry. 6. I received this email a few months back: 86 . That is pretty much what it is all about. Oh and if you already are a seller out there doing this.money from exercisers of warrants. that’s right. anyone can hire an emailer. There is no such thing as good manipulation in the stock market. Remember. There is no c). and b) you are a sucker if you buy these shares and take the sellers out of their positions by putting these sham shares into your account. Yup. Then there are very profitable manipulations out there. but are you getting the idea here? These emailers are benefitting from you and me reading these emails (some of which are totally bogus). 7. Exercised warrants money goes directly to the company. the investor will hire an emailer just to get himself the liquidity necessary to liquidate his position. There are lots potential reasons. Lack of liquidity will incite activity at the point that 144 shares become free trading. of course. you are the seller. and then acting on them. you will hate the fact that I have just blown your cover. Just getting these emails should notify you loud and clear that: a) there is a seller in the midst.
com Howdy. This emailer must be a market genius!) Click here to read my newest blog post! (And learn how to self destruct your portfolio. but I’m looking for another move too. I wanted to quickly drop you a line and point your attention to my blog as I’ve updated it with my thoughts on the current movement in the Dow Jones. The bulls remain in control and continue to push the market higher! (What a great come on. Please note: PennyStockFarmer employees are not registered as an investment advisor in any jurisdiction whatsoever. you should have already made some nice profits on the first move. 87 . or joining our email list. (He means it!) The disclaimer is to be read and fully understood before using our site.Mon. 2010 12:47:14 PM Dow Jones Looking Pretty! From: Penny Stock Farmer <support@pennystockfarmer. so keep your eyes on it! The Farmer And here is the disclaimer: Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment.) Make sure you still have CZHC on your radar. April 26.
000 by a third party for investor awareness marketing campaign for CZHC. (Third party? Some investor. damage (monetary or otherwise). he’s selling when you’re buying. (Exudes enormous confidence. its operators owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise). PennyStockFarmer has been compensated $15.Release of Liability: Through use of this website viewing or using you agree to hold PennyStockFarmer.) Any opinions expressed are subject to change without notice. which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. or injury (monetary or otherwise) that you may incur. or is available from public sources and PennyStockFarmer makes no representations. warranties or guarantees as to the accuracy or completeness of the 88 . (Oops. doesn’t it?) The information contained herein is based on sources. did we say that?) PennyStockFarmer encourages readers and investors to supplement the information in these reports with independent research and other proadvice.) All information on featured companies is provided by the companies profiled. PennyStockFarmer’s affiliates may from time to time have a position in the securities mentioned herein and may increase or decrease such positions without notice which may negatively affect the stock price. (In other words.
Do you really think that this emailer plants seeds (good ideas) in millions of minds so that the investors can harvest the rewards once the stocks grow (go) up? I am giggling to myself. How do you know that the email campaign hasn’t ended? Then you are really stuck. Maybe the best time to get out is the next email blast. (Since when are we on the same playing field?) 89 . jump right in. This is not a solicitation to or sell any securities. Any claims or Statements should be deemed apocryphal.disclosure by the profiled companies. And what a cool name. How lucky am I? Okay let’s read on: Tuesday Premarket Analysis From: HyperGrowthStock <info@HyperGrowthStock. Doesn’t premarket analysis sound intriguing? Perhaps I have been chosen to receive a premarket analysis. if there is one. but the unsuspecting public jumps in hook line and sinker and then stresses over when to get out. nor any of its affiliates are not registered investment advisors or a broker dealers.com > View Contact Dear Fellow Traders. Penny Stock Farmer. believable. It is clear to me that most investors treat this information as if it is accurate. Yuck. and make some money. Here is another one of the emails I have personally received. as if they are lucky to receive it and should act swiftly. (Huh?) PennyStockFarmer.
And another: 90 . (No. but I am going to slowly give a bit more education in the daily newsletter from time to time.com/2010/02/02/tuesday-feb-2premarket-analysis The whole purpose of that email is to recommend the buying of BGOI.BGOI opened very strong on Monday. but I still managed to take a small position just in case it would make a parabolic move.hypergrowthstock.) On this you can go see today’s post: http://www. (Oh really?) This would confirm that the stock stays in the same uptrend as the one we entered. (What does this mean?) Now after yesterday’s action I will expect a consolidation of a day or 2 and then we could see this stock move up from here. If it breaks this it will be acting as my stop loss. I will manage this trade by making sure the stock stays above its 10 day moving average (you can be more aggressive by using an 8 day moving average. There is no identification of what market it trades on or if it is on an exchange. thank you. managing my average cost. (How is that?) I rarely cover this on the daily newsletter. as I take for granted that you know the basic elements of technical analysis.
(How does a pullback provide another opportunity to take profits? That’s a good one. (Remember this recommendation from a previous email?) We also continue to watch SFMI. Their pullbacks on Friday should provide us with another opportunity to take some profits. Last week we saw some impressive gains in our recent stock picks. It managed to hold on to most of its recent gains and when silver prices start to move higher we should see another strong performance. (Does this mean he is going to make another email drop?) It is a similar story for CZHC. (This guy is desperate for something that he’s recommended to actually work.Monday’s Premarket Analysis is Ready From: Hyper Growth Stock <email@example.com> Add to Contacts Dear Stocknewsnow@yahoo. The stock could drop to a low of $0.) There are still signs of strong buying in TLAN but volume is starting to drop.) You can read our full premarket analysis at: http://www.com/2010/05/16/monday-may-17premarket-analysis 91 .com.025 but this would present a good buying opportunity.hypergrowthstock. We should see another move higher when volume picks up again.
however. right) HyperGrowthStock. consider the facts. sell or hold securities. HyperGrowthStock.com is not liable for any investment decisions by its readers or subscribers. The liquidity is questionable and there is a wide spread between bid/ask.com profiles are not a solicitation or recommendation to buy. It is strongly recommended that any purchase or sale decision be discussed with a financial adviser. or a 92 . and so long as the email blasts are working. also known as the cover your ass (CYA) disclaimer and disclosure statement. You do not want to be in the last buyers group. HyperGrowthStock. All statements and expressions are the sole opinion of the editor and are subject to change without notice. Before you read. or a broker-dealer. Francis is a guy. if you bought in early. Remember. So long as the company keeps plugging away with email blasts. And I thought they only played hockey!) ****************** Written below is the Caveat Emptor. (Of course not! You would rather sell the shares you own without them knowing it!) An offer to buy or sell can be made only with accompanying disclosure documents and only in the states and provinces for which they are approved. The stock is trading at good volume and the price is moving higher. (Yeah. lives in Montreal and is a French Canadian.Have a Great Trading Day! Francis (By the way. last-in buyers are always left holding the proverbial bag. the stock looks good on paper.com is not offering securities for sale. selling at this time looks like a smart idea. Verify all claims and do your own due diligence.
93 . Neither HyperGrowthStock. assumptions or future events or performance are not statements of historical facts. there is an inherent conflict of interest in HyperGrowthStock. Any statements that express or involve discussions with respect to predictions.com and its employees or members of their families may hold stock in the profiled companies. HyperGrowthStock.com is owned and operated by HyperGrowthStock. All statements are based on expectations. The accuracy or completeness of the information is not warranted and is only as reliable as the sources from which it was obtained. objectives.com.com statements and opinions and such statements and opinions cannot be considered independent. or delivering this Web Site or e-mail and any contents. (Even though if you do. they will call you stupid and out of control for ever buying any of these. compiling.com nor any of its affiliates. Investors are cautioned that they may lose all or a portion of their investment in this or any other company. plans. reporting. projections. interpreting. caused in whole or part by its negligence or contingencies beyond its control in procuring.member of any financial regulatory bodies. expectations.) The information contained herein has been provided as an information service only.com and its management may benefit from any increase in the share prices of the profiled companies. HyperGrowthStock. Since HyperGrowthStock. It should be understood there is no guarantee that past performance will be indicative of future results. or employees shall be liable to you or anyone else for any loss or damages from use of this e-mail. goals. beliefs.
acting doesn’t require anything more than being a gambler who thinks he can manipulate the market based on email blasts that spread the word to the masses in the hopes that they all buy the stock after you have bought the stock and are ready to sell it. For more disclaimers on past compensation please go to www.hypergrowthstockcom/disclaimer. It’s all about getting an email early. acting upon the information. The great dilemma: To do. It is not about whether or not the company involved has good management or sound fundamentals. Is this really the stock market or is it a gambling opportunity? Are there any stock market fundamentals or technical analysis involved? No way no how this is quasi-insider trading. And there you have it. or not to do? Do I act on the email blast in my inbox. This is Caveat Emptor! 94 . Over the course of an email blast campaign. watching it closely and selling at the first opportunity of profit with liquidity to get out. this should be viewed as a definite conflict of interest and as such. That’s the edge you want to gain. the reader should take this into consideration. this is catch if catch can. the stock can appreciate in value and can also give you an opportunity to buy and sell with a profit. So it’s about getting in early! It’s about being as close to the writer as possible! That’s the challenge. Email blasts may actually work to hype a stock.com may be selling shares of stock at the same time the profile is being disseminated to potential investors. or not? After all. All of the rudimentary market and stock behavior patterns and all of the trading knowledge and portfolio management expertise go out the window. ladies and gentlemen.estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. HyperGrowthStock.
No Spam.000 results (0.com Mingle With Winners.com Free Email Sign Up. how many there are.28 seconds) Sponsored links 1. and where they come from. 900% Jumping Penny Stocks www. 3. 3. Best Penny Stock Picks www. 1. could it be third party delivery? Is the blaster selling while you are buying? Is this what they mean by pump and dump? What should you do if caught on the wrong side of a blasted stock? 7. The Hottest Penny Stocks www.” About 388. If I am making money doing it. Avoid Losers. How many shares did the email blaster receive? Were these shares free trading? How is that possible. 4.PremierePennyStocks. Make 2500% 95 . Free Ebook. 2. 6.com We are the best rated on the web 2.AwesomePennyStocks. Could I be disgorged from my winnings by regulatory authorities? Let’s get an idea of who these emailers are.PennyBreakouts. why not continue? 9. 5. Free Alerts.) 8. Receive penny stock alerts for free Get Up To 3000% Gains In Days. Let’s Google the phrase “penny stocks. Is this legal? (Let’s not be naïve.Here are a few questions to ask of yourself.
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. There is no reason to invest in penny stocks without some guidance. . Trade Hot Penny Stocks The Top Penny Stocks newsletter for active penny stocks investors looking for penny stocks and Pink Sheet stocks.Similar Small High-Growth Companies. 8.Cached .com/small.pennystocks.Cached .Welcome Penny Stocks by Peter Leeds. Peter Leeds is an online newsletter specializing in penny stock picks.Similar 97 .6.com/ .Similar 7..Cached .wall-street.hototc. They divide the stock .com/ ..Cached ..Cached .html . www.Your Guide To Penny Stock Research Sites and . stockeinstein. Penny Stocks Visit Tip Reporter for reviews of several penny stock newsletters.Similar Think Penny Stocks . links to the newsletters and summaries of their stock picks. 9.. Penny Stocks by Peter Leeds .. 10. www.com/ . 1. There are several penny stock research and newsletter sites that you can choose from to . Penny Stocks|Penny Stock Investing|Penny stock|Penny stock I just wanted to thank you for some plain and simple insights that you offer in yournewsletters every week.com/ ..thinkpennystocks. www.. www. Penny stocks do not usually last long.Similar Penny Stocks Alerts daily... You can profit as we reveal undiscovered companies of .
when the next book came out. It all ended when the S. Marty. I am receiving between 10 and 15 emails a day strictly from Penny Stock email blast sources. One day. They had an industrial sewing machine business in the 1960’s and 70’s on Sixth Avenue and 17th Street in Manhattan. Well.B. Irving. and his partner. You can be sure that the other guy added a fourth A in the next edition. the two partners noticed that the phone was ringing less and they were flustered as to why. They checked around and they found out that another company had listed in the telephone book as AAmerican Trading Company. Marty and Irving were delighted to see their new listing in the telephone book as AAAmerican Trading Company. Some have great names don’t they? How about stockeinstein. Well. For years they prospered.com? Or hotpennystocks. 98 .s threw in the towel after Irving and Pops had added enough As to become AAAAAmerican Trading Company. the Yellow Pages phone directory was the marketing and advertising tool for small businesses. had put an ad in the book and now had the listing above theirs. They called the guy but to no avail.O. My father and Irving were racking their combined brains to figure out how to beat these guys at their own game. The name of their business was terrific: American Trading Company. ran ads in the yellow pages. like Google.B. the listing is key.Do I look like a Penny Stock Trader to you? Maybe not. and their phone rang all the time with new customers. but to these newsletters all I need is a pulse and an email address. They built a good business and a very strong brand.com? I remember an old story about my Dad.O. In those pre-Internet days. Some S.
17 . AMCG.680 N/A N/A N/A N/A (N/A) Quotes delayed.Similarly. except where indicated otherwise.OB. AMICO GAMES CORP (OTC BB: AMCG. The really big difference here is that one company probably owns 100 or 1000 different web addresses.19 x 5000 N/A 0.18 Trade Time: Change: Prev Close: Open: Bid: Ask: 1y Target Est: Day’s Range: 52wk Range: Volume: Avg Vol (3m): Market Cap: P/E (ttm): EPS (ttm): Div & Yield: 3:59PM EDT 0. Let’s look at Amico Games Corporation. Currency in USD.01 (7.28 38.21 0. First.07 . these Penny Stock blasters are trying to top each other.17 x 5000 0.0.0.19 0. It’s probably a good time to do a case study.689. 99 .OB) Last Trade: 0.593.330 2. we’ll take a look at Amico’s stats.22 0.26%) 0.
May 19) Amico Games Corp. Reaches 23.876. Highlights Growth of Chinese Telecom 3G Networks and Mobile SubscribersMarketwire(Thu 7:30AM EDT) Amico Games Corp. May 14) AMICO GAMES CORP. May 17) Amico Enjoys Smooth Growth in New Game Users in February 2010Marketwire(Fri.Make lots of press releases. May 19) Skymark Research Initiates Independent Research Coverage on Amico Games Corp. Files SEC form 10-Q. Quarterly ReportEDGAR Online(Wed. May 11) AMICO GAMES CORP. Adds Another 1 Million Registered Users for Its Mobile GamesMarketwire(Wed. Apr 14) 100 . 1d 5d 3m 6m Step One: Headlines .GlobeNewswire(Wed. Files SEC form 8-K. May 18) Amico Games Corp. Reports a 70% Increase in Revenue in Its Second QuarterMarketwire(Tue. Plans to Upgrade Its In-Game Graphics in Journey to the West OnlineMarketwire(Thu 4:00PM EDT) Amico Games Corp. Amico Games Corp.906 Registered Users as of March 2010 for Its K-JAVA Mobile Phone GamesMarketwire(Mon. Regulation FD DisclosureEDGAR Online(Tue.
Apr 6) » More Headlines for AMCG.OB Add AMCG.OB Key Statistics Forward P/E (1 yr): P/S (ttm): Ex-Dividend Date: Analysts Annual EPS Est () : Quarterly EPS Est () : N/A N/A N/A N/A N/A Mean Recommendation*: N/A PEG Ratio (5 yr expected): N/A * (Strong Buy) 1.0 (Sell) 101 . financial summary..0 .Reuters Investment Profile(May 15) AMICO GAMES CP (AMCG=US) 2-weeks forecastPechala’s Reports(May 14) » More Reports for AMCG. Amico Enjoys Smooth Growth in New Game Users in February 2010Marketwire(Tue...5.OB Headlines to My Yahoo! Amico Games Corp: Business description. 3yr and interim financials.
Step Two: Continue to pump good news out through email blasts. AMCG yesterday received a 0. AMCG holds strong despite markets sinking! From: PennyStockGains <picks@pennystockgains. Even companies such as Apple were down about 5% today. despite strong market fears and a market that is near 2010 lows.com Hi Everyone. but at the current usergrowth rate we believe we could get a surprise soon! 102 . putting the total user count at about 25.000 users! This is phenomenal growth that should clearly have a very positive effect on the next earnings announcement because as it is already AMCG announced a 70% growth in revenues.com > Add to Contacts To: stocknewsnow@yahoo. Welcome! AMCG for a fourth straight day traded record volume today. We have very high hopes for AMCG in the short and mid-long term. Their exciting report can be read by following the link at the very bottom of this e-mail! AMCG also announced that the company gained an additional million users last month from March to April.000. and managed to not retract more than a penny. For all our new subscribers.40 TargetPrice and StrongBuy recommendation by renowned research firm Venture Research.
Apparently we were right. and nothing would make us happier than to see our subscribers be a part of it! AMCG is absolutely on fire! The chart patterns are currently pointing NORTH! 103 .The 0. and we still believe that there is much more to come.40 Target would give it over 100% gain from today’s close as illustrated below! Symbol Rating by Venture Target Price by Research LLC Venture Research LLC Strong Buy 0. Mobile gaming is so huge and AMCG is positioned in one of the best spots possible! AMCG is catching the attention of investors. reporters and newsletters everywhere! We think it is likely only a matter of time before it reaches new highs.40 Gain Possible at Target approx +105% AMCG We brought you AMCG this week as we knew that it has enormous potential and that a lot was possibly cooking there. Several of our features in the past achieved similar gains and made a lot of people very happy! The volume accumulation we have seen today could be the beginning of something great.
We believe it’s definitely not too late to get in! . AMCG is gaming company specializing in the development of fun and interactive online games and more specifically mobile games.AMCG is rapidly growing the red hot online gaming market! Similar companies such as Zynga and Playfish are making billion dollars 104 . AMCG announced that they reached 22. 1 million users per month! Interested to know more about AMCG? Read below: . such as MMORPGs.AMCG is still at bargain levels in our opinion! .AMCG has recently been approved for a 40% income tax reduction! Great news for the company: They will be paying 40% less in taxes! That means significantly more profit than before! This truly is fantastic news.5 million registered users (gamers). and will be in a much more secure position! .For those of you who don’t know.AMCG has solid games at the moment with a very big user-base! In fact the growth numbers mentioned below speak for themselves! The latest news about the company is that it is experiencing very strong growth! Just last week. . showing both that the company will be more profitable in the future. with an increase of approx.
Chinese gaming companies are perfectly placed to monetize and profit from this huge population.a year with the most simple and most profitable online games! The only problem is that they are not public companies and we cannot buy into them on the public market! Fortunately. and AMCG is once again right in the middle of the action! . AMCG is! . AMCG has been a cutting edge interactive 105 . and thinking outside the box as much as possible. Each of these people have access to advanced cell phones. China is the world’s most rapidly advancing country. With the population getting access to more and more credit cards.AMCG is rapidly growing and penetrating into the HUGE China market.AMCG is determined to provide the most amazing gaming experiences to its players By adding new technologies and new marketing methods. and of how much money it’s making every single month from its members? The MMORPG is the most profitable and the fastest growing market in the gaming industry. (AMCG)? For about 10 years. . computers and internet. Which one of us hasn’t heard of World of Warcraft. AMCG is showing an extremely promising future! Want more information about Amico Games Corp.AMCG specializes in the extremely popular MMORPG market.
with incredible potential in the rapidly expanding gaming market. given the great momentum we are observing. AMCG’s recent growth shows us that their games are attracting more and more people.com We strongly believe that AMCG is a fantastic company. as well as the first company to provide games over China’s WAP network (the world’s largest network).amicogames. way up! Our last few picks did absolutely fantastic for our subscribers. Last year. and AMCG is clearly onto the same road! Find the research report here: http://www. we have a good feeling that things are just getting started! We believe that AMCG can only go 1 place from here. another privately owned Chinese gaming company. and that the company really knows what they are doing! Finally.pdf 106 .entertainment media company.com/ initiation_amcg. which was one of the first game developers in China. specializing in developing multiplayer networked mobile phone games that are played over the mobile internet in China. AMCG acquired Galaxy Software Ltd. and that is way. Make sure to check out their awesome website at www.claymahaffey..
Markets Quote Depth/LII Charts Depth/Level II for Amico Games Corp.67 k 107 .0105 (+6.69 m 3:59 PM EDT May 20.175 News Filings Streamer -0.26%) Volume: 38. holy cow! Where is all the selling coming from? I guess we figure the buying is from all the email blasts and company announcements.otcbb. reflective of the market making and trading of AMCG. This is the trading time/sales level two.com trading. Here is the www.1855 0. Does it seem curious to you that the last five trades occurred after the market was closed? Especially as the last and largest trade that occurred was 14:26 after the close? 38. from the same day as the above announcements and email blasts. They are seemingly dependent on one another. Your PennyStockGains Editor Step Three: Analyze the tape. 2010 4:14 PM EDT May 20.00%) Volume: 454.6 million shares.Make sure to add AMCG to your radar if you haven’t already! Happy Trading.0137 (-7. (AMCG) $ 0. 2010 After Hours: $ 0.
a penny stock promoter blasts several claims that he expects a blockbuster announcement to come out by Wednesday. What does the Dow Jones have to do with the stock being recommended by this promoter? 2. Why would anyone believe they should run out and buy the stock recommended in this email blast? 108 . To the unsuspecting and trusting. or he is connected real close to the company. By doing so. Such a deal! When you read this posting by Hypergrowth. wow! He is either right all the time due to a miraculous intuitive capability. The promoter not only knows what the next Wednesday announcement is going to be. which is a big plus. So yeah. Who gave this promoter the credibility he claims in his posting? 3. he knows and can say unequivocally that he knows a blockbuster announcement is due out Wednesday. and that everyone should load up on their positions in advance of the announcement. and is in possession of the next half dozen pending announcements. on a Monday morning. For instance. please answer the following questions for yourself: 1. advised the company when to release it. and which establishes the credibility with which they are sending emails. but he probably already helped write it. they attempt to prove that they were right.Here’s a good trick to watch out for: Penny stock promoters love to lead their readers and listeners along in their penny stock newsletters. gets great inside information and is generous enough to share it with investors for FREE.
Beats me. (Why?) There are signs that buyers are also taking advantage of lower prices in CZHC and KNDR. Thursday was an exciting day in the marketplace and if optimism can hold. (Why?) TLAN is starting to heat up and we are expecting to see a very strong move soon. Nothing. we should see another strong move today. No one.Answers: 1.hypergrowthstock. This optimism should also provide some momentum for our recent stock picks. 3. As fear begins to dissipate. A strong open could attract even more investors to the marketplace. The bulls were able to recapture the 10. (Why?) You can read our full premarket analysis at: http://www.com/2010/05/27/friday-may-28premarket-analysis Have a Great Trading Day! 109 .200.000 level and pushed the Dow Jones above resistance at 10. we should see investors re-enter the market and drive these stocks higher. Volume is rising and is helping to drive the stock higher. 2.
but put yourself in the public company CEO’s position. CEOs are constantly pressured to provide reasons to shareholders to buy or hold the issuer’s stock. Any Good News You Can. I have put a little chart together to rate good announcements: Signed an LOI Signed an MOU Sales increased Attending a conference Profits accomplished Losses reduced Weak Weak Strong Strong Strongest Stronger (Did stock move up or down?) Completed an acquisition Strongest 110 . That’s why we don’t trust MOU’s and LOI’s. What to do? Here’s the scenario: The only commodity available to buy companies or to raise money to grow the company organically is the value placed on the public company shares. this chapter heading may sound goofy or unreasonable. Philosophically. These shares are valued by their market price. remember? Good news is anything that sounds positive. assuming there are no earnings and no unused collateral. I have seen press releases announcing that there were going to be more press releases coming. I know CEOs that scramble to release an announcement because they have to feed a hungry audience. or the CEO has hired and paid a promoter and the promoter needs an announcement to boost his content for his email blasts.Chapter 18: No Earnings? Give Good News.
” and “No Bull. So the more he sends. Other promoters have catchy names and brilliant slogans like. the more he thinks we will read. Unfortunately. getting you and me to read them. or unavailable if it means them getting emails and even more importantly. What a perfect segue way into penny stock promoters. just remember this: desperate CEOs do desperate things. Then it’s a grand slam homerun if one of us buys any shares. The promoter expects that we will read more than one of emails.000 different websites on which he could post similar or same stories on the same stock. expensive. someone is selling every time we are buying. “Penny Stock Winners Only. but then again the whole point of this book is to smarten us all up to avoid these scams because as we know. We got us a sexy cowgirl from the Penny Stock Farmer. Who knows. the sellers could be the same promoter telling us to go buy the damn stock already! 111 . and the frequency of the various opinions and promotions will reinforce his ultimate message: “Go buy the damn stock already! How many times do I have to tell you?” Well. Just Bullish Stocks. I knew one promoter who boasted having over 1. Penny stock promoters will use any device at their fingertips with no tool too fragile.) Outbid competition Strong What does the growth in the industry have to do with our issuer if he’s not growing at the same pace or better than the industry? When the CEO is at his wit’s end and desperate.” and so on. maybe all 29 I got today came from the same source. including hiring promoters.Research coverage begun Strongest (So long as it’s not paid for. maybe he’s right in certain cases. Now follow me here for a minute.
but that is not my style. I’m telling ya now .down even further! Had you gotten out yesterday and cut your loss. you’d be using that money to play other stocks today and hopefully making money back. look at HSCO today . if you did not honor your stop loss. HSCO was a rough trade.com. you 112 . With momentum trades like this. cut your losses and move on. and the HSCO trade gives us a nice opportunity to learn. we have a nice little lesson though.com Howdy Stocknewsnow@yahoo. and that’s what I’m gonna do here.com> Add to Contacts To: stocknewsnow@yahoo. and that is the nature of trading stocks. However. But you know what? It happens! Anyone or any newsletter that makes it seems like all trades are winners. not only did you tie up your money today.Ya Win Some. I know most newsletters don’t do this because they want to appear perfect without ever making any bad trades. but now you have taken even a bigger loss! Money management is key! As long as you have capital. if the price goes against you. Ya can’t win them all! In regards to this. I am a big believer in learning from ‘actual’ situations. Us country folk like to shoot straight. Case in point. Ya Lose Some From: Penny Stock Farmer <support@pennystockfarmer.BEWARE! HSCO went against us. The gapping nature of the stock drew in the bears and unfortunately they won the day.
so decisions need to be made fast. The Farmer An update on July 4th. 113 . a momentum trade. and if you held on too long.can turn that into more capital! Could it still bounce? Yep. but the current market conditions are a prime example of why it is wise to always use stop losses. EVXA made us some nice profits. take this as a learning example and grow from it! All the Best. I’ve been losing money. I discuss this more in my blog post located here. don’t get frustrated. and it’s not an intended trade where you buy and wait (like our current TLAN trade). Heck. Keep your chins up. always a possibility. Howdy Stocknewsnow@yahoo. but AUMY was caught in the common color currently of the majority of stocks: red.com. even EVXA is feeling some pain and looks like it may be getting ready to head back down. The past couple of weeks have been rough out there for traders. but in a controlled fashion. but as I presented this from the start as.
There is a big difference between losing money and losing money in a controlled fashion.10 x 500 N/A 0.OB) Last Trade: Trade Time: Change: Prev Close: Open: Bid: Ask: 1y Target Est: Day’s Range: 52wk Range: Volume: Avg Vol (3m): Market Cap: P/E (ttm): EPS (ttm): Div & Yield: 0. / (OTC BB: TOPZ.20 .98 0.06 (6. TOPZA RESOURCES INC. use your stop losses! I also break down the Dow Jones chart.0.98 0.OB.90 Jul 2 0.96 0. there is? Oh my!) In short. this would be great if we needed a pen pal and it wasn’t our money getting pissed away.582 82. (I love this.826 75. so read the blog and let’s see what happens the rest of this week.) The next stock to follow: TOPZ.87 .69M N/A -0.00 N/A (N/A) 114 .95 278.3. (You know.85 x 2500 1.25%) 0.
10 ask.000 CAD from a third party. introduced its team of 57 administrative and operations personnel.) From: PennyStockGains To: stocknewsnow@yahoo.) Topaz senior management includes five key professionals that collectively represent over 150 years of experience in all aspects of developing and managing energy projects and in running private and public companies.) TOPZ an independent oil and gas company ("Topaz" or the "Company"). volume before receiving this email: 279. Give me a minute. First.90 last) TOPZ has the attention of Wall Street! (Average volume: 83. in 115 . I wonder what compensation is not disclosed. TOPZ.000 shares. (57 people must be quite a burn rate.) TOPZ has a chart pointing North! (NO EPS market cap: $76 Million.com Hi everyone. I will add the symbol to my yahoo finance page.OB. The Topaz management team has been involved in operating well and field activities. That is disclosed. The recommending newsletter writer indicates they were paid $5. the price is $ .Our hot Oil pick of the summer! (We must follow this one. 1d 5d 3m TOPZ .000 shares. in building and running drilling rigs.85 bid. So here goes. and $ . $1. and to all new subscribers Welcome! TOPZ is THE stock to keep an eye on this week! (As of July 6th 2010. I will be right back.
Strategically. acquisitions and developmental drilling opportunities within proven producing areas of north. We hope that everyone has been taking a close look at our new feature Company . safety reports. which will be instrumental in executing our objectives of growing our reserve value and our share value through strategic acquisitions and hands-on developmental work and drilling. Topaz utilizes one reservoir engineer and one field engineer plus one drilling superintendent overseeing two rig crews of 22 personnel each.leasing of mineral rights and in arranging appropriate financing. Topaz has an additional five personnel handling accounting. "America is buying 700 Billion barrels of 116 . these involvements in the drilling and operating businesses provide Topaz a functional presence and an accumulated experience in all aspects of the north-central-west Texas energy business that would be difficult to duplicate in a small cap oil and gas_ company. operations and payroll. President and CEO. Inc. So does that mean that it’s time to watch who is selling while we are being told to buy?) Topaz Resources is an independent oil and gas company focusing on production. (Does this make it 62 people?) Operationally. Boone Pickens. (Let’s Google Ted…so far nothing bad. railroad commission work and general office duties. TOPZ! We believe that TOPZ could be another HUGE WINNER! Lengendary Oilman T. central and west Texas." said Ted Munden. But I do see that there is a plan in place for a whole series of announcements to be sent out over the short term. "We are very pleased that we have been able to assemble a team as qualified and experienced as ours.Topaz Resources. Administratively.
Driving growth through internally generated projects. central and west Texas where their management team has a competitive advantage. acquisitions and developmental drilling opportunities within proven producing areas of north. Pickens buying any TOPZ?) TOPZ is an independent oil and gas company focusing on production.Foreign Oil a year or 70% of our consumption. (Is Mr. We need American Energy Solutions. central and west Texas.2 TRILLION cubic feet of gas in one of the largest natural gas fields in the world. (Any investments in TOPZ?) 117 . and Maintaining a conservative financial position to preserve financial flexibility. TOPZ objectives are to increase shareholder value. Petrohawk and coal giant Consol Energy. Washington is putting $150 billion behind the switch to natural gas. to enhance cash flows and to grow proven reserve values by building on strengths and by pursuing a balanced strategy of: Remaining focused in our area of operation within north. (How much is TOPZ to receive?) Exxon. Strategic reserve and leasehold acquisitions to supplement cash flow and to complement drill-bit growth strategy. investing mega-millions in natural gas. TOPZ could be sitting on 1. Achieving operational control of properties in order to manage costs and development schedules." Companies like "TOPZ" address this major US dependence on foreign Oil. Exploiting and drilling existing core properties to maximize reserve growth.
the fourth largest coal company in the world are on-board with natural gas as you see in a few minutes. As some might say. Boone Pickens calls it.With shale gas coming on stream. let’s watch this puppy and see what kind of a dog it really is. our natural gas supply is more than abundant and the plan could work. Exxon. T. BP and even Consol Energy. I’m thinking one that can’t hunt!) Start watching TOPZ right now! We could be in for a wild run! (Key operating word here is “could. Boone isn’t alone. Says Pickens. Boones $62 million initiative alone that our energy crisis is handing us an opportunity to profit immensely especially with junior US energy company Topaz Resources. Inc. (TOPZ).”) Happy Trading. you can see from T. Inc. That’s why I’m so excited about my latest discovery Topaz Resources. we should turn to it [natural gas] as an immediate replacement for foreign oil in fleets and heavy duty vehicles. We’ve been watching this energy play very closely and it’s clear that natural gas is going to be the new oil or the bridge to the future as T. (HUH? Okay. Your PennyStockGains Editor 118 .
30 141.918 July 19 NO 10. The trading volume was very good by most standards.120. They want to know if they buy in or lend money to the company.61 389.229.366.46 .52 . So I began to add up the number of shares that were trading.03 UP .87 264.92 266. let’s start watching and see what happens.990 July 7.96 UP .30 DOWN .62 UP .828 July 20 NO 10.34 148.967 July 8.535 July 9.575 July 15.37 228.154.30 .62 .45 .48.41 . They want to gauge the stocks liquidity.100 July 21 NO 10.37 388. multiply the volume by the last price each day and then add the total. 2010.975 July 14. will they be able to exit profitably? That is their main concern. and market experts judge a stock by the amount of money the stock trades over a period of time. if you paid $. Liquidity is a prerequisite of buying or shorting.37 277. YES 10.Starting from Tuesday July 6.53 DOWN .545 July 6. If you want a rough estimate in total dollars. 119 .10 .30 UP How would you feel on July 22.86 1.322.92 .000 .50 . NO 9743.30 .097.640 July 22 NO 10.51 518.85 .33 .33 .99 UP . hedge funds. YES .46 .30 115.32 . Dow Jones: 9686.33 138. Speculators. YES . NO (YIKES!) 10.25 . 2010.35 . Bid Ask Last Volume Announcement Market UP or Down .36 . YES* .70 .90 on July 6? On Saturday July 17.46 .90 286.063 July 16.88 . TOPZ.198.72 UP .34 . I began to think the worst about what was going on in the trading of TOPAZ.BB.30 . NO 10.
I want to analyze if the buys and sells are each being reported.36 bid and $. averaging almost $250K per day. Regardless of this exercise. are not protecting the bid.361 to $.46 and sales at $.36. especially toward the trading day’s end. let’s assume it is one side reporting. I also noticed that the sellers.09 spread and an almost 30% markup for the trader). I checked the trading range and it seems the stock was trading from $. In other words. Traders love big spreads. In fact. Next.37 last.TOPZ has traded approximately $2M over eight days. Tie the announcements to the email blast that I received and it’s way obvious someone is paying for this flow of announcements.37 with the bid $. to see what price the stock had traded at before the last trade. This is an indication that the market maker filled a sell order at $. the sellers either hit the bid or were filled in the middle. on July 14. So here’s the big question: who’s the seller? I am really not sure yet. and the stock traded at $. the company made four press releases. $2M bucks in eight days. To protect the bid. It is a very big spread between bid/ask as well. 15. A public company averages 22 press releases annually. which would also double the amount of money the stock is trading. the stock closed at $.37 (a $. which seemed to have disappeared. a narrow spread for the market makers. I notice that in eight days of trading. and there are sellers obviously.46 ask. At this point. email blasts and who knows what else that is creating all of this volume and liquidity. I would look at time and sales that day. There is an obvious promote going on. the regulators have forced traders to switch from fractions to decimals. I didn’t see buys at $. the sellers would offer the shares on the offer/ask side of the market. or is only one side being reported. Double reporting would double the volume. Well. but here’s my line of reasoning: who stands to gain? 120 . and 16. For instance: July 15.381.
I am going to see if there are any 144 filings. 6.1. shareholder lists. 2010. but we do have access to public records. How many FREE trading shares were retained by the shell seller? Who are the new shareholders as a result of the reverse mergers? Who are the insiders? Who are the largest shareholders? 121 . 2. This could get interesting. A large shareholder holding free trading stock. Now my interest is piquing. isn’t yours? We do not have access to the company records. A company attempt at a short squeeze against someone they know is short. The information indicates that TOPZ was a reverse merger into a shell (formerly Kids Germ Defense Corp). These are six good possibilities. The beneficiary seller committing a fraud. The possibility of a seller arises from the transaction involving the original shell owner. Lots of questions come up about the reverse merger such as: How much did it cost? Who paid? How was it paid for? Cash? Or cash and stock? Or other? Don’t you find it interesting that a company with so little cash is trading $2 million dollars worth of stock in the last eight days? I know I do. An insider who freed 144 stock (pretty easy to trace) and has free trading stock. 3. or DTC sheets. A promoter in a deal with the company who was issued free trading stock from a third party. I have pulled the TOPZ 10Q. A funder converting debt into equity. 5. transfer sheets. which is reflective of the company’s financial position as of March 31. 4.
If March was the last filing they calendar reported. but I cannot wait to read that filing! 122 . I don’t know about you. the next filing should be a June 10Q.Having fun yet anybody? TOPZ is required to file a 10Q each quarter. They have until August 15th to file the June 10Q.
O.UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON.C. For the quarterly period ended March 31. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. TX 76207-2057 (Address of principal executive offices) (Zip Code) Registrant’s telephone number. INC. Box 2057 Denton. 333-158721 TOPAZ RESOURCES. 2010 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ____________ Commission File No. D. (Exact name of Registrant as specified in its charter) Florida 26-4090511 (State or other jurisdiction (IRS Employer Identification No. including area code: (940) 243-7744 123 .) of incorporation or organization) 1012 North Masch Branch Road P.
large accelerated filer and smaller reporting company" in Rule 12b-2 of the Exchange Act. an accelerated filer. INDEX Page No. 2010 (Unaudited) and December 31. 2010.100. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). INC. See the definitions of "accelerated filer.0001 par value common stock outstanding as of May 14. Yes [ ] No [X] There were 84. Part I. and (2) has been subject to such filing requirements for at least the past 90 days. TOPAZ RESOURCES. 2009 Condensed Statements of Operations Three months ended March 31.000 shares of the Registrant’s $0. a non-accelerated filer or a smaller reporting company. Financial Information Item 1. 2010 and 2009 (Unaudited) 3 3 4 124 . Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer. Financial Statements Condensed Balance Sheets March 31.Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports).
Default Upon Senior Securities Item 4. Other Information Item 6. Quantitative and Qualitative Disclosures About Market Risk 11 Item 4. Exhibits Signatures 12 12 12 12 13 125 .Condensed Statements of Stockholders’ Deficit Three months ended March 31. Other Information Item 1. Management’s Discussion and Analysis of Financial Condition and Results of Operation 9 Item 3. Legal Proceedings 11 11 Item 2. 2010 and 2009 (Unaudited) Notes to Financial Statements (Unaudited) 5 6 7 Item 2. Controls and Procedures Part II. Unregistered Sales of Equity Securities and Use of Proceeds 12 Item 3. Submission of Matters to a Vote of Security Holders Item 5. 2010 (Unaudited) Condensed Statements of Cash Flows Three months ended March 31.
388 ----------- Stockholders’ equity: Preferred stock.330 8.000 shares authorized.000 ------------53. Inc.000.108 ------------ $ 35.000 shares issued and outstanding at March 31. (formerly Kids Germ Defense Corp.974 ---------$ 199. 700. respectively -- -- 8.0001 par value.0001 par value. $0.108 ------------2.000 shares authorized.330 126 .) (A Development Stage Company) Condensed Balance Sheets March 31. 10.300.000 and 83. 2009 --------- $ 199.PART I--FINANCIAL INFORMATION Topaz Resources. none issued and outstanding Common stock. 2010 -------(Unaudited) ASSETS Current assets: Cash Total current assets December 31.254 --------$ 25.254 --------25.300.974 $ 25. 83.254 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable Due to related party Total current liabilities $ 2. 2010 and December 31. $0. 2009.388 18.974 --------199.000.
000 -(75.670 -(500) 200.974 $ 25.634) ----------------Total stockholders’ equity 197.134) ----------------$ 199.866 (28.877 26. 127 .254 ---------------The accompanying notes are an integral part of the condensed financial statements.Additional paid in capital Stock subscription receivable Common stock payable Accumulated deficit 64.341) (62.
341) -----------(75. March 31. March 31.707) ------------(12. 128 .000 ========== 63.341) ======== 83.341) -----------(75.344 -----------(12. Loss from operations Net loss before taxes Income tax expense Net loss Net loss per share Weighted average Number of common shares outstanding 8.363 4. 2009 Jan. 16. Inc.) (A Development Stage Company) Condensed Statements of Operations (Unaudited) Period Period Jan.000.508 -----------(75. 16.707) ======== $ (0. (Formerly Kids Germ Defense Corp.00) ========== 500 149 -----------(649) -----------(649) ------------(649) ========= $ (0.707) ------------(12.Topaz Resources.000 =========== The accompanying notes are an integral part of the condensed financial statements.300.00) ========= 52.833 22. 2010 2010 2010 ----------------------------------------$ -$ -$ -- Revenue Operating expenses: Legal & Accounting General & Admin. 2009 (Date of Inception) (Date of Inception) Three Months Ended through through March 31.
----------------.000 -- 28.670 ---------- ------(500) (62.000 8.300 --(300) --Issuance of common stock for cash ($0.Topaz Resources.000.001. 2010 Common Stock ----------------------Amount Par Value Shares $0.0001.----------.-----------------. December 31.-----------Preferred Stock --------------------Deficit Accumulated Additional Common Stock During Paid-In Stock Subscription Development Capital Payable Receivable Stage Total ------------. 2010) (unaudited) ----38.----------- Balance at Inception.634) (62.134) Payment on stock subscription receivables (January 14.----- Shares Amount ---------.-----------. 2009 $ -.) (A Development Stage Company) Condensed Statements of Stockholders’ Equity For the Three Months Ended March 31. 2009) 63.$ -$ -- $ -- $ -- $ -- $ -- Issuance of common stock for cash ($0. 2010) (unaudited) ------500 -- 500 Capital contribution from shareholders (February 16.207 129 .634) (28. January 16.-----Balance.000 2.0001 --------.030 --26.000 6. 2009) 20.$ -$ -.500 -------26. 2009 83. 2009 (Date of Inception) through March 31.300.634) ---------------(62.207 ---38. (Formerly Kids Germ Defense Corp.300.330 --- -- 6. Inc. December 9. January 16. 2010 and For Each of the Years From January 16.970 -(500) Net loss for the period -----------.
2010 (unaudited) -------(12.330 $ -.$(75.25.000 Net loss for the three months ended March 31.707) (12.$ -.Issuance of common stock and warrants for cash ($0.-----------------------------------------Balance.000 $ -.707) -------.000 --. 2010) (unaudited) -----200.341) $197. March 31. 2009 (unaudited) 83.877 $200.$64. March 26.000 $8.-----.866 ======== ====== === === ======= ======= ===== ======== ======== 130 .200.300.
707) $ (649) $ (75. 16. 207 2. 026) 131 . March 31. 2009 (Date of Inception) (Date of Inception) Three Months Ended through through March 31.) (A Development Stage Company) Condensed Statements of Cash Flows Period Period Jan. 2009 Jan.280) --- 38. 16.108 Net cash used by operating activities (7.341) 38.Topaz Resources. Inc.780) (649) (35. (Formerly Kids Germ Defense Corp. March 31. 2010 2010 2010 ----------------------------------------(unaudited) (unaudited) (unaudited) OPERATING ACTIVITIES: Net Loss $ Adjustments to reconcile net loss to net cash used in operating activities: Contribution from stockholder Increase (decrease) in: Accounts payable (12. 207 (33.
END OF PERIOD $ 199.500 NET INCREASE IN CASH 174. BEGINNING OF PERIOD Period Period Jan.Three Months Ended March 31. 2010 --------------(unaudited) FINANCING ACTIVITIES: Proceeds from advances from stockholder -Repayment of advances from stockholder (18.000 --------6.720 CASH. 2010 2010 --------------------------(unaudited) (unaudited) -- 18. 16.000) 200.974 132 .000 35. 2009 Jan.974 25.000) Increase in common stock payable 200. 2009 (Date of Inception) (Date of Inception) through through March 31.000 --------235.000 --6.000 199.351 (18.974 ---------$ 5.000 Proceeds from issuance of common stock 500 --------Net cash provided by financing activities 182.254 --------CASH.351 ---------$ 199. March 31.000 5. 16.
2009. all adjustments consisting only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the periods ended March 31. to Topaz Resources. Effective April 16. The corporate headquarters are located in Denton. The accompanying condensed financial statements and notes should be read in conjunction with the audited financial statements and notes of 133 . the Company's activities have been limited to raising capital. 2009 (Date of Inception) through March 31. have been made. 2010 and December 31. The Company is an independent oil and gas company focusing on production. Inc. (Formerly Kids Germ Defense Corp. acquisitions and developmental drilling opportunities within proven producing areas of North-Central-West Texas. 2010. organizational matters and structuring its business plan. To date.) (A Development Stage Company) Notes to Condensed Financial Statements Three Months Ended March 31. (b) the financial position at March 31. 2009. Inc. (the "Company") is a development stage enterprise that was incorporated in the state of Florida on January 16. and (c) cash flows for the periods ended March 31. GENERAL ORGANIZATION AND BUSINESS Kids Germ Defense Corp. 2010.Topaz Resources. 2009 (Date of Inception) through March 31. 2010 and 2009 and the Period January 16. and the Period January 16. 2010 (Unaudited) NOTE 1. 2010. The unaudited condensed financial statements and notes are presented in accordance with SEC Form 10-Q. the Company changed its name from Kids Germ Defense Corp. Texas. certain information and note disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. Accordingly. 2010 and 2009. ACCOUNTING BASIS In the opinion of management.
707 and $75. 2010 are not necessarily indicative of those to be expected for the entire year. the Company has had a net loss of $12. NOTE 3. the Company's ability to continue as a going concern is dependent upon the Company's ability to begin operations and to achieve a level of profitability. Actual results could differ from those estimates. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets. Since inception. As of March 31. NOTE 2. The results of operations for the three month period ended March 31. the Company has financed its activities principally from loans from the executive officer and sale of public equity securities. the Company has not emerged from the development stage. For the three months ended March 31. In view of these matters. including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. RECENT ACCOUNTING PRONOUNCEMENTS Management has reviewed all recent accounting pronouncements issued by FASB (including EITF).the Company for the fiscal year ended December 31. the AICPA and the SEC since the last audited financial statements. 2010. or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources. 134 . 2010 and since inception through March 31. 2009. respectively. 2010.341. GOING CONCERN The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
STOCKHOLDER'S EQUITY TRANSACTIONS The Company's Board of Directors has authorized 700.000 shares of common stock with a par value of $0. the Company and an investor signed a subscription agreement to purchase a total of 800. As of December 31. 2009. the Company effected a forward stock split of the Company's common stock on a seven for one basis. The Preferred Stock ranks senior to the common stock as to dividends and liquidation.000 shares of common stock at a price of $0.000 shares of common stock at $0. and $500 in a stock subscription receivable. SUBSEQUENT EVENTS Effective April 16.500 in cash proceeds. such that its authorized shares of common stock has increased from 100.0001 per share for a total of $6. such that its authorized shares of common stock has increased from 100. NOTE 5. 2010 the additional $500 had been received for the total of $29. the Company issued 63.000.000 to 700. 2009. the Company authorized a Private Placement Offering of up to 21. to Topaz Resources. par value of $0. On January 16. the Company had issued 20. 2009. Inc.0001 to be issued in accordance with the terms and conditions as determined by the Board. NOTE 4.000 to 700. 2010.000.000. As of March 31.000 shares of preferred stock.000. The total amount raised in this financing was $29. Effective April 16.50 per share for a total amount of $200.000 warrants to purchase shares of the Company's common stock at an exercise price of $0.and does not believe that they will have a material impact on the Company's present or future financial statements.000. the Company changed its name from Kids Germ Defense Corp. Effective April 22.000 shares of the Company's common stock at $0.25 per share plus 30. 2010.000.000. The Company also effected a forward stock split of the Company's common stock on a seven for one basis.000 common shares and had received $28. On January 16.000 135 .000.000.300.000 from the sale of its stock.000.0014 per share. 2010. the Company has received the $200.0001 and 10.000.000. As of March 31.000.000. 2010.
GENERAL ECONOMIC AND BUSINESS CONDITIONS. 2010. The warrants expire in 2015. INFORMATION REGARDING FUTURE OPERATIONS." "WILL. AND FUTURE NET CASH FLOW. SOCIAL. THE WORDS "ANTICIPATED. POLITICAL. REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS. 2010 that requires recognition or disclosure in these financial statements. No other material subsequent events have occurred since March 31. AND ECONOMIC CONDITIONS." "EXPECT. INCLUDING. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM 136 . The warrants entitle the holder to purchase 30. MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ITEM 2. AMONG OTHERS. FUTURE CAPITAL EXPENDITURES. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q AND IN OUR ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16." "SEEK." "INTEND. AND VARIOUS OTHER MATTERS. either cash or cashless exercise is permitted as determined by the holder of the warrant. INCLUDING BUT NOT LIMITED TO "MANAGEMENT'S DISCUSSION AND ANALYSIS"." "MAY." "BELIEVE.subscription price and recorded a common stock payable for the 800.000 shares of the Company's common stock. at an exercise price of $0. THIS FILING.000. CHANGES IN FOREIGN.50 per share. THESE STATEMENTS INCLUDE. WITHOUT LIMITATION." AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS." "PLAN. SUCH STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES." "ESTIMATE. at any time. THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS." "COULD.000 shares of common stock." "PROJECT. CONTAINS FORWARD-LOOKING STATEMENTS.
acquisition or combination with a business prospect. WE MAY NOT UPDATE THESE FORWARD-LOOKING STATEMENTS. OVERVIEW The following discussion and analysis should be read in conjunction with the financial statements. RESULTS OF OPERATIONS Our Company posted losses of $75. Concurrent with our search for additional financing for our existing business. we are also actively seeking business opportunities with established business entities for the merger of a target business with our Company. 2010. WE HAVE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE THESE FORWARDLOOKING STATEMENTS TO REFLECT NEW INFORMATION. included herewith. EXCEPT AS REQUIRED BY FEDERAL SECURITIES LAWS AND WE CAUTION YOU NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS.974 in cash. EVEN THOUGH OUR SITUATION MAY CHANGE IN THE FUTURE. 2009 to our year ended March 31. as our operations have not been profitable and our Company will fail without further significant financing. 2010. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future. or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. The principal components of our 137 . This is critical to insure our survival and to preserve our shareholder's investment in our common shares. OR OTHERWISE. FUTURE EVENTS.THOSE ANTICIPATED IN THESE FORWARD. We currently have $199. Our immediate priority is to either secure suitable financing to continue with our existing business or change our business and conclude a merger. At this stage in our operations. IN LIGHT OF THESE RISKS AND UNCERTAINTIES THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FORM 10-Q WILL OCCUR. we believe either course is acceptable. INCLUDING THE RISKS FACED BY US AS DESCRIBED BELOW AND ELSEWHERE IN THIS FORM 10-Q AS WELL AS IN OUR FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16. Such discussion represents only the best present assessment of our management.LOOKING STATEMENTS AS A RESULT OF SEVERAL FACTORS.341 from inception of the Company January 16.
or on terms that are acceptable.707 and has incurred significant losses since inception. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. respectively. the Company incurred a net loss of $12.974. As of March 31. The Company used $7. 2010. the Company has an accumulated deficit of $75. 2009 to year ended March 31. we may not be able to proceed with our intended business plans and our business will then likely fail. there is substantial doubt that the Company 138 . 2010 were related to the preparation of our Annual Report. legal and audit fees.losses for the three months ended March 31.50 per share for a total amount of $200. evaluation and combination or merger with a suitable business opportunity.341. Because of a minimum amount of cash.000. and not being able to generate any revenue from our business we need to raise additional funds for the development of our business and to respond to unanticipated requirements or expenses. In view of these matters. or to fund the identification. 2010. There is no assurance that such financing will be available in the future. We do not currently have any arrangements for financing and we can provide no assurance to investors we will be able to find such financing. the Company and an investor signed a subscription agreement to purchase a total of 800. For the three months ended March 31. 2010.000 shares of the Company's common stock at $0. 2010 we had cash of $199.780 and $649 of cash from operations during 2010 and 2009. which was funded by proceeds from the sale of common stock. 2009 through March 31. legal and administrative fees. LIQUIDITY AND CAPITAL RESOURCES From inception of the company January 16. As of March 31.000 shares of common stock.25 per share plus 30. 2009. the loss of $649 was primarily related to the start up expenses. the Company has received the $200. Consequently. There can be no assurance that additional financing will be available to us.000.000 warrants to purchase shares of the Company's common stock at an exercise price of $0.000 subscription price and recorded a common stock payable for the 800. Effective April 22. During the period from January 16. 2010.
Any failure by us to timely procure additional financing or investment adequate to fund our ongoing operations. However. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets. ITEM 3. or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. revenues. there can be no assurance that the Company will be successful in its efforts to secure such cash flow. QUANTITATIVE AND QUALITATIVE DISCLSOURES ABOUT MARKET RISK Not applicable. including planned product development initiatives and commercialization efforts. 139 .will continue as a going concern. we have not experienced any significant cancellation of orders due to the downturn in the economy and only a small number of customers requested delays in delivery or production of orders in process. ECONOMY AND INFLATION Except as disclosed herein. results of operations and cash flows. The Company is currently pursuing the following sources of short and long-term working capital: The Company's ability to continue as a going concern is highly dependent on our ability to obtain additional sources of cash flow sufficient to fund our working capital requirements. Our management believes that inflation has not had a material effect on our results of operations. will have material adverse consequences on our financial condition. liquidity or capital expenditures. and results of operations. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition.
or is reasonably likely to materially affect. The Certifying Officers have concluded that the disclosure controls and procedures are effective at the "reasonable assurance" level. which is required to be disclosed. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING No change in the Company's internal control over financial reporting occurred during the three months ended March 31. PART II -. The Company may be party to lawsuits from time to time arising in the ordinary course of its business. LEGAL PROCEEDINGS The status of our legal proceedings. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Our Chief Executive Officer and Chief Financial Officer (collectively the "Certifying Officers") maintain a system of disclosure controls and procedures that is designed to provide reasonable assurance that information. if any. processed.OTHER INFORMATION ITEM 1. that materially affected. summarized and reported on a timely basis in accordance with applicable Commission rules and regulations. 2010. including our Certifying Officers and other persons that perform similar functions. the Certifying Officers evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d15(e) under the Exchange Act).ITEM 4T. as disclosed in our Annual Report remains unchanged. as of the end of the period covered by this report. Furthermore. The Company provides for costs relating to these matters 140 . and (ii) accumulated and communicated to our management. is accumulated and communicated to management timely. the Certifying Officers concluded that our disclosure controls and procedures in place are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded. Under the supervision and with the participation of management. the Company's internal control over financial reporting. to allow us to make timely decisions regarding required disclosure in our periodic filings.
ITEM 2.25 per share plus 30. Effective April 22. 2010. the Company and an investor signed a subscription agreement to purchase a total of 800. EXHIBITS No. 2010.1 3. the Company did not issue any unregistered equity. ITEM 5. 2010. ITEM 4. the Company did not submit any matters to a vote of its security holders. ITEM 3.50 per share for a total amount of $200.000. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the three months ended March 31. The effect of the outcome of these matters on the Company's future results of operations cannot be predicted because any such effect depends on future results of operations and the amount and timing of the resolution of such matters. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During the three months ended March 31. ITEM 6.when a loss is probable and the amount is reasonably estimable. 2010.000.000 shares of the Company's common stock at $0. OTHER INFORMATION The Company does not have any other material information to report with respect to the three months ended March 31.2 Exhibit ------Articles of Incorporation* By Laws* 141 . DEFAULT UPON SENIOR SECURITIES There have been no defaults in any material payments during the covered period. --3.000 warrants to purchase shares of the Company's common stock at an exercise price of $0.
1 ---------- * Incorporated by reference to the exhibits included with the Registration Statement on Form S-1.S.C. TOPAZ RESOURCES. File No.1 Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 Certification of Chief Executive Officer pursuant to 18 U. Munden President and Chief Executive Officer (Principal Executive Officer) Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Dated: May 17. 333-158721.31. MUNDEN ------------------------------------------Edward J. (Registrant) /s/ EDWARD J. the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 2009. INC. 2010 142 . as filed December 8. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32. Section 1350.
Munden of Topaz Resources. Inc. and 143 . not misleading with respect to the period covered by this report. particularly during the period in which this report is being prepared. the periods presented in this report. in light of the circumstances under which such statements were made. this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made. to ensure that material information relating to the small business issuer.. (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures. results of operation and cash flows of the registrant as of. fairly present in all material respects the financial condition. Edward J. (3) Based on my knowledge. and for. Inc. (2) Based on my knowledge. (b) designed such internal control over financial reporting. the financial statements. is made known to us by others within those entities.. and other financial information included in this report. certify that: (1) I have reviewed this quarterly report on Form 10-Q of Topaz Resources. including its consolidated subsidiaries.1 CERTIFICATION I. (4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) designed such disclosure controls and procedures.Exhibit 31. or caused such internal control over financial reporting to be designed under our supervision. as of the end of the period covered by this report based on such evaluation. or caused such disclosure controls and procedures to be designed under our supervision. to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
2010 as filed with the Securities and Exchange Commission (the "Report") on the date hereof. based on our most recent evaluation of internal control over financial reporting. to the best of my knowledge. summarize and report financial information. Munden President. Chief Executive Officer and Chief Financial Officer Exhibit 32. (the "Company").1 CERTIFICATION I. Principal Executive Officer and Principal Financial Officer of Topaz Resources. Inc. 2010 /s/ Edward J.(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected. in compliance with 18 U. that: 144 . Date: May 17. process.C. Section 1350. to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record. Edward J. that involves management or other employees who have a significant role in ( the registrant's internal controls over financial reporting. and (b) any fraud. the registrant's internal control over financial reporting. in connection with the Quarterly Report on Form 10-Q for the period ended March 31. whether or not material. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 hereby certify. Munden -------------------------------------Edward J. or is reasonably likely to materially affect. and (5) The registrant's other certifying officer(s) and I have disclosed. Munden.S.
This leads me to assume that while we are reading all of these bullish (did I spell that right) press releases. Are you beginning to get the picture? Now all of a sudden. 2010 and as you have been reading. I randomly chose to follow Topaz Resources. we began our own following of TOPAZ at more than twice the price it is now.The Report fully complies with the requirements of Section 13(a) or 15(d). It infers you can trust the source implicitly. after the stock has seen uncompromised selling pressure. the financial condition and results of operations of the Company. it implies the coverage was unsolicited and unpaid for in cash or stock or options or warrants or some other barter arrangement. the price begins to plummet. As a reminder. I am feeling pretty good about the fact that I do not own a share. 2010 /s/ Edward J. The word independent is an important term in the world of research. that might have been called taking on a position or initiating coverage of Topaz. Even the headline runs shivers down my spine. Obviously. Had I been an investor or research analyst. in all material respects. Chief Executive Officer and Chief Financial Officer Today is July 14. licensed expert in the resource sector of the market. Munden President. We have been following Topaz together and now today the following “press release” has been made. It implies that the research was inaugurated by a skilled. and The information contained in the Report fairly presents. Date: May 17. of the Securities Exchange Act of 1934. The phrase independent research coverage is so ridiculous I am over-the-top perturbed. Munden -------------------------------------Edward J. someone or plural of 145 .
2010. 9:15 am EDT CALGARY. (OTCBB:TOPZ . 146 . Alberta.Emerging Stock Report.OB 0. 2010 (GLOBE NEWSWIRE) -. Emerging Stock Report is currently offering a complimentary trial subscription to the investment community. Inc. Related Quotes Symbol Price Change TOPZ. Companies: Topaz Resources. Emerging Stock Report Initiates Independent Research Coverage on Topaz Resources. July 14. trying to make a buck. I know it seems crazy that this goes on in the market. Inc. Let’s keeping reading and follow TOPAZ to its inevitable end.that is selling into this newly and deliberately created buying market.04 Press Release Source: Emerging Stock Report On Wednesday July 14.News).38 -0. today initiated coverage on Topaz Resources. a leading provider of sector specific independent investment research. the innocent investors trying to be treated fairly in the stock market. Inc. I wouldn’t be surprised if the cash from the sold stock is finding its way back to the company and being split between the press release creators and researchers. I know it is awful to dupe you and I.
Emerging Stock Report’s staff of investment professionals are dedicated to providing the tools and resources necessary to help make important investment decisions. visit http://www. wholesaling. The Company was formed to engage in the business of manufacturing.com/EmergingStockRe About ESR: Emerging Stock Report is a leading provider of independent investment research for North American companies.emergingstockreport.com To get our alerts AHEAD of the market follow us on Twitter: http://twitter. market commentary and the ESR newsletter.News) is a development-stage company. To view our research reports on a complimentary trial basis and take advantage of our other services.News): Topaz Resources. About Topaz Resources. Our services include research analysis on emerging growth companies.php. Emerging Stock Report 147 . (OTCBB:TOPZ .com/register.emergingstockreport. or go directly to our registration page at http://emergingstockreport.com and click on the complimentary trial subscription button on our home page. realtime news and financial data. sector specific research. ESR Disclosure: Emerging Stock Report is not a registered investment advisor and nothing contained in any materials should be construed as a recommendation to buy or sell any securities. Inc. (OTCBB:TOPZ .To view the Report in its entirety visit: http://www. Inc. marketing and sales of germ defense products for children 0 to 10 years of age.
a few million shares traded and several bucks ended up in someone’s pocket. and all the promoters are long gone onto their next deal and the next payday. 2010 and the momentum pump attempt made by ESR and TOPAZ management to the naked eye failed because the share price is a third of where it was when they started. for complete risks and disclosures. http://www. 148 .” Today is July 22. I think this stinks and you should.40. Are you getting the idea now that you were on the wrong side of these trades in TOPZ? Hint hint: that’s why I wrote this damn book! Smarten up! Don’t get fooled by this BS. Truly by accident. The announcements are done. too. As shown earlier.has not been compensated by any of the above mentioned companies. I have uncovered what appears to me to be a classic “pump and dump. but surely not the new shareholders’ pockets. The volume has dried up and with it the stocks liquidity.com. They are followed by their brethren and revered as if they are gurus. The naked eyes are in the heads of investors who bought the shares of TOPZ for more than $. Please read our report and visit our Web site.EmergingStockReport. So basically you guys that bought it are left holding the inevitable bag. which meant of course that the dump did work.
but of course difficult to prove and when intended to induce a shareholder to stay and not sell. the CEO is probably guilty of feeding some BS into the ear of some or many in order to maintain their support and protect their stock. the contradiction is the investor who loves the technology. why not again? 149 . the greater the brand of influence placed on the CEO by the shareholder. but until then he holds. Leaking out positive news is illegal. Been there. which of course we know is just a result of not being able to sell at a profit. Invariably. prays a lot and has a family who trusts in God and the CEO. huh? Do you think a pubco CEO feels everyone he speaks to is potentially a share buyer? Do you think the CEO feels he can be convincing when trying to induce a shareholder to increase his position? You know it is as natural as a calf sucking his mother’s tit for milk that a CEO will go back to an investor and try to get another investment out of them. The potential seller waits for the good news to come out publicly and then may sell. Sure. Sold him once. The list begins with people who bought and paid for their stock and are disappointed they haven’t made any money. so the disgruntled investor seeks out anyone close to the CEO so he can bust his balls and in turn place pressure on the CEO through a third party. sound like you? Depending on the size of this position. or that they are sitting in a losing position. access. done that. or deal with. such as another officer. and not really loyalty at all. Length of hold is oftentimes confused with shareholder loyalty. investment banker or lawyer for example. Sometimes the CEO is hard to reach. pubco CEOs are under extreme pressure from the usual suspects in their small world to make things happen. generally has no influence on the share volume or price.Chapter 19: CEOs Historically. The second instigating element of creating pressure on a CEO is the length of time the shareholder has held his shares.
the professionals involved and the end result? The details are not my main concern. For instance. “Wow. The LOI is signed alright. only to be incredibly disappointed and shaken by the end result. Not an announcement of something yet to come. It is a requirement which is scrutinized by everyone from us shareholders to market makers or specialists to analysts and investment bankers. and more often than not they become timed out without a contract. Once the CEO has made one announcement of low import just to make an announcement. Okay put your hands down and let’s move on. but nothing definitive has really been contracted other than a non-binding LOI The majority of LOI’s never materialize into an agreement of merit. not a deal pursuant to due diligence and financing capability. To some this is material. who handled the details. but it is really dissected by the same group putting pressure on the CEO to make an 150 . describing how it was financed. liabilities and final results. which is that nothing is done. although we all know the devil is in the details. it is still good news right? WRONG. ABCD CEO announces the signing of a Letter of Intent (“LOI”). A closing is a material event that should be disclosed. and perhaps the stock has a bump in volume and price. or break apart during negotiations. the credibility of future announcements is severely reduced. My concern is the nature of the transaction and the closing. The public has been alerted to some deal and is now poised to hear about the terms.But let’s get down to the nitty gritty. The CEO made the announcement. Don’t we get pissed off when this happens? Raise your hand if this has happened to you. Suppose the inevitable happens. The LOI signed between ABCD and EFGH gets distributed along with the announcement throughout the various newswires and repackaging services. benefits. what a great deal for our company!” And although not earnings. Wouldn’t you rather hear that the CEO of your favorite holding made a press release announcing the closing of a transaction.
Regardless. Doesn’t it register as true that if a CEO is smart and careful enough to resist the temptation to put out good news ahead of an event. The whole business of press releases gets sticky in this regulatory guided environment. CEOs may begin to grope at straws and simply play the announcement game. By the second or third failed closing of an LOI/MOU. Just know what to look for in the announcements a CEO issues. For fun. When there are no profits. it would seem true that he would refrain from tipping anyone off before he went public with the announcement? Now. follow the stock after the first or second time the CEO announces an LOI or an MOU. you would expect that every CEO gets SEC legal approval before every press release. Most of them are written in conjunction with an IR firm or business development person and may likely be filled with fluff. they found out about the closing of the transaction the same time we found out. Do you value this criteria in evaluating the type of CEO running your portfolio of companies? Go back to the announcements to feel comfortable or make changes in your holdings based simply on this level of integrity. At the same time. see how many announced Letters of Intent or Memorandums of Understanding (“MOU”) actually close. Many CEOs tend to walk the fine line and live in the gray area. Sarbanes Oxley tightened the reins on CEO carelessness or regulatory disregard. giving what is to be perceived as positive or good news when there is no news at all. bluff or ridiculous stuff. no earnings and no major positive material events. the stock will not respond positively and the CEO’s integrity will be diminished dramatically. if you can still smile. making them personally responsible.announcement. or worse potentially good news prior to a closing. Hopefully. compare what we just construed as integrity to what you as a shareholder read from your individual CEOs when they make announcements. Is this an incorrect assumption? Is it that only some CEOs run their pubco business by the book? My 151 .
10Qs. 152 . and some do comply.com for guidance in reporting stature of Pink Sheet stocks. Always check on Pinksheets. but many do not. Pink Sheet companies can comply. and 8Ks are undoubtedly material in nature and must be compiled. approved and released to maintain listing on an exchange.opinion is that 10Ks.
In addition. Inc.com).. 17.dglp. 2010. market capitalization is micro-cap. (OTCBB: DGLP . at which time we expect to begin consolidating revenue from their operations. Aug. Our acquisition of Rovion is expected to close by the end of the third-quarter. DGLP. eliminate his losses and become profitable by announcing the acquisition of Rovion. earnings are non-existent.05 stock. reported financial results for the second quarter ended June 30.Chapter 20: Interpretation of Press Releases Let’s start this analysis by stating that the acquiring company. 2010 (GLOBE NEWSWIRE) -DigitalPost Interactive. 153 . DigitalPost Chief Executive Michael Sawtell commented: "The factors that contributed to first-quarter results continued into the second quarter.com family website platform are expected to begin attracting new subscribers and recurring revenue.News) (http://www. the CEO figures he is going to bolster his revenues. The decline was due to a reduction in the number of recurring subscribers from B2B partnerships and lower professional services provided. the recent launch of Ritz Camera & Image’s interactive video gallery and the Q4 scheduled launch of Lucidiom’s FamilyPhotoZoo. compared to $376. revenues are either small or pre-revenue. IRVINE. a leader in the digital media-sharing and social networking space. Typical of a $. Here goes. Calif. but during third and fourth quarter this year we expect to return to our earlier positive trend.700.400 in second-quarter 2009. is a $. and the company is probably relying on press releases to draw in investors and gain attention.05 stock. Second-quarter revenues were $144. So.
Calif.dglp. On Thursday August 5. services and sports industries.05 0. Inventor of InPerson(TM) Virtual Spokesperson Ad Unit Acquisition Adds Online Rich Media Ad Business. 154 .DigitalPost Interactive to Acquire Rovion Inc. Inc. today announced the signing of a definitive agreement to acquire Rovion. Substantial New Revenue Companies: o DigitalPost Interactive.OB 0.00 Press Release Source: DigitalPost Interactive Inc. entertainment. 8:30 am EDT IRVINE. foodrelated.. healthcare. a leader in the digital media-sharing and social networking space.rovion. retail. Rovion offers a broad range of online advertising products and services to its active client base of more than 1. 2010.DigitalPost Interactive (OTCBB:DGLP . (http://www.com). a privately held Boston-based developer of the innovative InPerson(TM) virtual spokesperson ad unit. 2010 (GLOBE NEWSWIRE) -. e-commerce.com). Founded in 2001.News) (http://www. Inc. 5. Related Quotes Symbol Price Change DGLP.000 companies in the automotive. Aug..
Food Network. The ability to offer businesses high performance ad units with a 5% Click-Through average.1%. The acquisition of Rovion as an additional business unit is expected to provide DigitalPost the following benefits: Substantial additional revenue. While. and Summit Entertainment. with most estimates projecting double-digit annual revenue growth through 2012. delivery and reporting of rich media ads as a turnkey solution for ad agencies. Rovion InPerson(TM) technology has also been used to represent celebrity spokespeople such as Megan Fox. The creation. Michael Sawtell. potential expense ratio reductions. and J.01% to 0. the $40 billion online industry average click-through-rate (CTR) for traditional display or banner ads ranges from 0. Matt Lauer and Lamar Odom. (OOPS! No sales numbers for Rovion. so here is the size of the industry propaganda. Toyota.0% over more than five years of verified data. Online rich media advertising is growing rapidly.Rovion’s client list includes industry-leading brands such as Chevrolet. Sony Pictures. commented: "This acquisition significantly increases our base of annual revenues and enhances our growth potential as well.) In contrast. Lebron James.0% average. Ford. and rich media claims a 1. and major advertising agencies such as Digitas. Technology to incorporate online video into ads that reach millions of highly targeted users through the Web’s largest publishers. DigitalPost Chief Executive. Saatchi & Saatchi. Our goal as DigitalPost/Rovion is to 155 . Walter Thompson. Tiger Woods. Rovion InPerson(TM) ads boast an average CTR of 5.
" (By how much will the revenues be increased? CEO makes a bullish statement with no backup. Where’s the money to pay for R&D and marketing?) Obviously the market couldn’t care less about this press release.) Under terms of the agreement. management and technology team would remain in Boston. and the ability to quickly drive business growth by optimizing the combined company’s technology and sales strength and targeting the $40 billion online advertising market. the $40 billion.) Adding Rovion gives DigitalPost a second very viable business unit." (This guy has no public company experience and no money. (This is where shareholders have to take a deep breath.make InPerson video technology available to businesses of all sizes in all markets. remarked. He thinks he is going to be in the chips and his shares are worth a fortune. Has he closed transactions in the past? Does the company have the cash to support the acquisition?) Rovion’s operations. instant additional revenue. What 156 . The synergies that exist between our respective platforms will deliver immediate and significant benefit to the expanded organization. DigitalPost will acquire Rovion for restricted common stock. The stock didn’t move an inch and the volume was a non-event. creating a much bigger footprint on the Web. (Restricted common stock? How many restricted shares of common stock? How many millions of shares?) The acquisition is expected to close within 30 days. "Everyone at Rovion is excited to join the DigitalPost team. Rovion Chief Executive. while the DigitalPost corporate headquarters will remain in Irvine. We look forward to working together to create innovative technology that significantly changes the way businesses advertise on the web. Brian Goss. He’s doing this deal for shares only. (Again.
telemetrics and advanced IT solutions. Only trouble here is that although the company may be prepared to immediately implement its plan. Inc. I happen to know the CEO. including the OilDam (TM). In fact.) "Scientists believe that up to 79% of the spill.) According to an article appearing in the Wall Street Journal Friday August 20th. "Oil from the Deepwater Horizon spill formed an underwater plume of hydrocarbons the size of Manhattan. raising fears of a lingering cloud of trace chemicals in the Gulf with an unknown long-term impact." (We know the danger. (Pink Sheets: TTCS . tens of millions of gallons of crude oil. (I have a soft spot in my heart for companies trying to make money saving the environment. Thirty days becomes 90 days and where is the money coming from to pay the lawyers? I am not picking on DGLP." Edward Andercheck. it hasn’t found anybody to pay for it. The next press release for me to analyze is another micro-cap company. TIE Technologies. This ain’t new information. I am laying down important considerations from this press release. announced today that it has completed engineering and is prepared to immediately implement its plan to roll out a multi part oil protection system. to protect both low energy water flow coastlines and higher energy areas. who operates a portfolio of Homeland Security assets focused on environmental disaster remediation and security driven by proprietary smart logistics. TIE Technologies. Only full height seafloor-to-water surface solutions like OilDam (TM) can guard from the eventuality of tar balls rolling into marshes and up on the shore. I interviewed him on SNNLive at a financial conference. "We are planning to 157 . Chairman and CEO of TIE Technologies stated.News). and TTCS Pink Sheets. scientists said Thursday. still remain in the Gulf.happens 30 days from the announcement is something to watch.
FL--(Marketwire .. they are not getting anywhere. smart logistics and telemetrics company. very weary of this kind of come-on. TIE Technologies is traded on Pink Sheets under the symbol "TTCS. with other threatened locations to follow. down to small business needs and mobile smart phone applications.News). Inc. CCTI (Pinksheets:CCTC . but I sure hope we have learned something from ole’ Shelly boy by now and that we are very. Strange. announced today that it has signed a consulting agreement with MMB Global Advisors ("MMB"). there are no names attached. I suppose. Alabama within the next two weeks. INC. security.Clean Coal Technologies.08/17/10) . All this company did was hire a consultant. please visitwww. from large logistical challenges.com. a clean energy technology company. TIE Technologies is a science and technology driven systems integration." For additional information." (Nice try. I couldn’t find a website for MMB Global Advisors. CORAL SPRINGS. On top of that.tietechnologies. and no comment or quote from MMB. but unless they are on the BP radar. This next press release is an example of getting mileage from a press release.deliver and install the first sections of our solution to protect Weeks Bay. 158 . TIE TeleMetric’s Services and Acumen architecture are designed to provide real time actionable intelligence to help team’s secure critical assets.) ABOUT TIE TECHNOLOGIES. TIE’s Smart Technology Solutions strive to provide better ways of doing things in every market it touches. TIE is actively evolving smart solutions and proprietary critical path technologies for the environmental and security needs of government and institutional customers.
we believe CCTI’s technology provides a compelling solution." After reading all this. corporate finance. and re-aligning the Company to attract key personnel while facilitating the development of strategic partnerships and alliances. trading. This hiring has made its way through a gigantic series of promotional websites and tout email blast sites. Beijing. coupled with increasing international environmental concerns. including redefining CCTI’s global corporate structure. China. Hong Kong. MMB will also assist the Company to create financial models and joint venture structures. will establish CCTI as the industry leader in the rapid growth markets of Asia.37 seconds). etc. CCTI Chief Executive Officer and member of the Board of Directors of the Company.MMB will provide various strategic consulting services. Given the strategic importance of coal as the primary fuel source for Asia’s growing energy needs. London and Hong Kong. 159 . and develop new global client relationships predicated on the commercialization of CCTI’s products and technologies. says. and New York. mining and finance sectors and have a broad range of applicable skills. which when combined with MMB’s resources. capital market and investment management with blue-chip corporations in the world’s energy sectors. and other targeted countries. let’s do a Google search. and the financial markets of New York. "Our company is very pleased to have this consulting agreement with MMB. MMB’s associates based in New Delhi. mergers and acquisitions. This is the mileage. which I am confident will help CCTI’s efforts in commercializing our technology within India. We get about 2. including consulting. Robin Eves.790 results (0. have considerable expertise and relationships in the energy.
Latest company news & analysis.. .com/5181/mmb-global-advisors-cctc/ ..6 hours ago Clean Coal Technologies (PINK: CCTC) (CCTI) recently inked a deal with MMB Global Advisors.1..Company News & Executive Profiles | BNET Global Consultants Inc..Cached Show more results from morewealthlesswork..com/5779/mmb-global-advisors-19/ . mmb global advisors cctc | More Wealth Less Work Aug 17. .. in which MMB will provide various strategic consulting services . that it has signed a consulting agreement with MMB Global Advisors("MMB").com/company/global+consultants+inc. x1news.com/news-search-Global-Advisors. morewealthlesswork... News for MMB Global Advisors Hot Penny Stock Highlight . 17 Aug 2010 17:24:00 GMT. X1 News Global-Advisors Aug 17. Check Out Stock Marketing Inc Today!! morewealthlesswork.com .. Tue. Tue... mmb global advisors | More Wealth Less Work Aug 17. 17 Aug 2010 07:58:00 GMT. 2010.Cached 4. Clean Coal Technologies Signs Strategic Consulting Agreement . .. Global Consultants Inc.Bing News. Beacon Equity Research (blog) ..Cached 160 . . 2010 . mmb global advisors .com 5.Bing News.bnet. mmb global advisors cctc . recent events www.Cached 3.html .msnbc. 2010 .10 related articles » 2.
.. Hot Penny Stock Highlight | Beacon Equity: Penny Stocks. 2010 .. announced today that it has signed a consulting agreement with MMB Global Advisors www. a clean energy technology company.../Clean-Coal-Technologies-Signs-StrategicConsulting-Agreement-1305421. (OTC PK: CCTC) today announced that it has entered into a consulting contract with MMB Global Advisors (MMB). Clean Coal Technologies...... Research . 2010 .marketwire. in which MMB will provide various strategic . 2010. Clean Coal Technologies Signs Strategic Consulting Agreement Aug 17...com/hot-penny-stock-highlight-2010-08-23/ 9./product-compint-0000308098-page./strategic-consulting-agreement.1424724....6. Inc..Similar 10. Springs Global US Inc.ecnext. 2010. announced today that it has signed a consulting agreement with MMB Global Advisors www. Mar 29.consulting agreement with MMB Global Advisors goliath.Cached 8.com/.org/.. Hot Penny Stock Alert – Clean Coal Technologies | MicroStockProfit Aug 23. 161 . 2010 .com/. Stock Alerts Aug 23. Aug 17... Clean Coal Technologies Signs Strategic Consulting Agreement . Inc.. SC | Company Profile.html Cached .html Cached 7.earthtimes.. CCTI PINKSHEETS. | Fort Mill.htm ... www.. Clean Coal Technologies (PINK: CCTC) (CCTI) recently inked a deal with MMB Global Advisors.beaconequity.. Clean Coal Technologies.
/hot-penny-stock-alert-clean-coaltechnologies/ 11.Cached Page 2 of about 2..Cached 13.. they have growing revenues. a clean energy technology company.Clean Coal Technologies Signs Strategic Consulting Agreement Aug 17.Clean Coal Technologies Signs Strategic Consulting Agreement Aug 17../clean-coal-technologies-signs-strategicconsulting-agreement/ .9 authors .ecodirt...22 a share. August 17th 2010 10 posts ... 2010. . 2010 .tmcnet..com/usubmit/2010/08/17/4959544. a clean energy technology company. announced today that it has signed a consulting agreement with MMB Global Advisors www. Without getting into the due diligence of this company at $. 12.. Global Online Communities (GOC) . that it has signed a consulting agreement with MMB Global Advisors … www...Last post: 5 days ago . it seems really undervalued 162 .. earnings growth and really bright management.. announced today that it has signed a consulting agreement with MMB Global Advisors ("MMB").790 results (0. Global Online Community . Obviously. but still nothing has happened! Here’s an example of a micro-cap company that has written a nearperfect press release.htm .www..microstockprofit. CCTC Intraday Thread for Tuesday...53 seconds) CCTC announced MMB and it’s all over the email blast and blog promotion circuit.com/.com/.
--(BUSINESS WIRE)--Waytronx. and commercialization of new. its Japanese subsidiary. (Wow.) As explained by William Clough.494. Waytronx produced consolidated revenues of $10.(OTCBB:WYNX News). TUALATIN. especially in comparison to some of the other somewhat inflated stocks. For the three months ended June 30. up from $7. (Fantastic. the SG&A dropped from 37% of total revenue in first quarter 2010 to 29% of total revenues in second quarter 2010 – a quarter-to-quarter drop of 8%.805 in the first quarter 2010. 2010. a partially owned (49%) Japanese subsidiary. 2010. Significantly. General..479. today announced that it posted results for the second quarter ended June 30.716.227 and EBITDA of $6. a platform company dedicated to the acquisition. what a beautiful three lines!) This revenue growth and operating profit was accomplished while the company’s Selling. a provider of electromechanical components and CUI-Japan. and Comex Electronics. Inc.to me. CUI Inc. These numbers represent a 40% quarter-to-quarter increase in revenues. Waytronx’s president and CEO. SG&A reduced. “We are especially encouraged by these numbers and the trend in growth 163 . The company maintained 37% gross margins and continued to focus on operational efficiencies. and Administrative (“SG&A”) expenses were reduced from 41% of total revenue in second quarter 2009 to 29% of total revenue for the second quarter 2010 – a decline of more than 12%. Ore. development. earnings growth. innovative technologies along with its wholly owned subsidiaries.668.
and the GasPT2 natural gas metering device – all of which are expected to be in the market later this year.) “These numbers demonstrate the effectiveness of our calculated decision to build out infrastructure and engineering support.and profitability. “These results and this quarter-to-quarter year-over-year growth rate and profitability again demonstrate the effectiveness of our new technology/licensing model. He should be commended. while.200. and continue to restructure and/or retire corporate debt. The result is clearly evidenced by the fact that we continue to see an increase in revenues and an increase in our EPS. at the same time.” (No hype. long-term plans to expand our product line.” (Just when you thought you were impressed with management. along with restructuring the company and expanding our Representative network.000 in debt in the last five months are all part of our larger.” (What professionals!) The company reports that the above analysis does not take into account any revenue or sales associated with its Novum Digital Power Line or its other proprietary technologies like the SEPIC-fed BUCK converter technology. “These strategic improvements have allowed us to get into the design cycle much earlier and much more effectively.” Clough stated. lowering our SG&A as a percentage of revenues. they also retired $9 M in debt!) 164 .” continued Clough. focus on operational efficiencies. “This growth in revenues and profitability and the retirement of $9.
meaningful press release. up to an aggregate of $5 million. The Agreement does not prohibit the Company from raising additional 165 . Roswell has committed to purchase. No smoke. ATLANTA. they are actually completed. You know how much I love “promise less and deliver more. announced today the completion of a $5M Equity Funding Facility with Alpharetta. but I love this guy. Let’s close this chapter with this real. and increased shareholder value. GA--(Marketwire . over a period of two years.WinSonic Digital Media Group.” Bill. a facilities-based digital media company. Here is another cool announcement. just an announcement of the completion of a $5 million equity deal. they are not announcing an LOI or an MOU. (Pinksheets:WDMG . The Equity Funding Facility is a cost effective and flexible financing instrument that places WinSonic in control of how and when it raises equity. whom I know personally.net). Now that’s a deal! It’s not the intent to close.News) (www.“We are even more confident that the acquisitions and initiatives we have implemented since May 2008 will continue to produce positive results in revenue growth. with both sides commenting. is uniquely qualified and confident and sets a great example to be followed by other micro-cap companies. shares of the Company’s common stock for cash consideration. profitability. Ltd.) I realize Waytronix has revenues and growth and acquisitions and they understate. Georgia based Roswell Capital Partners. (I don’t know about you. no mirrors. That’s meaningful.” concluded Clough. WinSonic can privately place its common shares as strategic opportunities arise and equity financing is attractive to the Company.08/23/10) .winsonic.
Ltd. Paul Gorski. "We are very excited to be working with WinSonic and look forward to providing them with the necessary capital and support to achieve their potential in the coming years.debt or equity financings. Chairman and CEO of WinSonic Digital Media Group. Since 1994." said Winston Johnson. LLC is a fund management company focused on private equity investments in small-cap publicly traded securities. Senior Investment Officer at Roswell. its members have served in the Private Equity Markets as the Principal or Investment Banker for over 125 public companies. 166 . other than financings that duplicate the terms and structure to this agreement. "WinSonic is excited to work closely with Roswell Capital on this financing and looks forward to exploring additional opportunities with previous financing partners." Roswell Capital Partners. added.
the SEC adopted final rules that broaden the scope of required corporate governance and executive compensation disclosures in public company proxy statements. the rules recognize that company executives are responsible for day-to-day risk management and instead focus only on the board’s oversight role. as they became effective on February 28. Enough shareholder rip-offs have occurred that once and for all the regulators have justifiably stepped in to regulate management compensation. When CEOs begin to discuss their compensation and the rest of management’s compensation. Boards will need to address these new disclosure requirements promptly. 2010. in time for the 2010 proxy season. in this day and age. It also includes cash and stock bonuses. Importantly. the rules require a proxy statement description of board supervision of the corporate risk function. This question of compensation goes way beyond salary. Cash and Stock Disclosure This could easily be the most sensitive chapter in this book. say. Late last year. vacation time and pay. Preparation will largely involve expanding the information collected by those responsible for drafting companies’ proxy statements and board discussions concerning the presentation of this information in compliance with the new requirements. they are messing around with so many new rules and regulations they had better have their SEC attorney in the room during any and all of these discussions. travel perks. as an example. 167 . options and healthcare. these new rules were designed with you in mind. These enhanced proxy disclosure items reflect a heightened political and regulatory focus on corporate practices that some have linked to the economic turmoil of recent years. a home purchase.Chapter 21: Management Compensation. options plans. In fact as an investor. In response to a perceived failure of risk management at some financial firms. and PIKS (payments in kind) which could be escrow for.
Although it truly increases the transparency. including whether and why a company has chosen to combine or separate the CEO and Chairman positions. Well. but companies should be sensitive to writing their disclosures in a manner that does not reduce their flexibility to adopt alternative leadership structures as personnel and other changes occur over time. Over the past decade. In addition.Audit committees of NYSE-listed companies have for some time been required to discuss policies with respect to risk oversight. Directors will need to thoughtfully respond to longer D&O questionnaires being developed by companies to elicit information necessary to comply with the new requirements. You may have heard that the costs connected to being a public company are outrageous. and whether and why a company has a lead independent director. Increased governance is a double-edged sword. some companies have separated the Chairman and CEO positions while other companies have named a lead director. with an expansion of the types of disclosable legal proceedings. it’s these SARBOX-related changes that have increased the costs of doing business. the rules impose longer look-back periods for disclosure of other directorships (5 years) and of legal proceedings (10 years). Companies will now be required to describe. and justify. Compliance with this requirement should not be difficult. mandating an annual discussion of the specific experiences and skills relevant to service as a director. responsibility and accountability of management and directors. it adds enormous extra costs in monitoring. in their proxy statements their leadership structure. and accordingly these discussions will in many cases be the focal point for developing disclosures in response to the new mandate. The new rules also expand required disclosures about directors and director nominees. legal and management time. 168 .
No skin means the CEO is just a taker. so some new rules needed to be installed. How many shares of stock in his company has the CEO paid for? How much of his own money does he have in the deal? Has he taken small salaries and reached into his own pocket at all. Let’s cut to the chase. or just taken for each or some of the rounds of financing that have come in? Skin is critical to big investors. options. and as soon as that happens it gets tested. Good luck. He doesn’t fit into the culture and expects to play golf and belong to the country club at the company’s expense. We investors and shareholders want our public company CEOs to have “skin in the game. stints in prison. and so on and so forth. That’s why in most cases.” Why should they be granted all kinds of bonuses. fines and in some cases. So now what may or may not have been a problem in the honest thousands of companies out there becomes a new rule and law to which they must adhere or run the risk of heavy penalties. Unfortunately. As usual. government oversight usually goes overboard to prove to the electorate that their elected officials are doing their level best to protect their constituents. the system breeds contempt and temptation in both lawyers and management as they scheme to figure out ways around the new rules and laws. This incredible creativity and productivity usually does produce loopholes that you can drive a truck through. an executive from a big board firm doesn’t make it in a micro-cap company.In a nutshell. which tends to foster the creation of a new bill or rule to fix it. I tell you. the past saw many CEOs and directors flat out steal from the coffers. Let’s remember to ask that key question of every CEO we speak with: Do you have skin in the game? 169 . Skin in the game represents dedication and devotion and the right attitude in building a company. and other perks with our money? Skin in the game.
did you know there are penny stocks on the NYSE and micro-caps on the AMEX? And blue chips on the Pink Sheets? Confused yet? Well here goes: Penny Stock: the lowest-priced publicly -traded stocks. www. Pink OTCQB. en.org/wiki/Penny_stock A stock that trades at a relatively low price and market capitalization. Pink OTCQX. But to totally confuse you first. Pink Sheets.wikipedia. A stock selling for less than $1/share. NASDAQ. Companies with a market capitalization of less than $50 million are typically referred to as nano-cap stocks. a penny stock is a common stock that trades for less than five dollars a share and is traded over the counter (OTC) through quotation services such as the OTC Bulletin Board or the Pink Sheets. usually outside of the major market exchanges.taipanpublishinggroup.com/investment-glossary.princeton. wordnetweb.org/wiki/Micro-cap_stock 170 .Chapter 22: Penny Stocks.edu/perl/webwn In the USA.html Micro-Cap Stock: Based on market cap (market capitalization) Market Capitalization is based on the following formula: Outstanding Shares (fully diluted) X share “bid” price = Market Capitalization The term microcap stock (also micro-cap) is used to describe publicly traded companies which have a market capitalization of roughly US$300 million or less. Micro-Caps This chapter is here to provide you with some initial definitions.wikipedia. en.
Job one is to get audited financials for moving up the ladder.Any good investment banker and CEO would want to move up the ladder. the higher the financial requirement to be listed. good management is looking upwards and striving to reach the highest market cap possible. serious funding. Here’s the ladder! The Ladder NYSE/Amex/ Euronex . cooperative professionals.NASDAQ-OMX Group NASDAQ Capital Market NASDAQ Global Market NASDAQ Global Select Market NASDAQ PORTAL Market NASDAQ Bulletin Board OTCQX OTCQB Pink Sheets The higher the listing. 171 . non-reporting penny stocks are the bottom of the barrel. Pink Sheets listed that publicly-traded. a management team that can be trusted. Moving up from this position requires an incredible amount of skill. you would hear all about the company moving up the ladder. Reaching financial projections are a must! If you ever sat in a meeting or on a conference call with a good professional investment banker. great choices. and generally to be in an important sector that is desirable to investors. Regardless of where the company starts. a good market.
Recently people have added ‘micro-cap’ and ‘nano-cap. companies are divided into large-cap.Categorization of companies by capitalization Traditionally. and smallcap. mid-cap. A rule of thumb may look like: Mega-cap: Over $200 billion Large-cap: $10 billion–$200 billion Mid-cap: $1 billion–$10 billion Small-cap: $300 million–$1 billion Micro-cap: $50 million-$300 million Nano-cap: Below $50 million 172 . population change. and they may be different for different countries. These need to be adjusted over time due to inflation.’ People have rules of thumb to determine category from market capitalization. and overall market valuation (for example. $1 billion was a large market cap in 1950 but it is not very large now).
144.Small Business) 10-K405 (Annual Financials . Don’t memorize. 10K. 8K. 15c211.Chapter 23: Filings: Fully Reporting Companies 13D. financial advisor) is devoted to these various filings. Form 5 and the Manning Rule These are important filings to know. For further information go to: http://research. In fact. Form 3. Thank you Wikipedia for the great definitions you will find here. Form 4.com/help/sec_guide04-03-02.Small Business) (Current Event) (Securities quote on NASDAQ) Proxy Statements SCD 13-D (Acquisition Statement) 173 . 14D. 10Q. just refer to when needed.Concerning rule 16) 10-Q 10-QSB 8-K 10-C (Quarterly Financials) (Quarterly Financials .thomsonib. an entire section of the Series 7 exam to become a registered representative (stockbroker. and laws. rules. People in the money world know all about these legal filings and refer to them all the time.htm The following list of financial documents is required knowledge. 10-K 10-KSB (Annual Financials) (Annual Financials .
the acquisition or disposition of 1% of the securities that are the subject of the filing. non-issuer) SC 14D-9 (Tender Offer . and other "change of control" events. 13D filings allow the investing public to see who a public company’s large shareholders are and. why they have an interest in the company. perhaps more importantly. among other things. A filer must promptly update its Schedule 13D filing to reflect any material change in the facts disclosed. including. by anyone who acquires beneficial ownership of 5% or more of any class of publicly-traded securities in a public company. These filings may be a precursor to hostile takeovers.SC 14D-1 (Tender Offer.solicitation) SC 13E-3 (Private Transaction Rpt) SC 13E-4 (Private Transaction Rpt) SCH 13-F (Quarterly Manager Report) SCH 13-G (>=5% Acquisition) Form 3 Form 4 Form 5 (New Insider Report) (Insider Buy/Sell) (Year End Insider Report) Registration Statements Prospectus Schedule 13D is an SEC filing that must be submitted to the US Securities and Exchange Commission within 10 days of acquisition. company breakups. 174 .
2) the issuer is complying with filing requirements and has in its records its most recent annual report. the firm cannot ignore that order. securities broker or dealer may not publish a quotation for any security unless certain information concerning the issuer is available and the broker or dealer has a reasonable basis for believing that the information is accurate. financial statements of the issuer and certain other data must also be on record. I know several 175 . and 4) the broker or dealer has on record information relating to the issuer. F-1) has been filed within the last 90 days. laws. In fact.The Manning Rule prohibits an NASD member firm from placing the firm’s interest before/above the financial interests of a client. and regulations are not completely understood by registered people on the Street.S.The Manning Rule is a finance term based on the NASD regulation NASD IM-2110-2. For example. in simple terms. its business. if: 1) a Securities Act registration statement (F-6. 3) the issuer is complying with Rule 12g3-2(b). The firm cannot trade for their account using a price that would satisfy the customer’s limit order without executing the customer limit order. when a securities firm is holding a customer limit order (a limit order is an instruction to buy or sell securities at a certain price). under SEC Rule 15C211 a U. The information requirement is satisfied. Management information. 15c211 was designed to allow fully reporting public companies to have their securities quoted on the Over-The-Counter Bulletin Board ("OTCBB") by filing some simple disclosure. According to Rule 15C211. The rule is applicable both in normal trading hours and in the extended hours trading sessions. Many of these rules. products and facilities. its securities.
176 . That is a good upper hand position to be in. but by reading and understanding them you may actually be more knowledgeable than others.consultants that make a living keeping track of the changes for BDs to avoid the fines or censures that come along with violations of these forever-changing laws. Don’t expect to use these terms with regularity.
rules and regulations. a broker cannot work as a broker. each FINRA member is required to have the same licenses as I once held. Sarbanes Oxley. It can be suspended. The SEC. The licenses required test taking and included a cross section of all the information required of a broker including margin. FINRA was the NASD (National Association of Securities Dealers). options. http://www. which required broker dealers to be members. which meant that each broker must be registered with the NASD. including market-making and buying and selling. most states required a licensing fee.org/Investors/ This webpage is a good place to gain understanding of your rights under FINRA. SEC. I’ll leave you with a compelling article. Each firm was a member and each broker was an employee of the member.Chapter 24: FINRA. However. which was the 50 state registration.finra. FINRA did not exist. Even today. that discusses FINRA’s role in OTCBB trading. This is your 411 website.GOV When I was a stockbroker during the 1980’s and 1990’s. Rule FD. and an understanding of how the market works. and must possess a Series 7 license as well as a Series 63. Without these licenses.com. 177 . revoked. The Securities and Exchange Commission oversaw the NASD. which was charged to the broker.gov is your 911 website. courtesy of news. or limited by FINRA.
FINRA is proposing to shift its role from operating the OTCBB to acting as the consolidator and disseminator of all quotation and trade information for unlisted equity securities—non-listed. including the Over-the-Counter Bulletin Board (OTCBB). 2009 that it was offering the assets listed above for sale.com content. the Financial Industry Regulatory Authority (FINRA) owns and operates certain quote and trade reporting facilities.Over-the-Counter Bulletin Board (OTCBB) Sale Re-Opening Announcement news.com Web site URL and reservation rights. a number of new bidders have stepped forward and indicated an interest in submitting bids for the OTCBB. certain OTCBB. FINRA would continue to be the primary regulator of all over-the-counter trading activity. FINRA is reopening the bidding process at this time and invites parties interested 178 . The OTCBB is an inter-dealer quotation system on which FINRA-regulated broker-dealers may post OTC quotations in unlisted equity securities. To achieve this. FINRA is proposing to divest itself of the ownership and operation of the OTCBB as an OTC inter-dealer quote system. FINRA entered into good faith negotiations with the one bidder but has not been able to reach final terms. including: the OTCBB. As part of these changes. publicly traded equity securities. In the interim.com As part of its market transparency role. As a result. FINRA first announced on September 14th. and the OTCBB trademark. FINRA intends to sell to an independent third party certain FINRA assets.
in the purchase of certain OTCBB sale assets to contact us. writing and enforcing rules and the federal securities laws. informing and educating the investing public. For more information. providing trade reporting and other industry utilities. The War between FINRA (OTCBB) and OTC Pink Sheets 179 . Stone. FINRA Transparency Services Department. Interested parties should contact: Christopher B.finra. FINRA reserves the right to accept or reject any and all requests to engage in discussions with third parties. The substance and structure of the assets for sale have not changed since the original offering. FINRA is dedicated to investor protection and market integrity through comprehensive regulation. and administering the largest dispute resolution forum for investors and firms. please visit www. No FINRA contractual obligation whatsoever shall arise from the publication of this announcement. 2010. Interested parties should contact FINRA for additional information concerning the sale assets and bid form and content requirements.org. to change or limit the assets for sale listed above and/or to cancel the OTCBB sale process entirely. All new or modified bids must be submitted by July 30. 2010. FINRA touches virtually every aspect of the securities business—from registering and educating all industry participants to examining securities firms. FINRA intends to re-open the bidding on the sale assets until July 30. About FINRA FINRA is the largest independent regulator for all securities firms doing business in the United States.
" Rodman chief executive Edward Rubin said in a statement.Rodman & Renshaw Agrees to Buy Bulletin Board Assets from FINRA Posted September 14. "We are extremely excited with the prospects of acquiring the OTC Bulletin Board assets and the opportunity that it presents for expanding the quality services and products that we offer to the financial community and the potential to further diversify our revenue base. 2010 10:57AM PST Rodman & Renshaw Capital Group.000 a day on Pink OTC Markets’ listings. reached a preliminary agreement to acquire assets related to the OTC Bulletin Board from the Financial Industry Regulatory Authority. according to Pink OTC. Terms of the deal weren’t disclosed. 180 . which provides its own quotation system for over-the-counter stocks. the most active placement agent in the PIPE market.000 a day. New York-based Rodman said it expects the transaction to close in the first quarter of next year. The number of quotes on the Bulletin Board has declined to about 8. FINRA has been in talks to sell the Bulletin Board assets for some time with Pink OTC Markets. compared with about 54.
This chapter is about how to be an investor in private equity of either a private or a public company. You leave it to creative investment bankers.00 per share in your portfolio. Thanks to the imploding of the real estate market. The company announces publicly or you find out from your broker or in some way 181 . who love financial products almost as much as they love using acronyms to describe them. You are buying either common shares or preferred shares or warrants or options. This method of financing companies is not new but has changed over the years into an assortment of products. you can have some fun with private placements. online. You are an investor in AABB and not a trader. Assuming you are an accredited investor. most of these private investments require you to be an accredited investor. being an accredited investor means you have more than $1M in assets. and other liquid assets give you the right to be an accredited investor.Chapter 25: Private Placement. offering investors various exit strategies and different ways to earn a profit. Private companies also raise money privately and then go public. stocks. using an IRA or 401K. Rights Offerings. or even a credit union. ask your broker or banker with knowledge within your state of residence. PIPES. Imagine owning AABB at $2. For more information on you being an accredited investor. The outside the box that I am referring to has to do with public companies raising money privately. you accreditation as an investor can no longer include your home in the calculation. Warrants and Direct Investment Perhaps the greatest secret on the Wall Street is knowing how to invest in both private and public companies outside the box. Another way of putting it is that most investors making a decision to purchase stock go about their business of purchasing shares either through their broker. and in others more than $2M. First of all. Figure more than a million of cash. which for the most part you can follow in the newspapers or on a financial website. In most states.
00 per share.50 per share or even $1.that AABB is raising money privately. As the I(initial) P(public) O(offering) market shrank and new offerings were few and far between. This private stock cannot be sold for the term of at least six months. terms. conversion. use of proceeds. information and build syndicates. however. Private placements are just that. PIPES are P(private) I(investment) P(public) E(equity). It works like this: If you own AABB trading at $2. So you can either buy it at $2. which after six months is removed and the stock is registered with the transfer agent. turning it into free trading stock with no difference to the existing trading shares. Rights offerings. PIPES were so popular that conferences were created for investment bankers to attend and mingle with their industry colleagues to share ideas.00 per share with a six month old holding period. the private stock could be $1. IPO went by the wayside as the market resisted new issues. if AABB is $2. The terms are listed in a private placement memorandum (“PPM”): cost.00 depending on the interest in the deal. For instance. over the years the holding period of private shares has been shortened. subscription documents and almost a full business plan and executive summary. but investors adopted the idea of private placements readily. the company can create a rights 182 . The private shares come with an actual legend stamped on the certificate.00 and trade it freely. or buy private shares as an accredited investor for $1. Even if you do not invest. it is good to read what management’s plans are. private stock. are incredibly inexpensive to the issuer and beneficial to shareholders. Because the risk is high and the holding period is at least six months. the price is going to be below the share price of the publicly trading stock. these private financings grew to billions of dollars in funding. So that’s the deal. rarely used these days.00 public. PIPES have been used for many years by investment bankers to fund rounds of financing for public companies. There are numerous rules restricting the sale of private shares. Buy private shares at a discount and hold them for six months.
even to investment bankers.00 warrant while the free trading shares are at $2.00 stock and the warrant is exercisable at $2. thus putting money into their company. Companies raise millions upon millions by utilizing warrants and rights in popular companies with sound liquidity. For instance: AABB is a $2.00. That’s called having skin in the game. A little known fact. Warrants are convertible into common stock. is that exercise prices can be lowered. The issuer has the right to lower the exercise price say to $1.00.00 per share. Warrants are used less and less but are also an incredible way to benefit both investors and shareholders. The key to these transactions is that the money goes directly to the issuers. exercising the right gives the shareholder/investor a share at $1. I LOVE rights offerings. I have seen insiders exercise warrants and rights.offering. all shareholders of record have the opportunity to exercise warrants or rights.50 and the money goes to the company rather than to another selling shareholder.00 and the right is $1. Stockholders would be much more prone to exercise a $1. thereby giving every shareholder of record a “right” to buy another share at a fixed price. or both. Warrants have an exercise price which allows an investor to convert a warrant into a share of common stock. For instance: AABB is $2. or more warrants.00. Warrants are similar to rights in that they are established with an exercise price. including insiders and management.50. Oh by the way.50. So instead of buying more shares of AABB at $2. but never raised.50 for a share when they could buy it in the open market for $2. Remember that I mentioned this in an earlier chapter? 183 . Stockholders are not prone to spend $2. a win-win situation for the company and the investor.
you could have your checking account debited on a regular basis to make investments in the plan. you have to look at investing in private stock whether in a public or private company. without having to use or pay commissions to a broker. DSPs usually will not allow you to buy or sell your securities at a specific market price or at a specific time. the company will purchase or sell shares for the plan at established times — for example.Let’s talk about Direct Investment Plans. The leverage is very attractive. You can find out when the company will buy and sell shares and how it determines the price by reading the company’s disclosure documents. but the plan may charge you a fee to do so. Here are descriptions of the two different types of plans: Direct Stock Plans: Some companies allow you to purchase or sell stock directly through them. on a daily. You can also have the cash dividends you receive from the company automatically reinvested into more shares through a dividend reinvestment plan (“DRIP”). I look at it 184 . Rather. privately. weekly. You may be able to buy stock by investing a specific dollar amount rather than having to pay for an entire share. or monthly basis — and at an average market price. But you may have to pay a fee for using the plan’s services. Depending on the plan. or buying stock directly from the company. Some plans require a minimum amount of investment or require you to maintain specific minimums in your account. Some companies require that you already own stock in the company or are employed by the company before you may participate in their direct stock plans. you may be able to have your shares transferred to your broker to have them sold. In that case. As an investor. Many companies allow you to buy or sell shares directly through a direct stock plan (“DSP”).
so let’s just smile and get through this. but for now it gets the point across: You’re reinvesting dividends.. why not find the best way to invest? For sure owning a convertible into stock commodity will result in heightened risk.. I want to touch on it but if you don’t own stocks that pay dividends skip this section of the chapter. investing for dummies. I thought I would include it because someday. It is exactly what it sounds like. a few of those smelly doggies in your portfolio will clean up their act and take off. drip." Now. but also better leverage.. hopefully in this lifetime. 185 .. Drip. and usually on a monthly basis if desired. Wishful thinking is a chronic diversion of the OTC market. drip. a reinvestment plan. we know Drip or DRP isn’t a very good name. The plans also reinvest all or partial dividends paid (it’s up to the shareholder) into more stock.... Another easy user friendly investment device is called a Dividend Reinvestment Plan. And that adds up over time. DRIP PORTFOLIO What Are Dividend Reinvestment Plans? Drips are offered by companies to their shareholders as a way to buy stock directly from the company (usually through a transfer agent) in very small amounts to large amounts. but you’re also "dripping" money into your holdings every month. thus the name "Dividend Reinvestment Plan.like this: If I am interested in a particular company and I intend to be a long term investor.
This gives investors an immediate return on their investment and sometimes balances out any fees associated with setting up the DRP or buying the stock. Over 100 companies have DRPs that allow investors to purchase stock at a discount to the current market price." Advantages of Drips: Drips give a cost effective way for investors to put stock dividends to a better use -. DRIPs "force" investors to buy stock on a regular basis and hold on to that stock. only discount shares bought with dividends. although many of them are in the thousands of dollars per quarter range.purchasing more shares of the company rather than simply spending the money or having it sit in a money-market account. The amounts to participate can be as low as $10. Almost all DRPs allow dividends to be reinvested at no fee. Many Optional Cash Purchase Plans have very low minimum investments. allowing you to purchase stock regardless of how much money you have or have left. As a result.or often no fee at all. however. investors adopt a long-term horizon and often 186 . the most obvious of which being: You don’t need a large amount of money to start. not new shares. There are limits on almost all of these plans. These are called Optional Cash Purchase Plans (“OCPs”).The advantages of such plans are numerous. Let’s look at some other "perks. These discounts can range anywhere from one to ten percent. You can open an account with as little as one share of stock. Most companies allow investors to purchase additional shares through a Dividend Reinvestment Plan for nominal fees -. Some companies.
these brokerage-run plans strictly pertain to dividends only and do not allow any optional cash purchases like an OCP would. First Chigago Trust and Chase Mellon. Drips are a way to begin investing with a very small amount of money.P. Transfer agent-run: As management of Drips has become more cumbersome. L. However. they can often use the same resources for a number of customers and provide the entire plan at a much better rate than the company could do so by itself. The company-run Drips are simply administered from corporate headquarters. too. normally as part of the overall shareholder relations effort.money that they usually don’t even miss. Three Kinds of Drips Company-run: Many companies take it upon themselves to run their own Drips. Because they can do this for a lot of companies. Some companies go as far as to offer Individual Retirement plans (“IRAs”) along with the Drip program. and optional cash purchases are a big part of what makes Drip plans so attractive. even if the company in question does not have a formal Drip plan itself. while avoiding brokerage commissions and reinvesting all dividends. In the long-term. These very often are the companies that allow you to buy directly through them without having to own a single share. Some of the larger transfer agents include Boston EquiServe.invest small amounts of money on a regular basis .. although this is not always the case. it’s a great and "patient" 187 . Transfer agents are financial institutions that basically run DRIP programs for a number of companies. and to keep investing monthly (or as frequently as you can afford) in small or large amounts. Brokerage-run: Some brokerages will allow shareholders to reinvest dividends at no cost. many companies have turned to third-parties called "transfer agents" as a way to make things simpler for themselves.
” This one you just might want to keep to yourself. as you have dollar-cost averaging working for you as well. and you’re investing. or you may have just opened yourself up to some serious potential accusations. “No. 188 . You better have a wonderful personality. Once you get past the acronym it does make sense if that’s your desire. “Oh. no you don’t understand.way to grow money over time. in great companies that you can’t foresee selling at any time. Drip is an acronym for Direct Reinvestment Plan. one drip to another. Drips are tough to explain to your girlfriend.” and so on. ideally. Well honey I have decided to invest in Drips.
I do not want to glorify these sons of bitches. good bye wifey. Realizing that you are standing in deep doo da is no pleasure. but don’t bet on that. but stuff happens. including yours truly. returns the money. a felony conviction(s). press crucifixion. total and thorough embarrassment. jail time. we cannot leave out the biggest crook of all time: Bernie Madoff. It can happen to anyone. loss of licenses. Making money on Wall Street can be simple. and your own dog may bite you in the ass. He goes back to the bank. which is a whole story in itself. Over the line means a law or rule has been broken. Someone once told me the following story which is an incredible life lesson: A man robs a bank and makes an escape in a car. family disgrace. being a part of fraud like the ones listed below may have begun quite innocently. There is no turning back unless you turn yourself in. Let’s stop for a short story. you can hope and pray for a slap on the wrist at best.Chapter 26: Wall Street Disasters What do a British spy and a licensed stockbroker have in common? The British spy is 007 and a stockbroker has a Series 7. So if you turn yourself in. It is precisely at this moment when a good SEC attorney needs to be called. 189 . expect more like disgorgement. return the money. both licenses to kill! Beyond Michael Milken & Ivan Boesky. So many Wall Streeters walk the fine gray line every day. a line so fine that one misstep here or there and they are over the line. apologizes and is arrested for bank robbery. The moral of the story is that he still robbed the bank and a penalty must be administered. From the inside looking out. and apologize. he realizes he has made a mistake and he decides to turn around. When he is about five blocks away in his escape. keeping it is a completely different and difficult matter.
I often use the expression “follow the money. financial conferences. and financings. and every single press release you can find. www. You should never accept something you do not understand in a financial statement (or misstatement) and when reading a press release. Never lose sight of the money. There are emails. hire an attorney. telephone numbers. If the guy blatantly lied and you can prove it. Disappointment and letdowns lead to over-reactions and frustration. A little knowledge can be dangerous in the hands of a scorned investor who has taken a loss way too personally. Sources of information are available starting with the company directory.gov. call the press. but chances are it could be ugly and you will feel like crap if the uncovered information buries your investment. go after his ass with a vengeance. If what you find is incredibly suspicious and you are losing money in the investment. they become jilted lovers of the stock and seek revenge. CEOs have a tendency to exaggerate things like earnings. If the CEO is trying hard and is telling the truth. Too many investors blame everyone else for their own stupidity. but make sure you do your homework. and they possess the gift of sounding incredibly believable as they tell you exactly what you want to hear. IR people and PR people.SEC. if something jumps off the page at you. notify regulators. Read 10Ks. or his naive belief in a CEO’s every word when the words were only partly true. The annals of arbitration are filled with lists of frugal arbitrations brought about simply due to an investor over-extending his capacity to lose money. you will have to become a good detective and record keeper. The guys to watch are the ones controlling the money. You may love what you find out. contracts. chances are you won’t win in arbitration anyway. I hope you are not one of those. Investors have a tendency to fall in love with a stock and when it fails to perform the way they expected and believed it would.” This is smart advice. Get the truth. inquire about it.You as an investor must keep your both eyes on the ball. 190 . 8Ks. You may even have to record conversations. 10Qs.
Barry 191 .. we’ll look at some of the all-time greatest cases of companies betraying their investors. But these assumptions can be disastrous. ZZZZ Best Inc." "steal. Just as we trust our friends. these shareholders had no way of knowing what was really happening as they were being tricked into investing. Inc. eventually reaching a market capitalization of more than $200 million. but he did so through forgery and theft. For example.000 phony documents and sales receipts without anybody suspecting anything. posited that his carpet cleaning company would become the "General Motors of carpet cleaning. we put faith in the investing world. but words often associated with money and fortune are "cheat. Understanding how disasters have happened in the past can help investors avoid them in the future. Some of these cases are truly amazing.Editor’s Note: The information included here is accurate as of September.Barry Minkow. and that management is competent and honest." and "lie. 2007. Unfortunately. Amazingly. It is unfortunate.." Minkow appeared to be building a multi-million dollar corporation. but it also requires us to make a lot of assumptions." Who among us hasn’t "accidentally" taken two $500 bills from the Monopoly bank. Minkow shelled out more than $4 million to lease and renovate an office building in San Diego. He created more than 10. or forgotten at least once to pay $5 back to a friend? Chances are you were never called on it because your friends trusted you. With that in mind. Try to look at them from a shareholder’s standpoint. ZZZZ Best went public in December of 1986. Investing in a stock takes a lot of research. we assume reported earnings and revenue figures are correct. the owner of ZZZZ Best. Although his business was a complete fraud designed to deceive auditors and investors. 1986 .
was said to be the richest gold mine ever.4 billion. making millionaires out of ordinary people overnight. At its peak.Minkow was only a teenager at the time! He was sentenced to 25 years in prison. Centennial overstated its earnings by about $40 million. when the gold mine proved to be fraudulent. which was reported to contain more than 200 million ounces.. 1997 . 1997. the company was really shipping fruit baskets to customers. Amazingly.50 per share on the New York Stock Exchange. Centennial’s stock rose 451% to $55. between April 1994 and December 1996. and the stock tumbled to pennies shortly after.This Canadian company was involved in one of the largest stock swindles in history. and his management recorded that the company made $2 million in revenue from PC memory cards.000 investors lost almost all of their investment in a company that was once considered a Wall Street darling. which lost $70 million. the CEO of Centennial Technologies. The major losers were the Quebec public sector pension fund. The employees then created fake documents to appear as though they were recording sales. which lost $100 million. Bre-X Minerals. Centennial Technologies Inc.In December 1996. which lost $45 million. 1996 . Over 20. the company reported profits of $12 million when it really lost about $28 million! The stock plunged to less than $3. the Ontario Teachers’ Pension Plan. and the Ontario Municipal Employees’ Retirement Board. The stock price for Bre-X skyrocketed to a high of $280 (split adjusted). 192 . Emanuel Pinez. Its Indonesian gold property. Bre-X had a market capitalization of US$4. According to the Securities and Exchange Commission. But the party ended on March 19.
known as the 43-101 required documentation. an entire new method of valuing resource company minerals in the ground was created. together with its Companion Policy 43-101CP and Form 43101F1 Technical Report can be downloaded from the Ontario Securities Commission (OSC) website: (http://www. NI 43-101.on. mine development or operation or mineral project assessment. b) has experience relevant to the subject matter of the mineral project and the technical report. It covers oral statements as well as written documents and websites.osc. and c) is a member in good standing of a professional association.jsp). or any combination of these. 193 . A qualified person (QP) as defined in NI 43-101 as an individual who: a) is an engineer or geoscientist with at least five years of experience in mineral exploration.ca/Regulation/Rulemaking/Current/rrn_part4 _index.gov.(Would you believe I actually owned a substantial position in this piece of crap? This deal so tarnished the Canadian Regulatory’s reputation. It requires that all disclosure be based on advice by a "qualified person" and in some circumstances that the person be independent of the issuer and the property.) Mining Marketwatch: National Instrument 43-101 National Instrument 43-101 (NI 43-101) is a rule developed by the Canadian Securities Administrators (CSA) and administered by the provincial securities commissions that governs how issuers disclose scientific and technical information about their mineral projects to the public.
Additionally.Not long after the collapse of Enron. essentially recording one dollar of revenue multiple times and creating the appearance of incredible earnings figures. Telecommunications giant WorldCom came under intense scrutiny after yet another instance of some serious "book cooking. and the share price dove from over $90 to less than $. WorldCom.70.S.You will need to scroll down the page to 43-101. Doing so fooled investors and analysts into thinking this company was more fundamentally stable than it actually was. the company felt that office pens. Enron. Through some fairly complicated accounting practices that involved the use of shell companies. Enron was able to keep hundreds of millions of dollars worth of debt off its books. 2001 . basically imploded after David Duncan. the seventh largest company in the U. Apparently.Prior to this debacle. Enron’s auditor. the shell companies. the complex web of deceit unraveled. recorded fictitious revenues. a Houston-based energy trading company was. Enron’s chief auditor. the fifth leading accounting firm in the world at the time. ordered the shredding of thousands of documents. Andersen. run by Enron executives. with 194 . based on revenue. 43-101CP and 43-101 F1 Standards of Disclosure for Mineral Projects and then view/download the files from the appropriate links there. The fiasco at Enron made the phrase "cook the books" a household term once again." WorldCom recorded operating expenses as investments. Eventually. $3.8 billion (yes. As Enron fell. 2002 . pencils and paper were an investment in the future of the company and therefore expensed (or capitalized) the cost of these items over a number of years. Enron. the equities market was rocked by another billion-dollar accounting scandal. In total. it took down with it Arthur Andersen.
Kozlowski and Belnick arranged to sell 7. an infamous $6. who was reported as one of the top 25 corporate managers by BusinessWeek. In fact.were treated as investments and were recorded over a number of years.3 billion. Who suffered the most in this deal? The employees . usually disguised as executive bonuses or benefits. and safety equipment. and a $2 million birthday party for his wife. In early 2002. This little accounting trick grossly exaggerated profits for the year the expenses were incurred. Kozlowski used the funds to further his lavish lifestyle. In 2001. siphoned hordes of money from Tyco in the form of unapproved loans and fraudulent stock sales. healthcare. Before the scandal. Tyco International (NYSE: TYC). These funds were smuggled out of the company.which should all be recorded as expenses for the fiscal year in which they were incurred . 2002 .With WorldCom having already shaken investor confidence. Kozlowski received $170 million in low-to-no interest loans. Tyco was considered a safe blue chip investment.tens of thousands of them lost their jobs.5 million shares of unauthorized Tyco stock for a reported $450 million. which included handfuls of houses. the executives at Tyco ensured that 2002 would be an unforgettable year for stocks. its business was becoming increasingly unprofitable. During his reign as CEO. the scandal slowly began to unravel and Tyco’s share price plummeted nearly 80% in a six-week 195 . as it plummeted from more than $60 to less than $. The next ones to feel the betrayal were the investors. Along with CFO Mark Swartz and CLO Mark Belnick.a ‘b’) worth of normal operating expenses .20.000 shower curtain. who had to watch the gut-wrenching downfall of WorldCom’s stock price. Dennis Kozlowski. manufacturing electronic components. without shareholder approval. WorldCom reported profits of around $1.
especially when your boss instructs you to falsify earnings reports. At the time. Scrushy arranged political contributions of $500. The scandal unfolded in March. Amazingly. 2003 . prior to releasing an earnings loss. the CEO was acquitted of 36 counts of fraud. but investors should have taken the warning.000. The SEC works hard to prevent such scams from happening.45 in a single day. The information came to light when CFO William Owens. allowing him to ensure a seat on the hospital regulatory board. The worst thing about these scams is that you never know until it’s too late. which in turn costs investors/taxpayers even more money. In the late 1990s. These scammers can pick a lifetime’s worth of garbage and not even come close to repaying those who lost their fortunes. but was later convicted on charges of bribery.Accounting for large corporations can be a difficult task. CEO and founder Richard Scrushy began instructing employees to inflate revenues and overstate HealthSouth’s net income. caught Scrushy on tape talking about the fraud. the company was one of America’s largest healthcare service providers. but were eventually convicted and sentenced to 25 years in jail. The first sign of trouble surfaced in late 2002. Apparently. working with the FBI. but with thousands of public companies in 196 . The executives escaped their first hearing due to a mistrial. The repercussions were swift.4 billion.period. Those convicted of fraud might serve several years in prison. when the SEC announced that HealthSouth exaggerated revenues by $1. as the stock fell from a high of $20 to a close of $. An independent law firm concluded the sale was not directly related to the loss. 2003. HealthSouth (NYSE: HLS). when Scrushy reportedly sold HealthSouth shares worth $75 million. experiencing rapid growth and acquiring a number of other healthcare-related firms.
and its share price plunged to $2. So just in case you didn’t think it could happen to you…read this story which is as recent as the week of July 6.90. a stock promoter. Last June. To Securities & Exchange Commission gumshoes. Concorde America Inc. 11. merged a small private labor-recruitment company into a shell corporation that Oehmke controlled. Oehmke and Bryan Kos. Oehmke and Kos had dumped shares. it is nearly impossible to ensure that disaster never strikes again. Concorde’s stock price soared from $3 to $8. press releases. don’t overlook the importance of the description of the Pink Sheets: Pink Sheets quotation-and-trading service for unlisted stocks. Just have a quick read below. according to the SEC. it was a classic case of pump and dump. Pink Sheets uses the words system and venue.3 million and $1.7 million respectively. Wall Street’s Dirty Rotten Little Scoundrels The SEC has a new plan to turn up the heat on small-time Wall Street fraudsters..North America. financier Donald E. Concorde’s management issued a press release disavowing any involvement in two earlier rosy releases -. pocketing $11. With the new company. How do the Pink Sheets describe themselves? While SEC uses the word service. By then. 2010. trading on the Pink Sheets quotationand-trading service for unlisted stocks*. When considering the potential for disaster. 197 . But on Aug.51 the next day. the duo allegedly cranked up a stock-promotion scheme replete with phony analyst reports. and spam e-mails.
S. I tried to find out more information about Wall Street Follies. and better inform investors.ABOUT PINK OTC MARKETS From www. 198 . Credit for the next amazing piece goes to: C:\Users\shelly\Desktop\Wall Street Follies . improve price discovery. Pink OTC Markets offers widespread access to all U.pinksheets. enabling investors to seamlessly trade these securities through their institutional. Ok.com Pink OTC Markets Inc. Pink OTC Markets operates the third largest U. provides the leading inter-dealer electronic quotation and trading system in the over-the-counter (OTC) securities market.Diagrams. it’s amazing. We create innovative technology and data solutions to efficiently connect market participants.S.htm. I want them to get the credit because I love the creation below. I’m saving the best for last. broker-dealers. online. increase issuer disclosure. It reminds me of the way the FBI tracks down criminals and how they would look at the inter-relationship of mobsters. equity trading venue which includes both the elite OTCQX market tiers for strong OTC-traded companies that can satisfy financial and disclosure listing standards and Pink Sheets for all other OTC quoted securities. or full service brokers. but was not able to do so.
Believe me. of course. So folks. sure as shooting. and discouraged others. Build the reputation and it’s the old catapult to fame from the capture of the latest white collar thief.Ladies and gentleman. somebody spent a great deal of time creating this poster which. and then rocked on Broadway I know. this is how political careers are begun and elections are won. Bernie Madoff can’t get off Enron rocked Wall Street. the next thief is lying-in-wait to have you invest in his or her planned scam. is hanging on my office wall. In jail they write their memoirs and after release they do book-signing tours. Lou Pearlman got 50 years. In the old days of Wall Street. Here’s an example. Here are two lines from the work in progress: Ken Starr went too far. DO YOUR HOMEWORK. In case you haven’t noticed. I’m not quitting my day job. capture the bad guys. but in today’s world. a scandal disgorged. disgraced. DO YOUR 200 . dismissed. Sort of like Eliot Ness capturing Al Capone. I mean. I have no interest in making comparisons. I agree. Can a movie or reality show be far behind? And let’s not forget the power of the quote when discussing the regulators who love to see media blast the scoundrels. the scumbags are vaulted into primetime. Two of the most popular political careers that grew from this situation: Elliott Spitzer and Rudy Giuliani. but take my word for it. a white collar criminal can get more jail time than a capital murderer in our society. and the Web to mention a few places. and then take the credit. And as an added kick in the pants. Bernie Madoff got 150 years. they hit the lecture-speaker circuit. the print media. I stumbled across this marvelous art while I was writing a Wall Street rap song with a rap star buddy of mine. The criminals make it into the worldwide news reports. never say that I am not a connoisseur of art. but really it’s endless.
You will be impressed. you will be led down the path to the point where your greed will overcome you sensibility. the culprit is trying to get into your pants. Start from the first moment of introduction. you will be swept off your feet. It’s very similar to what happens when you meet a new gal or guy. The first meeting is always the best. 201 .DUE DILLIGENCE. In fact in each case. Use your brains. don’t sit on them.
FINRA and Google websites. outcomes possible. is there an indication of whether the trade was solicited or unsolicited? Is all the information correct on your confirmation and have you verified it online? Have you checked the price on your confirm 202 . Do a background check on the broker from available sources. Answer: Pursuit of the broker. channels and paths to follow. Many attorneys out there are looking for the first plaintiff in a class action lawsuit. How much money you feel you have been cheated out of. maybe lots of it. in which case you own him. with what cause? Does he have any arbitrations listed on his U4? Historically. He may not be registered in your state.Chapter 27: Protect and Defend Your Money So it’s probably at this time that you need to understand the apparatus you have at your finger tips to pursue the rightful return of your money as well as justice (which may have more value than money to you). Standard operating procedures: SEC. or worse for him and better for you. you may find he’s done it before and there’s history. Find out what states he is registered in. and time to be invested.gov. has a value. and if so. decisions to make. Find out how many actions he has been involved in. It isn’t worth pursuing. How much money do you throw at any given situation before you just say: “The hell with it. Does he have any yes answers on his license (U4)? Has he changed firms often.” But sometimes as an accuser of someone’s wrongdoing. costs to analyze. There are many characters involved. A stockbroker lied to you and you can prove it. I am going to throw out some ideas at you and we can go from there: 1. there is a class action you can join. It could be your lucky day. or just the fact that you were cheated. has he recommended low price stocks or stocks listed on the Pink Sheets? When you receive a confirmation. avenues to travel.
out of balance and completely screwed.with time and sales on the OTCBB website for accuracy? Remember. Bernie Madoff and his firm falsified records of trades and stock positions for years. How did they meet and how long have they worked together? Identify whom the independent board members are and for sure check into whether the company has D&O insurance (sometimes this is invaluable beyond your imagination). When it comes to trading your money and your money in general. consultants etc. were at the time you purchased the stock. CFO. This keeps everyone on their side honest. Incredibly so. The company has lied and you can prove it. Start with identifying where the management. will be short lived and inevitably will be corrected when you least expect it or want it to happen. and it went on for more than a decade. just like you do your checking account.. Chairman. Errors usually show up in commissions charged. President. Especially be weary of partialfills of buys or sells. Chances of them making a mistake in your favor are possible.000 that hit your account by mistake under any circumstances. you must micro-manage your account. the CEO. Just get your confirms compared (market language) and compare your mail to their postings every day. and immediately check your exact position to compare yours to theirs or you could end up short. Create a spread sheet with each of their names. directors. Now if everything the broker has told you is backed up by the press releases and financial filings of the company whose security you have purchased and you feel that someone has lied to you for whatever reason. So do not go spending the $50. Sometimes 203 . ticket charges. Brokerage firms are notorious at making mistakes in their favor. You thought they were sold and you had more to go. or you received a wrong price fill. Develop a background check of each person and create an historical dossier of their professional careers. well then we come to: 2. wrong symbols or wrong stocks.
for those will definitely be repeated. For instance. brokers. I could detect fraud or backdoor payoffs by knowing the patterns of my traders. Worse. creating a pattern. you may have invested in the shell that they previously destroyed. These patterns are dead giveaways once you figure out what the pattern(s) is/are. They will follow the same pattern almost to a T. for short. management teams will hire the same lawyers and accountants and use the same funding sources over and over again. 204 . The consistency of managements hiring IR firms and how they compensate them is also pattern. you can bank on that. All things are possible. with a leftbehind bankruptcy or sale of a shell. or MOs. Some public companies are recycled many times. and IR folks all have patterns. even though you thought you could prove their wrong doing. too. they will repeat the same modus operandi (Latin.management teams hop. leaving behind company shareholder death and destruction. then you just might have a very difficult time collecting. From the standpoint of management they will say: “Why fix what isn’t broken?” My perspective is that the whole darn team can be in cahoots to make money for themselves and the hell with the investors. one of the greatest tools in my tool bag on the Street was to know that traders. Depending on their clandestine activities. investment bankers. So watch patterns closely and for sure be on the lookout for successful financial gains. there could have been an early escape from a bad previous situation. and more often than you think it’s the same folks bringing it back in another form again and again. like Caveat Emptor). the same amount of shares issued and outstanding with the same shareholder base in each new company will follow a pattern. Of course if everything is kosher and they follow procedures and are absolutely compliant within the rules of full disclosure and SOX. Or worse. Tracing stock lineage was a hobby of mine when I was trading on Wall Street. In some cases. You see. Structure is another key area to discovering a pattern.
market makers. purposely hidden behind various corporate entities (of which their individual holdings are less than 5% each but added up are significant). to mention but a few.The next paragraph takes us beyond the normal transparencies into the great abyss of: Well. Often times the IR firm plays a major role in what goes on in a particular public company beyond investor relations. if you’re not screwing me who is? Where do I begin? You may actually be in the same position as the company management and stockbroker. long forgotten about. These old shareholders were completely diminished in shares by the controlling interest in the shell. you still represent a threat to them. conferences. during which a whole new capital structure was installed. or there are undisclosed options. After all. there could always be a behind the scenes operator who is either camouflaged by management. IR firms can be paid both in cash and in restricted paper (restricted paper also known as rule 144 stock has a holding period of six months. So all parties in the mix will do their own individual due diligence for fear that they may find they either inadvertently screwed up or that there was a rogue individual in the midst. you might want to find out if the company began its life as a reverse merger into a shell. although the S1 and 15c211 structure is a safer starting point due to transparency and financial filing requirements. I have seen every possible scenario and from my experience I say: “Keep your friends close but your enemies closer. IR firms often know funding sources.” 3. and sponsors. Even an S1 and 15c211 public deal has lineage. but neither will admit it to you. such as 144 stock issued but trading in another market or just trading in another market openly. at which time the restricted paper can be 205 . You can always sue or arbitrate against them. the shell had shareholders. I don’t think it’s the stockbroker or company management so who else could it be? Depending on the public companies lineage. For instance. If so.
along with denial of wrongdoing. because it’s the IR firm that is called upon to help the company out of its self-made jams. short memoryitis sets in. and if they have written and released all the company’s press releases. especially if they hold paper. act as if you are a detective working for CSI. Remember names and spell them correctly and don’t leave out middle names or nicknames. Just as a good measure. You wouldn’t want to mess with them alone. Once saved. Jerrys and Pauls and Lucys. hopefully within bounds. 206 . A scorned and hurt IR firm can be like a wounded animal in the jungle. including dates. for the sake of paying the piper later because remember. Kerrys and Kristins. “It is not the money you make but the money you keep” that determines true wealth. There are many Iras. however. Storyboard what happened. All parties have a love-hate relationship with IR firms. So long as the company survives. secrets (knowing where all the bodies are buried). Many an IR firm holds a public company hostage or worse. I never indicated the importance of the CEO’s survival skills. whether it’s an IR firm or a shareholder. They love their help but hate paying for it. As you sort through what you know and what you don’t know. as investors and entrepreneurs. but I guess by now you get the point. Survival at any cost. who are merely trying to reduce the IR firm’s compensation.converted into free trading by lifting the legend on the certificate so the shares can be freely sold into the market). be it overhanging stock or the emergency need for money. you as an investor must always watch what the insiders are doing with their stock. someone is getting richly rewarded with compensation that may be of a “gray” nature. IR firms sometimes take the brunt of ferocious attacks by management. the management team has survived to live another day. So in agreeing to help the company.
FINRA had to hire almost 19. inspectors and administrative personnel. because that will just piss me off. It is a vicious cycle. but even as this is being written. It better not be that you didn’t make enough money. the scumbags will still be feeding on your greed to make money in low priced stocks. new BDs are opening and existing BDs are withdrawing. I am saying that if you have been screwed. There are enough scumbags in this business to keep FINRA and the SEC busy 24/7.000 more examiners. or being closed for net capital or just because they can’t make any money.In summary. they weren’t hired just to use up the budget money provided by the federal government. you have to show a real loss in value to your portfolio. 207 . The extra army of badges is in the mix. In fact. Regardless. Believe me. or you should have made more money sooner.
turned around against you? So we’re talking about almost 25 questions that raise one real question. you may be surrendering your rights to sue in a court? Is the reason for your lawsuit or arbitration to teach your broker a lesson. or to prevent him or her from doing the same thing to other investors? How much did you lose? How much is it worth to you to find justice? How much do you need for a monetary settlement? Are you prepared to have your background completely investigated.Chapter 28: When Do I Need a Lawyer? Are you ready to sue? Do you know exactly who to sue? Do you think you can win? Is it worth it? Can it cost more than it’s worth? What kind of a lawyer do you need? Can suing bite you in the ass? Do you have the right to sue? Or does your matter go immediately to arbitration? Does your level of frustration require a cooling off period before you go for it? Do you have enough evidence beyond the shadow of a doubt to bring you victory? Did you know that an arbitration panel consists of a three person contingency from the same industry as your stockbroker? How many cases do you think are won or lost by brokers and broker dealers at arbitration? What are your chances? What do you think the odds are that your arbitration panel will vote your way? Did you know that the panel could rule your way and still not grant a monetary payment to you? Do you know that if you agree to arbitrate. Just remember that the person you are going against is going to have his own major league SOB fighting hard in his corner. but I can sure give you insight to evaluate your expectations. expense and abuse of going after the son(s) of bitches that screwed you out of your money? I cannot answer these questions for you. including all of your trading activity? Is there exposure of any kind in your background that when brought out in an arbitration or courtroom could have your case simply thrown out or worse. Do you really want to put yourself through the torture. simply because the case could end up on his 208 .
209 .” Those words are like music to your ears. will offer you something of this sort. The mark on his license would lead to a lot of settlements. which you may or may not accept. Depending on the severity of the case and how well your lawyer may have done in the early stages of arguing the case. The target of your attack. which you also need to keep in mind. the possibilities begin to arise. So let’s say that after answering every question you still have a major bone to pick and you go for it. Remember these words: “Without admitting or denying any guilt. on its way.license if you win and he doesn’t. That means there is a settlement offer. if he feels he is losing after hearing the panel’s questions or by the body language of the panel.
Throughout my entire career on Wall Street. Reach into the bag and pull out a handful of the loose hundreds. How much money do you need to live a comfortable lifestyle? The 50 year old guy has different needs than the 32 year old guy. Say $10 grand in total.Chapter 29: What Should I Do with My Money? What do age. Lucky you. and the more risks you are able to take. Watch the bills carefully as they spiral down. wants and monetary requirements than a single 30 year old woman. And as they get older. land on Chance (just like in Monopoly). in their portfolio. Now take the money and go directly to the bathroom.” Here’s how it goes: You the speculator. one after another. responsibilities. all the way down the drain. sometimes needless and stupid risks. I have had one theory. or replace lost money with extra labor or a bonus. Fantastic. and drop them directly into the toilet in front of you. tear the bills up. Repeat this until all the bills are gone and 210 . tear them in half. and profit objectives have in common? They all play a huge role in how you will answer the above question. and take a bag of $100 dollar bills. the more time you have to earn back lost money. Now flush. They have been brainwashed. the more earning years you have. even if it takes a few years. the risk taker. I will tell you that the common opinion is that the younger you are. I guarantee that this idea of having all the time in the world to earn back losses is the major reason why so many younger people take financial risks. You tear them in half to prevent backing up the toilet and having it overflow. and drop them into the toilet. Do not pass go. risk tolerance. income. A married 40 year old woman has very different needs. I believe this thinking has a lot to do with the fact that the younger you are. and it is called the “toilet bowl theory. Figure out who you are. they forget to take into account that they are not as young as they once were. Reach back into the bag and grab another handful of cash.
Losing is the best preventative medicine. aka toilet bowl money. here is a true story which must sink in to your head for a number of reasons. It is just too damaging a concept. So why piss money away in the stock market and hate yourself the next day? If you just want to take a shot.” therefore the penny stock market is their casino. and above all else they have a load of discretionary income. which they were reading in earnest. and if you can count cards. At least you get free drinks in the casino. even great. I knew many a stockbroker that would open the Wall Street Journal at their desk simply to cover the Racing Forum. it does happen. That was an indication that gambling was in their blood. They have gone through years upon years of education. while winning big with beginner’s luck has the potential to ruin you for years to come. What better stocks to play with than biotech. The racetrack is another story. Hey. You must know. med-tech. So visit the racetrack with the money burning a hole in your pocket and get it out of your system. For your sake. remember that black or red is 50/50 in roulette. but that you do not win. I hope you have fun. Many are money managed by “professionals. Once finished.the bag is empty. so to speak. Not too good. For those of you who are out control. blowing $10 G’s can often times feel okay. blindly investing in penny stocks. 211 . life sciences. and pharmaceuticals? They are playing ball on their own field. So why not? They are smart. Doctors love the stock market because to them it represents an opportunity to make money without facing malpractice lawsuits. Here’s a “tip”: kids’ and pets’ names oftentimes overcome the need to look like you know what you’re doing. Odds are best in craps. try blackjack. I bet. but the exercise of flushing or burning money up in a fire is not one of those times. take a deep breath before telling me how you feel.
we were it! Dr.01 penny stock called Nastech Pharmaceutical. it’s your lucky day. a staggering move. A was a nice guy. size and buy/sell availability was to call a broker. because their market was usually the most real. I had been buying the Nastech shares for months when finally it began moving up.000. Do you want them?” I knew he couldn’t resist. Dr. and he always wanted to know the closing bid and ask price. he was addicted. He called incessantly to check prices (in those days the Pink Sheets were pinks papers stapled together with various market makers listed alongside their inside markets). I have a block of 100. “Doc. or roughly $32. It was my first stock and inaugural recommendation as a Series 7 licensed stockbroker. no clue as to the difference between Nastech and IBM.20. In the case of Nastech Pharmaceuticals.28 bid to $. They were both stocks. Then one day the inevitable happened. and the block was 100. Sometimes he called several times a day in between patients and surgeries. He wanted me to call him the moment there was news. was accumulating and correctly cost averaging up the Nastech stocks. because the only way to find out prices. a surgeon from Bloomfield Hills. especially as I had no idea what I was doing and worse. But I decided to call Dr. I had a client that needed to sell a substantial block of Nastech stock. 212 . Dr. or the moment a block of stock traded. It shot from $. he had fallen in love with a company that owned the patent on the nasal delivery of drugs. Anonymous (fictitious of course). picked up. The stock was trading at $. A. And the best way to find out was to call the originating IPO brokerage firm.000 shares of Nastech for sale on my desk at this very second. I could have called a number of my clients to see if perhaps they were interested in buying the shares. right? Well anyway.03 to $. Michigan.32 ask.000 shares. I said. He had accumulationitis. The phone rang.Back in the mid-1980’s I was trading a $. but he took buying stock a bit too seriously. A.
both biotechs.000. Here’s the punch line: Nastech Pharmaceutical actually became a big winner on Wall Street.He said. But for every one of these success stories. buy them for me!” I ran the trade and the commish was delish. 213 . put kids through college. took dream vacations and basically upgraded their lifestyles. A added another 100. you know it’s a 3 day settlement plus an extension if you need extra time. This and one other stock IPO I did had great results.000 thousand shares. made a small fortune. When do you need to have the money?” I responded. “Well. At 100. Dr. new cars. I know many bought new homes. “$32. Nastech Pharmaceutical still trades today (NSTK).” He mumbled loud enough for me to hear.000 shares to his position. there are tons of deals that did not work out quite as well. achieving a plus $20 stock price and my clients. huh. many of whom were not doctors. “I have a gall bladder tomorrow morning and another…Okay.
Except that instead of helping you lose weight. or equity sitting in your account at their company. I am going to miss sharing my experiences and my opinions with you in my never-ending quest to protect your butts. they are out to get your cash. I now leave you on your own. take at least some of this knowledge and use it.Chapter 30: I Can Do This! Right now I feel like the host of a reality TV show that has come into your life. I have been asked to provide a blog. tame your kids. The cheap or free trades are a loss leader. DO NOT open accounts with stockbrokers just to have someone to talk to. repair your family relationships. find you a wife or husband or redecorate your dining room. I have known my share. just delete them. did you ever stop to think how a brokerage firm like Scott trade or eTrade (which has become a bank) can make money charging you $7 a trade? Answer: they rely on you having money. Imagine that! In fact. Don’t fall back into the traps laying in wait for you. I’m always eager to lend an ear. Always remember that your stockbroker and his/her firm makes money on every trade. rebuild your house. the brokerage firm can utilize your cash account for inclusion in their net capital and loan against it and earn fees. which I will. If you are lonely and want to make friends. definitely clue me in on some of your wild west stories. Once there. how you should approach investing in micro-cap stocks. Please. I am attempting to show you the way to a better understanding of the financial markets and more importantly. whether you have a winning trade or not. You don’t have to keep changing your email address to avoid penny stock newsletters. 214 . you may be a recovering penny stock junkie. Remember. And all you readers out there.
no news you bleep. at around 2:30 PM. closed my books. went home and poured myself an Absolut on the rocks in a tall glass and began to think about the day’s events. but I felt she was either excited or nervous. and she was a sprite but older retired woman who knew her way around the stock market. but I checked anyway. during the winter of 1994. I will hold.” “Elaine you are trading on inside information and you are using me and my staff to give you updates. But this day she had a greater sense of urgency than normal. no big deal. So is there any news?” I check quickly. no news at this moment.” I said: “Elaine what’s going on? You’re acting weird even for you. I know you have a Bloomberg machine. I received a call from a regular client.Chapter 31: The Commercial You Have All Been Waiting For One day at Emanuel & Company. She was asking for news about a company that I was not familiar with. and there was none. Are you a bleep bleep? And furthermore how dare you do this and use me like this. At 3:58 PM she calls for the last time before the close and now I pick up the phone and Elaine is apologetic and says: “Come on Shelly. At 3:45 PM. she asked for me again: “Shelly check everywhere for news. She called every ten minutes thereafter. “No Elaine. don’t get upset. I was actually mad that I spent so much time 215 .” Now I am pissed and I hang up on her. We have been friends for a long time.” She basically hung up after some small talk. no news of course.” I hung up on her again. I spoke to the CEO and he promised me there was news coming out today and I am waiting. that I did not even recognize. Please check. Her name was Elaine. which I tell her. I reported to her: “No Elaine. speaking with my assistants throughout the rest of the afternoon.” “Well Shelly. that’s all.
SNN Inc. CEOs record into a video camera and easily upload to SNN.com are all dedicated to supporting micro-cap companies and their CEOs. CEOs go to snnwire.. stocknewsnow. financings.that day dealing with Elaine but in retrospect. and I have been glued to the Web for information from its earliest days in existence. high net worth accredited investors. My Company SNN Incorporated is a publisher. an investor’s portal. 216 .000 selected media outlets throughout the world including TV. management decisions and now the marketing of all of its enterprises. websites. magazines. SNN is in some ways similar to businesswire or prnewswire as a news-release company.com. or symbol. Stocknewsnow. CEOs tell their stories and give updates to new investors. name. I have managed the company through acquisitions. Elaine led me to realize the need for investor access to real-time news and news direct from CEOs.com. radio. press releases.com. Investors can search the site or archives for companies by sector.” is the first video press release website.com provides investors with a FREE informational financial portal dedicated to micro-cap companies.com and microcapreview. The most popular videos reside on the front page. as well as a media and entertainment company. SNNwire. but different in that we specialize in video press releases (which can also have attached text). “Where CEOs meet investors. CEOs use SNNwire for uploading and distributing usergenerated VPRs. and pull up video press releases. like YouTube. I attend approximately 40 financial conferences annually. As CEO. newspapers. and millions of investors like yourself. I have probably read and watched more press releases and company presentations than anyone else in the world. SNNwire. SNNwire users can reach more than 500. new product launches. Over the course of the last 15 years. I have interviewed more than 2500 CEOs. and new media. investment bankers.com and investors go to stocknewsnow.
investment bankers. money managers. At these websites investors are polled.private equity holders. And you?” 217 . surveyed. One says to the other. IR. and offers CEOs their own financial youtube. A stockbroker dies and several strangers unknown to the family show up at the funeral home in the Bronx.com is a financial portal and news distributor.com. “So how did you know the deceased?” He answers.com service. All viewed videos are tracked by the SNN team. wealth managers. as well as lists of surveyed subscribers. bloggers and social network users to send their VPRs to. CEOs get a menu of opted-in micro-cap investors.com operate in conjunction with one another. This maximizes search engine optimization and CEO/Investor interaction for company exposure to investors. In theory. “Well. In the balance. I like to say it’s a great place to find the next Google and to meet a CEO and look him in the eyes whenever you like. SNN receives video press releases and stocknewsnow. and professionals such as lawyers. indications of investor areas of interest. Two strangers in attendance sit next to one another in a pew and strike up a conversation. I am going to end this book with a couple of Wall Street jokes so I know for sure you passed this book on to others with a smile on your face. this provides CEOs and investors with a match. has been my pleasure. financial advisors. and to put more transparency into the market place. CPSs. SNN and stocknewsnow. stockbrokers. he was my stockbroker. and questioned regarding areas of interest to become part of a targeted database for future RSS & email updates. But it is how I have chosen to live the rest of my life. PR and media. Creating and operating SNN Inc. My whole purpose is to make it easier and more efficient for investors to get timely and accurate information. and the data is transparent to SNNwire CEO customers. although it is very exhausting.
you had the choice of a doctor’s heart. Cohen says. Schwartz and after all the tests determines that Schwartz needs a heart transplant.The other answers. “I will take the heart of the stockbroker. I don’t know about you. you look great but I have wondered all of these years . but I am just here to make sure he’s dead!” And the next joke is: Mr. and is a new man. Schwartz has a heart condition and goes to visit a heart specialist. Schwartz heals. a lawyer’s heart or a stockbroker’s heart. Are you here for the same reason I am?” The other guy thinks for a minute and finally responds. “Maybe. “Well doctor.” Dr. Cohen goes ahead and gives Schwartz the heart from a stockbroker.” After about 2 seconds Schwartz responds to the doctor. About 20 years later. I wanted a heart that had never been used!” 218 . Cohen and Schwartz are in Miami waiting on the same line to get into Moe’s Deli. Cohen. “He was my stockbroker also. Cohen examines Mr. You can have a doctor’s heart. The doctor says to Schwartz. “You have a choice of hearts. a lawyer’s heart or a stockbroker’s heart. Dr. Why did you pick a stockbroker’s heart?” Schwartz looks at him and smiles and says. “Schwartz. Dr.
sell on Yom Kippur. 219 . Absolute Fact #1: Buy on rumor. and you must check for the pulse. and it has nothing to do with cosmetics. Lipstick on the Pig: No worries. as in don’t know a trade. Absolute Jewish Fact #1: Buy on Rosh Hashanah. someone will buy it. sell on news. Herd Mentality: Just remember Pamplona.Glossary of Terms Frustration: Everybody is making money in the market around you while you have nothing but mounting losses. It should mean have no clue! Cut your losses: The moment you realize you’ve been duped. Liars: Everybody that says they are making money in the market around you. Dead Cat Bounce: Another excuse for not really being a bull market. Don’t try and catch the knife: Trying to pick a market bottom. DKs: Don’t know. Great Trade: You didn’t lose money. Market Breath: Somehow you just know when the market is breathing heavy. Conscience: Something harder to find on Wall Street than profit. Liquidity: Spirits you drink when you find out your stock has no liquidity. Guarantee: Only at Midas Muffler. The Trend: Is your friend until it turns the other way. Spain. once the lipstick is on. A Can’t Miss Opportunity: Impossible.
New Definition is blue chips rise big. new definition is a stock now trading below $5 that started much higher. Insider Trading: Those able to buy or sell before I did. Link to Rule FD: http://www. NOT.Penny Stock: Old definition is a stock that trades $5 or lower. Market Momentum (Moment Dumb): The moment you realize you made a mistake with a trade. profits invested in micro-caps. sell on news: Which is illegal? Crash and Burn: What happens to your stock account at a penny stock firm when the firm blows up for net capital issues. or worse. Trickle-Down Effect: Old definition is blue chips rise big.htm 220 .sec. Pump and Dump: Nothing to do with social networking. profits pay down margin. Flash Crash: Oops! I hit the wrong button. Buy on rumor.gov/rules/final/33-7881.
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