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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.
from Red Sun Sportswear on Canal Street in Manhattan. Every day I was nagged about doing my homework. Jimmy Ying. Don’t get me wrong. and Dad was an industrial sewing machine mechanic. and then go to camp with the other kids in August. I was literally born into the stock market. skills and financial knowledge. I had to be up to par on my accounting terms. too. the talk was all numbers. He used to tell a funny story about one of his customers. with business and money in my DNA. As their only child. My mother and father owned their own small businesses. 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. I could use an adding machine by the time I was five. I would have learned earlier but the handle on the manual machine was too hard for me to move. engineer and inventor. or I was just a set of hands passing the vegetables and the bread at the table. I wanted to get my hands deep in the green. My parents were very involved in my life. While in school my classmates struggled with long division. I went to work with dad. fix sewing machines. This would go on for a month and then Jimmy would add up 4 . And when school let out in June. abilities. I was evaluating balance sheets and financial statements with the folks. But dinner in our house was different. work would really heat up. 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. At the table. I would spend the first half of my summer doing the inventory for my mother’s blouse company.Chapter 2: Born to Trade In many ways. He would go to Jimmy’s factory. They cared. and how long I had spent practicing the piano. And I loved it. Mom was an accountant/bookkeeper.
Had America listened to your philosophy the massive losses of 5 . hold them for their return. and her ability to grow money fascinated me. my interest in all of this endeared me to my mother. she would be invested safely and building a nest egg. In today’s market. 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 used to buy stocks like Telecredit and Con Edison. I hear you still in my ear today. She was into dividends and interest. her investment wisdom would have been considered quite conservative but then again. collect dividends and interest. just like the mavericks in the Wall Street Journal. largely due to my mother.the amounts on the wall and write a check and pay off the amount. no risk. I guess my mother was the first investor I ever met. and sell for capital gain. but that story was a classic in the Kraft household. and capital appreciation and trading. Jimmy of course made good. One month the bill was amounting to a lot of money. Mom was conservative in her investments to a fault. She was a big influence on my affinity for investing. only sell if the returns drop below your estimates and projections. Mom. although I was Doctor Kraft from birth. her not much selling. She loved collecting interest and dividends back in the days when people actually had flush savings accounts. At 14 years old I was spending long hours pondering and studying the stock market. always trying to impart upon me her simple investor mantra: buy high-quality companies at low prices. This is where she and I kind of differed. and her buying. Of course.
Her adherence to this analysis was unquestionably what differed between us. The numbers seemed to speak to her. CNN. Many an article was historic and I used to believe that every writer was a true genius. I was so young. But then I started a scrap book of business and finance stories that I found exciting. She was a professional bookkeeper. losing some. My mother was so sharp. In fact. She would make money slowly and steadily while I loved taking risks and taking shots. 6 . Even the Brooklyn Eagle was fairly easy to get my hands on. and selling at a profit was a great motivation for me. All I knew was what I read in the papers and magazines. As a youngster. I didn’t realize that these business stories were having such an incredible impact on my thinking. that newspaper was my Bible. Back then there certainly wasn’t any CNBC. Winning some. Bloomberg. thank you Charles Dow for creating the Wall Street Journal in 1889 because as a kid. only the numbers mattered. her eyes were so focused on the numbers that I knew to her.2008-2009 would have been avoided and many old line familiar Wall Street firms would still be around today. The Tribune. Fox Business. It was easy to get the Daily News. But the Wall Street Journal was the best and not every news stand had it. I never considered myself an investor because I had no formal finance education. or anything that even remotely resembled Cramer or Motley Fool. I used to wonder where her smarts came from. or The New York Times. While I was full of excitement and exuberance about companies that had new products coming to market and how sales were growing. My hobbies were collecting baseball cards and comic books. It was almost too much information for me to digest in one gulp.
He read two publications religiously: Popular Mechanics and the Physicians’ Desk Reference. known as the PDR. 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. My father had served as a Chief Pharmacist Mate in the United States Navy through WWll. out of necessity. he invented the industrial diamond chip sharpening stone to sharpen the carbide. just as a side note. he would study the characteristics and side effects of different drugs and then devote himself to creating cocktails with this information. including weekends. He was even smart enough to sell his inventions to Union Carbide and the Carborundum Corporation. Then. When my mother was diagnosed with 7 . and more familiar than most doctors. I read up on those public companies at the time and made sure my father was engaging in smart business maneuvering. As a hobby. He was as familiar with pharmaceuticals as any druggist or pharmacist. He loved working with his hands as much as he loved to invest time and money into creating new devices and patenting them. My father’s interest in medicine and pharmaceuticals was beyond the ordinary. He had attended Dartmouth University in New Hampshire and ran track before enlisting. I always imagined that dad was sitting on the toilet one morning reading Mechanics Illustrated when he thought of that one. so he was no dummy. He tinkered in the basement for hours every day. and was in the USN reserves for both the Korean and Vietnam Wars. 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.My father was more the Renaissance man.
Parkinson’s disease in 1968. I was just a kid. How surreal. My mom passed away on April 29. I could never have braved it if my mother criticized my decision.725. I know you are all waiting with bated breath to know what I finally opted to buy so here goes. but it was 1965 and SYN 8 . you ask.389? That’s right. The symbol was SYN NYSE. although I didn’t call it that then.691. I realized that I could potentially lose all my Bar Mitzvah money. for me this was no small decision. Colton. I would have been crushed. 1982. 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. but my final decision was Syntex Corporation. The birth control pill. the inventor of Estradiene Compounds Oral Contraceptives. I read magazines. how about Mr. you won’t be surprised that when my mother asked me what I wanted to do with my Bar Mitzvah money. Frank B. Plus. which in those days was very real money. and 2. After all. especially ones that had information on companies creating new technologies and developing new drugs. I bought a company called Syntex. and price comparison. To me this decision required research. Patent Number(s) 2. my father entered her into the El Dopa experimental drug treatment program. I asked her for a week to do my due diligence. Why. but I give my father credit for making her time on earth longer and more comfortable. Now that I have told you all about my upbringing.028. comparative thinking. 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. I pounded the books. I remember it like it was yesterday.
I had put all my eggs in one basket. I look back on this experience in life as a serious education process. 9 . I held the stock until it surpassed all of my expectations. 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. Had I just traded the stock. Syntex did incredibly well. and was also the first stock I owned that had a two-for-one stock split. Of course mom was right all along. at least in my mind. but not necessarily a smart one.owned the manufacturing right to the birth control pill. so in all actuality I was not at all a good investor yet. I would have spent weeks lamenting about how much I could have made. and mulling over how much money I had left on the table. I am still working on that. I was on my way to becoming a very wealthy kid. In fact. Not that I was so disciplined back then. and at the end of the day I knew one thing: I had become an investor. I had intended to hold SYN and not sell until it had a huge big payday.
and is required to know each and every new regulation as it becomes a rule or law. Margin and options are the toughest parts of the test for most novices. Of course there is a separate set of questions and an entire section on insider trading. The rest of the 10 . The test also forces the candidate to understand the math involved in calculating margin. if you don’t know the material you are done. The test includes virtually every element of the stock market and demonstrates the interrelationship of the different components for investing or trading. and are the sections responsible for most of the multiple-time test takers’ laments.Chapter 3: Series 7 and Stock Education Before you begin to invest. The best course to take before investing with the intent to trade is to study for the Series 7 stockbroker’s test. It is not simply knowing when to buy and when to sell but how to do it. Bud Rosenblatt. because they ask tough questions about what is allowed and what is illegal. Knowing how to trade is knowing the mechanics of the market. Just for giggles. Each candidate for the broker’s license is then tested on the specifics of regulatory rules and regulations. 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. The test taker faces a series of problems that he must complete in order to actually understand the process of how options are used. but margin and options sank him like the Titanic. Nicest guy in the world. it is wise to get yourself a stockbroker’s education. This demands memorization. let’s get into what is on the Series 7 test. and certainly before you begin to trade. This isn’t the learner’s permit test at the DMV. I knew one guy.
the humiliation. So whether you figure out that you are an investor or that you are a trader or both. remember that the guy or gal doing it for you makes money regardless if you do or not. a fee you are charged each time you buy or sell. profit and loss. the embarrassment. it is the knowledge that qualifies stock brokers and financial advisors to take your money. and a new component that tests candidates on how they should and should not use social networks. pack up and go home now. The more you know. You cannot learn correctly without including all the charges. Shouldn’t you possess the same education? Try and get your hands on the Series 7 study materials. You are likely realizing about now that your education can directly correspond to your profit and loss in the stock market. If you think you will learn by doing it yourself. Save your money. It’s like the cowboy who sits down at the blackjack table and splits tens.test is stuff like what a broker can say. which does not pertain to our use of the information. Look for a program that has a running portfolio accounting system. In every trade you will ever do. win or lose. the greater your chance of making real money. including buy/sell trade by trade. and this money is called commission. In other words. what he can advertise. if you think you will learn from your broker. Mastering the fundamentals that are on the Series 7 test is tantamount to a complete stock broker education. or worse. Each program 11 . If they pass. 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. including commissions and ticket charges. you should at least be educated. and running total cost average of each position.
your knowledge will aid you when you trade.has its own competitive edge over another. Some discount brokers have simulated trading accounts for you to learn on. If you learn well enough. 12 .
This is a great wish list.Chapter 4: What Are Your Financial Goals? Making money with no risk. Increasing your interest rate on fixed income. Getting a large piece of every hot new issue imaginable. ride the quality of a great leader. keep dreaming. the CEO. 13 . the man or woman in charge. Always make sure that the leader. Each time. and Writing calls each quarter without stocks being called. I will repeatedly remind you to dig deeper and deeper before plowing your money into a situation. Give me a B-quality guy and an A-quality company and there could be a problem. Give me an A-quality guy with a B-quality company and I am good with that. I always ride the jockey. If you want to meet those goals. Let’s get down to reality. know who you are working with. has a personal stake in the business and possesses the abilities. Selling calls every quarter of your financial life on the same stock. Buying low and selling high. In theory. passion and vision the market requires. Maintaining a permanent put against your financial advisor and his bright ideas. Taking ordinary income as a long-term capital gain. but keeping the premiums and dividends.
it’s all relative. F. flying to the Mexican Riviera for long weekends. enjoying your beach house on holidays.A. All in all it can happen and happen repeatedly. it’s painful and it makes you feel battered. You would be something like pummeled to unrecognizable bits. Unknowingly. what could ever happen to the House of Lehman or The Bear? But once the hammer started to pound on your accounts. it hurts. and wondering if you should go for the Lamborghini or the Ferrari. Let’s just say you had a few million bucks in the market in what you and your broker believed were safe instruments. account at say Lehman Brothers. We won’t even suggest you had any money with Bernie Madoff. had you fully invested in funds (maybe his firm’s funds). you may have had a healthy. because you would be in a completely different category of battered if that were the case. and an assortment of other really “safe” product.Chapter 5: Are You Suffering from Financial Battered Wife Syndrome? You may not even know you are suffering financial battered wife syndrome. You were sleeping well in your five-bedroom house. Really. After all. Your money in the 14 . suddenly you had nowhere to turn for advice. you may find that you fit the definition. if not wealthy. high interest mortgage paper. or Bear Stearns. but once I describe this condition. Here’s what I mean: If you have as little as $10. Your guy and your account went into limbo overnight. This sucks. it has nothing to do with how much money you lose because on Wall Street.. that loss is as legitimate as the guy who loses a million or more. Your guy.000 in the market and you lose it thanks to the advice of some dummy broker.
So let’s remedy your battered financial wife syndrome with our own personal prescription for your success. Get into the research world. Once you learn the ropes.” I am engrossed in news and press releases and how they affect stock price and liquidity. MicroCap. start doing more. What a cure for what ails you! 15 . You will witness some of my personal fun as you read on. The more years you have left to earn a living. the more risks you can take. This weekend I am doing comparative analytical research on stocks in the ETF small-cap Russell funds.market should not be the money you need to live on. in certain circles I am known as Mr. Let’s have several wins in a row. and doing more on your own. right? Therefore. In fact. Wall Street and Mr. you can take some shots to win. I created my own stock index called “stock news index. especially when I track some of these newsletter email blasters.
The conversation went something like this: Hi are you Shelly Kraft? Yes I am. 16 . But throwing money at the stock market is like doubling your bet when you’re losing at the blackjack table: it is insane. but there is some hidden truth in that joke. just an old joke from the street. I can make you a millionaire.” Okay I can see guessing wrong on interest rates. Well. Just send me 2 million dollars! This is not really a true story.” Or. true story. Kraft. “Maybe the next broker can fix my account. Is that true? Yes that it was absolutely true. I can even see getting market direction wrong. One day I got a telephone call from a referral. even if those losses were beyond my control. what do I have to do to get started with you? It’s simple. I was referred to you by so and so because you made so and so a bunch of money. Mr. Every investor has made the mistake at least once of hoping. “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 have lost money in the stock market and I was told that you could make me a millionaire. This is where my experience as a stock broker really comes in handy. Let me start off with a good.Chapter 6: Can I Make Up for the Money I Lost? You never will.
How do you feel about doing that? Ask yourself these questions: A. 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.Let’s go back a few steps before we move forward.000 shares of WXYZ at $1. If you want more. What went wrong? Did you have control over it? Or did you lose control? After all. 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. rather than waste time playing the blame game. There are points in every transaction at which you have choices.00 ($5. Let’s say you buy 5. unless your guy had full discretion in writing over your account. Should you sell or should you buy? Or should you buy more and then sell? Or sell short. but that may be too harsh. the ball was in your court the whole time. 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. how much more? C. that’s a different story). Do you feel you missed it when it was cheaper? B. I would rather couch it a different way. How does additional buying affect your cost average? 17 . the pros? Remember: track record of the driver is key when going Greyhound. You need to be able to analyze what went wrong first. Stock moves up and you want more shares. Hopefully you don’t incur any serious accidents or asleep-at-the-wheel driver mistakes.000 plus fees).
married with one kid and one on the way. How does additional buying affect your ability to sell due to illiquidity of liquidating a larger position than originally purchased? E. 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. 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. To me. 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.000 compensation and you have about $100. Start believing in yourself. Last year you earned $250.000 discretionary income available.D. Is there any news? Now we’re getting into it. 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. discretionary income is not play money. a cool wild ride from research you did on your own. let’s ride this bad boy! Or there is always Greyhound… Let’s assume you are 35 years old. 18 . Yeah.
Now deal with the loss. the money is lost. your spouse and your own future is totally demolished. after all hell broke loose in the stock market and your account. 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. Learn from all your mistakes. Yikes. Your spending habits have been altered and have probably shrunk. Your dependability for having the necessary money for your kids. And the disrespect accorded you during the process of clarifying how the losses occurred is both disheartening and psychologically damaging. from licking your wounds to your lack of trust in general. From self doubt to having your confidence shaken all night long. Your leisure time has shriveled. Make it a part of your new mantra. This is critical. Write them down and never forget them. but we have all been there). I feel your pain. I devoted an entire chapter to the battered wife syndrome because the end result is loss.Chapter 7: I Just Won’t Take It Anymore Remember the movie Network. losses have a way of causing personality changes. The bottom line is education. your lifestyle is completely different. Keep a diary and make notes to yourself. One day all is well in your life and the next day. It’s gone. 19 . 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. either at your own hand or by paid professionals.
all in incredible opulence. In other words. It is less hurtful on the winning trade but has an effect on when you make your moves. the lobby is amazing. Most brokers split 50/50 with their firm. Even if the broker or discount brokerage firm charges the minimum. Let me repeat myself: win or lose. the house always wins. Here is a good comparison: When you walk into a casino in Las Vegas.Chapter 8: Commissions Ladies and gentleman. but it certainly wasn’t what we wanted to hear when we signed up with our stockbroker to make money in the market. Goldman Sachs’ offices or JP Morgan’s or Merrill’s main office. with expensive furnishings from chandeliers to ridiculous oriental rugs and gorgeous lighting. These offices were built with our commissions. or Caesars Palace. I am comparing casinos to Wall Street. these casinos weren’t built to lose money. or the Luxor. Series 7 boy is collecting a commish! His firm is collecting ticket charges and who knows what else. this may be a wishful thinking and a very liberal sports coach’s greatest expression and legacy. On a losing trade you just want to scream. it’s not about winning or losing it’s about how you play the game! Well. I probably helped pay for some of these chandeliers myself. Needless to say. House wins no matter what! 20 . Now let’s compare this opulence to say. losses at the gaming tables to commissions. Or after we realized we had a sports coach as a stockbroker. You feel you have just entered the actual Taj Mahal. You see. as we used to say before regulators forced the market to give up fractions for decimals. It is harder and harder to trade on 1/8ths. it still stings.
In fact. there is no commission until the stock is sold at a set minimum profit. Call me prehistoric. then your stockbroker could charge you a 10% commission (more than currently allowable) when he sold the stock. It will probably remain until the end of time that the stockbroker will earn at your expense. I believe a stockbroker should earn on what he recommends when it is successful. and also on how much you earned if it all worked out. he receives no commission (unheard of). but you are still charged the minimum ticket charges. But if his stock pick breaks even or loses money. but one that we would love to see. and no commission at all on the buy side if it’s your stockbroker’s or the firm’s idea and it loses. in fact I probably over use it: “Earning money should be based on you eat what you kill. 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 .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. There is an expression that I use. When it’s your idea and choice and it loses. Seems like a win-win situation right? Let me tell you this . Can you imagine the efficiency within the market if salesman-stockbrokers only earned when they were right? This earth shattering premise will never fly. In this second scenario. you should just find the least expensive commission at a discount online trading firm and go with that. it’s a different story. it’s gross when taken literally. it would get shot down quickly.” I know. In that case. But figuratively speaking. Here is my next question as your investor advocate (by the way. whether right or wrong.that is just a fantasy.
Who says you should trust him blindly and be led where he wants to lead you? I think you need to know more. After all. But no where will you find any information about his or her track record. and I understand that there are difficulties to deal with. My partner Eric and I were on a call with one of our SEC attorneys. and even overpay. even if he is your wife’s cousin or your best friend’s wife. so make sure you get the same research as they get from their firm. in all areas of life. Eric was discussing the recent outrageous bill we received from one of our law firms. customer complaints and legal history. 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. can’t you just win once in awhile?” Follow me here. Most brokers worth their weight will base decisions on research. Do your own research away from the broker to see what the rest of the Street thinks. Any broker can get hot really quick. don’t you? Sure. but he can also cool off just as quickly. or even Google. Ask about track record always.ideas out of all the times that he’s traded? You want to know as much as you can about your stockbroker. even with your current professionals. you can go to FINRA and SEC websites. But if you’re going to charge us this much. I remember a funny story about winning and losing. I quote Eric: “Okay Ray. Asking the rep is always worthwhile if you have spare time. Why not be willing to pay the going rate. I understand that you bill by the hour. 22 . until he or she proves that they pick more winners than losers. so long as you are winning more than you are losing? You still walk away with a much fatter wallet then you started with.
he is the middle man between you and your money. He. a favorite technique of every brokerage firm at every level. the firm’s assets grow. He is the middle man between you and the professional who will be investing your funds. Brokers do this asset gathering at the urging of their managers. He isn’t selling you his ideas or his firm’s recommendations. but rather turning over your assets to his so-called expert. Firstly. and is therefore avoiding every firm’s worst nightmare: a customer complaint. Yearend bonuses are very big business and have an impact on how each client of the brokerage firm is treated. In other words.Another major warning when you are choosing your broker: make sure he or she is not an asset gatherer. the broker is buying house product. By them gathering your money into their firm. size and tier. too. Securities firm management loves asset gathering above every other broker recommendation for a number of reasons. enabling the firm to have access to more cash from lending sources like the FED window or clearing firm. an asset manager. Asset gatherers work incredibly hard to convince you to use their firm’s principal analyst or fund manager to manage your account. and so on and so forth. Every day the broker comes in and does the same thing: he finds assets to 23 . would have a share in both the fees and the returns if included in a yearend bonus. Secondly. And don’t forget the broker who turned you over to the fund manager in the first place. This increases the firm’s ability to invest in more assets. So would the fund manager. You would then have a share in the expert’s gains or losses. Measuring gathered assets is a valuable gauge for firms that pay bonuses each quarter. the broker is less of a risk to the firm in that he is not using his own ideas and risking customer dissatisfaction.
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. of course. Commissions are a variable cost depending on quantity of shares bought or sold. and additionally due to exchange fees. I have been in power lunch meetings where guys from Hollywood brag about how much money they have in ETFs. and ticket charges. Even the $7 trades have additional costs attached. and charge for the time that you are in them. going out.bring into the firm. and when you receive the paperwork you will read the small print and clarify all the costs per trade for the future. 24 . Pretty important stuff.they get you coming and going. look for signs that the good times are soon ending. Unlike tipping the blackjack dealer for giving you blackjack even though you’re down ten grand. You will. It reminds me of certain country tariffs when traveling overseas . (Now that I have said this. pick a good Exchange Traded Fund (ETF) and pump your money into the ETF. huh? Some successful asset gatherers work fewer and fewer hours as they make more money from your gathered assets. clearing firm’s fees. For those of you throwing in the towel. ETFs are quite hot these days. Every registered representative or financial advisor checks his assets under management amount before he drinks his first cup of coffee. as those assets are deployed. ask all of the right questions before you open the account. So before you lose your mind paying commissions because things are so good. and certainly more intriguing than the mutual funds that charge fees going in. your assets for instance.
folks were on cruises in the Aegean Sea while Madoff was making off with their money. Now they are crying in their champagne rather than beers. I remember a UPS driver delivering me an overnight envelope. I am writing this chapter in mid-November. Right before one market crash. because the government needs to pay for the healthcare bill and some other ill conceived expenses. but there are signs of topping out. And they better. This may end up being a pretty good year for the Street 25 . Like retail businesses. 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.” The Dow is up 1500 points and so are commissions. in the second half of the year. I am twittering like crazy about “window dressing. the Street loves and depends on a great fourth quarter. Well. it went down significantly. even GM is trying to pay the government back as quickly as possible. Although the Obama administration is antibonuses and anti-high payouts. Stockbrokers and investment bankers are raking in big commissions in the fourth quarter and making up for the first three miserable quarters. The next day I liquidated my biggest positions and ran like hell to the sidelines. and that’s no joke. He had a UPS handheld computer in one hand and in his other hand he had a market watching device. 2009. and I locked in profits and watched the market correct (I hate word correct). it clearly meant the top of the market to me. very big. The market is screaming higher up.Nero fiddled while Rome was burning. and when he told me that he was watching his stocks. Sometimes there are indicators of a topped-out market. cash in hand. No glory here but I was right. I asked him what his handheld device was for.
being a broker is a great business.commission-wise. Cut jobs. this means real discounts on “Black Friday.000 registered representatives earning commissions in these fine United States of America. not salaries. after all is said and done. where retail consumer spending makes up 2/3 of the economy. that’s why there are more than 600. raise profits and make earnings look better. Except that in the US market. 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. 26 . So in summary.” Stockbrokers have job security in that they earn commissions.
Trust in your spouse. First National Trust Company. financial trust. he is having a few 27 . Unfortunately. 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. Trust Company of America or. 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. it is true as well as funny as heck. Another old retail joke: In G-d we trust. Trust in your family and close friends. My cynical repartee is not from my being naïve.Chapter 9: Is My Broker Someone I Can Trust? In the world of Wall Street. but I am going to clean it up a bit: How do you say screw you in Yiddish? Trust me! I know. and sound judgment.. All others pay cash.e. I love that one too. after all. deep concern. too. must be wisely conferred. The reality is that you do have to have some degree of trust with someone managing your money. This is a dangerous trap to fall into. Trust can be substituted for laziness. You begin to rely on your money manager’s judgment and pawn the critical calls on what to do on his advice because. that I need to trust. Okay. so Mr. and assume you will always be told the absolute truth. 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 expect no surprises. But that kind of trust. smart planning. ladies and gentlemen. It is founded on experience. i. I enjoy the way the word “trust” ends up in the names of well known brands: Bankers Trust. Making important decisions on your portfolio carries obligation. and that I believe trust is something built up over time.
It is that crowning moment when you realize that your control. You know what I am talking about. do I? Should I be confrontational? Maybe he knows better than me. 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. You begin to think. when you regularly did what I call visiting with your money. your trust and your absolute value system. you fell into the trap. Your manager’s financial upswing relaxed you. Still no call. Your comfort zone was satisfied when you knew every maneuver of your every penny. “I know he did something without my approval. too. and not because you have stop limit trades which trade automatically – this is a terrible sign. Now how do you feel? I would get nervous. This is called discretionary authority. 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. What should I do? I don’t want to piss him off.real good quarters. or that it could have 28 . If you are not aware. He picks up on this and feeds your jovial mood. But you were used to more conversation. He did something that was unauthorized! But it worked out. Time goes by and here comes your monthly statement. Money Manager. But then the frequency of the calls rapidly diminishes and the closeness of your rapport begins to wane. and put your antennae at ease. but it worked to my best interest. made you comfortable right away. if Mr. you guess. The problem is that you awarded your trust too easily.” You get confused. He is busy telling you that he saved you. He must be helping his other clients. Money Manager continues to make trades but your discussions start to fade. you’re winning on Wall Street. and not because he tried to call you first and couldn’t get you. You made money.
let’s look at Kraft.been worse. Chances are. Remember. Add up the cost of these products and calculate how often you buy them. can call yourself a financial analyst. and not necessarily original ones. Your guess is probably as good as the guy doing it for you. At the end of all of this addition and multiplication and guesswork. Sometimes it hurts to be right. too. or it was lucky you had him to take care of such matters. too. you. 29 . Anything here beginning to sound familiar to you? No need to tell me I am right. As an example. trust your thinking. be it you or Mr. I used to tell investors to open their fridge and look at the names of the companies on their shelves. That means the company has sales and revenues and should at least have good top line results. and countless other products manufactured by Kraft. when you walk up to the roulette table. This is about you and your money. So conjure up some of your own ideas. if you do not want to have as much control as I am talking about. red or black. If you do. don’t. Kraft products include cheeses from cream cheese to American slices. Go and find the right someone to do it for you. Go to your other cabinets and you’ll find the marshmallows. Project it out over a year’s time and then multiply that number by the amount of families that do the same thing. caramels. you’ll find the same names on a whole lot of other shelves. Money Manager. and once you have that number calculated multiply that number by the amount of countries that sell Kraft products. The final answer in the category of trust really comes down to whether or not you trust yourself. 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. That said. it is still almost 50-50! Just watch out for 0 and 00.
and they can still help shed some light on your rather nasty situation. venture capital clubs. the unscrupulous manage to set a new standard for barbaric stock market behavior. that would meet up every so often just to discuss what they should do and have done in the stock market. why bother unless you need the losses? As a broker. and can be incredibly useful and helpful. warrants that moved into the 30 . and just great places to seek advice and meet with like-minded investors. Many are viral. dividends. 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. when I inherited accounts. I have known clubs and groups. when a new method of communication develops that is useful and helpful. One method of finding an answer to this difficult question is to seek out advice from others who have been through it all before. Another factor involved in starting over is knowing your profits and losses. Are they short term or long term capital gains or losses? Add up interest earned and paid. The phenomenon is spreading and as is usually the case. I always reduced the sell side sales commissions to clean up the account to very little or almost nothing. These groups have multiplied over the years and have morphed into information gathering and sharing websites. formal and informal. so the client had more money to put in the market and thus had a fighting chance to get back in the game. If not. you could have some money left. after you sell. blogs. after doing all your selling and paying commissions.
For many of you. equaling $10. should be advising you in this area. the share price break-even point is $10. and real estate valuation changes. For instance: You buy a $10 stock called ABCD. commissions paid. phantom income from limited partnerships. exercising in the money warrants.720 And #3 is a winner! How much is $720 divided by 1000 shares? Seventytwo cents is the answer. benefitting from previous losses that can carry forward. On every investment you make. To do this you must add all of your costs including principal cost(s). such as: taking losses to offset gains. But don’t surprise him in the month of April when he is overwhelmed with the madness of tax season.360. Total cost is $10. the CPA. you will determine what options are available to you.360 3) $10.000. and anything else imaginable connected to that purchase. even legal advice. margin fees. and locking in a profit rather than paying taxes on phantom income. first determine your break-even price.72.00. So what is your break-even price? Hint: remember. There are ways to prepare for these kinds of disasters. You buy 1000 shares of ABCD at $10. 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.). The commission is $300. you think you just made 31 . Once you calculate your financial position.000 2) $10. you also have to sell the stock… 1) $10. etc. seeing an $11 stock price on ABCD would thrill you. On a share by share basis. ticket charges.money. ticket charges are $60. Your professional.
Add a profit margin of 40%.” I had to listen and I wanted to let them vent their frustrations. or $4. All set with the 40% profit.40. What really went wrong in the first place that put you in this position of starting over? As a stockbroker. there were a few positions sitting in the account which had dwindled down to a percentage of what they were when they started.40 unless you are double jointed and very limber. At $15. In many cases. including buy and sell commissions and ticket charges. I heard every combat story from each person on each account about what had happened. Good.” and “I never knew what my broker was doing in the account to begin with. I knew there would be no happiness. I inherited customer accounts of brokers that left and were no longer with the firm. “I forgot I even had this account. Not that you would ever sell it after only making a $1000 bucks. to the $11 total. Because if the stock goes to $20 you cannot kick your own ass for selling at $15.40 you have a profit of $4. you would know that if the stock went to $16 per share. 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. you sold at $15. Look in the mirror and ask yourself if a 40% profit is satisfactory to you.$1000 bucks. From.40. If you had placed a good until cancelled order at $15.40 and a 40% profit above your cost. Don’t leave the mirror until you are absolutely sure… Okay. At what point you buy or sell has to do with whether or not your established goal for selling or buying has been met. “I just gave up. and I could never reach him whenever I did call.40 with a 40% profit. There was no 32 . For instance: You bought ABCD at $10 and the total costs “all in” are $1 per share.” to “I want to sue the broker and the firm because the broker churned my account.” I heard confessions such as.
Many clients had been abused. The clients rarely wanted the money back. clearing firms and broker dealers. and start over. they let me take a shot at growing their funds. or worse. Sometimes I would give these beaten up accounts their first profitable trades. Sometimes you can’t do much more than sell at whatever bid price is out there. And I had a plan for how to invest the leftover money: invest it in new IPOs. neglected. 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. and you know you should sell and start over. Each time they had a choice of taking the money or letting me have a chance to make them some money. After all. but if the stock goes to zero. All I wanted to do was sell what I could. the stocks in these accounts were purchased for these accounts by another broker and that broker was no longer at the firm. churned. somebody is making money. things have changed in the market and IPOs are much harder to find nowadays. Obviously.doubt in my mind that they would trust me right off the bat. take the losses in the account. It hurts. If you are stuck in stocks that don’t trade. or have very little volume and no liquidity. Often times a rebuilt account can become a happy account. 33 . you are done with being able to sell it all. There is a world of stocks out there that trade below a penny. The OTC markets are known to be illiquid when compared with the NYSE or American or the NASDAQ. get as much cash in the account as I could. it may be easier said than done. but stocks that trade under a penny are seriously scrutinized by regulators. But regardless of market conditions.
Smith?” Here are a few things he will tell you: 1. you inherited Smith. 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). that you were a pain in his ass. “What happened to Jones?” And all the new guy can say is. 3. My name is Smith. that your account was too small and meaningless. But I have X amount of years of experience and I can do a much better job for you than Jones did. Do you have time right now? (He will recommend selling something and then buying something else . 34 . Don’t be insulted if he didn’t mention that he was leaving his firm to you. I am your new contact. and Mr. 2. let’s look over the account and see what’s going on.” So you demand.One more story comes to mind which could happen to you unexpectedly. now what to do? Jones is gone. Your only option is to ask. Your broker decides to one day leave his firm. Let’s sell everything and start over (yikes). So you call in to visit and you get the following: “Hi.” Gulp. “Sorry I have no idea. “What do you recommend I do with the account Mr.A. Jones is no longer with the firm. But do know that his non-disclosure means that you were someone he didn’t trust. your new F. Well. I just inherited your account. or that he purposely wanted to leave you behind.I know this like I know the sun will rise in the morning).
a paid-for assistant. It’s clear that once your broker checks out and leaves the firm. The only way you will find out quickly. Such benefits to you are ridiculous. not out of concern for your wellbeing). I switched firms to take advantage of their better research. 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. but very important to the broker. He will volunteer to do a free assessment of your account and get back to you. no question about it. Let’s open the new account now! 2. They will tell you: 1. Just sign the papers and we will handle the rest because your account will transfer no problem. 5. no one will tell you where he went. Truth is he probably got a major bonus check to come over to the new firm that includes extra benefits like health insurance. 3. and not something your broker would ever reveal to you. assuming you care. is when he or his assistant calls you to move to another firm with him. better syndicates. IPOs.4. He will set up a time to call you. a parking spot. Give me a break… 35 . better deals. executive bathroom usage.
or take it over yourself. because this is how the game is played. 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. your account definitely means something to the firm it is now with. So grin and bear it. 36 . 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. and keep both accounts active.So here’re the choices: use Jones (the devil you know) or use Smith (the devil you don’t know). Or use both of them. Or just move to a third broker. Underlying everything I have explained. the bigger the broker calling you to remain at the firm. The larger the account is in terms of assets and commissions paid per annum.
I had 13 OTC stock traders. and traders deal with other traders. It is generally understood that the bid price is where you sell. and the ask price is where you buy. They are worlds apart and even the rules are different.Chapter 11: Is it Possible to Learn How to Trade? Trading stocks can be learned. and a head trader who knew every trick in the book. Trading starts with taking stock of how much knowledge you already have and how much money you want to put at risk. Let me share some basics. The middle is called the spread. Believe me. Knowing the difference between bid and ask is a great place to start. I am referring to professional traders on Wall Street making markets in OTC stocks. It took me years just to understand the nuances and tricks that the professional traders use every day on the OTC market. I examined and signed off on an average of 1000 trading tickets every single day the stock market was open. Many of the nuances used by professional traders have been adopted by others such as private equity investors. Emanuel and Company. and are still being used today more and more. you will never know them and you will also have no clue what is going on 37 . each with their own level three machine. if I don’t share these tricks with you. At my firm. Some of these tricks and tactics can be useful to you when controlling and self-directing your own account(s). money managers and day traders. The high bid and low offer prices are known as the inside market. Retail deals with clients. but the real issue is finding the right teacher. There are two worlds in the stock market: retail and trading. We traded 300 OTC stocks with millions of dollars in the trading account. I learned them during my career on Wall Street.
bar none! 4.around you. but getting the view from the inside looking out is another story. 1. and size takes priority. In other words. best accomplished electronically. 6. Stocks can be bought on the bid. Stocks can be sold on the offer. he probably is. in the middle. 5. Trading is a profit center in every firm. and the truth is. trades on and 38 . you need good execution and fast reporting. In order to prosper as a trader. like can you sell on the offering price and buy on the bid? Looking in from the outside provides little or no insight. in the middle. 3. and size takes priority. cash changes. cash available. In the introduction earlier. And lack of knowledge ultimately means loss of money. You need to spend on top equipment and trader software that updates positions. even his own trader. You need to completely by-pass the retail broker and try and eliminate the middle man. Every retail broker thinks he is getting screwed by a trader. getting your trade done quickly (execution) and knowing it (confirmed) are key. I asked you certain questions. 2. Education is the key. Your stockbroker has no idea about what I am telling you because retail and trading are as far apart as North and South Korea. You must have real-time time and sales or your entry prices will be off. 7.
Strategic buyers wait and pick their spots to buy on weakness. 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. your plan is to buy (go long). Reaching a buyer. to no interest in adding to an existing position. you can always buy a stock. In general. margin. Long is easier to do because shorting requires a few extra steps and as they say. which creates additional opportunities to buy stock if covering a short position.” Although putting lipstick on the pigs is an 39 . buying stock is much easier than selling. and derivatives. Finding a buyer requires finding cash that is ready to be deployed. One of my tweets was: “I bet shoppers found a shortage of lipstick in the retail stores during the holiday season. but you cannot always find buyers for a stock. Putting on a position can be either short or long. So selling overhang needs buyers. 2009. is often hard to do for reasons ranging from no cash available. changes in positions. That’s because the market always has sellers whose reasons for selling range from profit-taking to shorting to being a dumper. with the intention of buying it back. new or prior involved. Only fools don’t have the tools! So don’t say you can do it better without proving it to yourself first. outstanding shorts. A Christmas Story: It’s Christmas Day. Buyers are also able to buy if a short is being put on. as a trader. All the money managers and hedge fund managers have been out buying lipstick so they can put lipstick on the pigs in their portfolios.their designation. or the price will drop until lower priced and finally a buyer surfaces. So between stock overhang and shorts. or with the intention to sell (go short).
The stock goes up. going into the market and buying the Dow Jones DJIA. Sometimes this requires selling in the third quarter and having cash ready for the fourth quarter. This concept of cost averaging is very important to your portfolio.30 stocks is like putting lipstick on the index and it will certainly have an effect on the Dow Jones average.00. You buy ABCD at $1.00 per share. 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. and you buy another 1000 shares of ABCD @ $3. I also tweeted about cost averaging a short position up.00 per share. They use the available cash to follow the trend. This accumulation will turn really ugly in the first quarter. You still like the company. To keep it simple: 40 . You go in and buy another 1000 shares of ABCD @ $2. Every fund manager is judged by his final numbers in the fourth quarter. the fourth quarter is the spending quarter. especially as a trader. but is most meaningful when the “herd” buys in and they all start acquiring the same stocks. The money managers have been going to cash or sitting on cash just for this opportunity.expression used on the Street.50. This idea applies to all levels of investors. You are long 1000 shares @ $1. promoting “the trend is your friend” mentality. Now you own 2000 shares of ABCD at an average cost of $1. To the money managers. so therefore you intend to buy more.00 per share. The stock continues upward. Let’s start with what cost averaging is. because they cannot have cash under-deployed in the fund in the fourth quarter.
This is called cost averaging up. Multiply 3. 41 . As a trader. you own 3000 shares. You see.00 Third trade: 1000 ABCD @$3. but for now relish in having done something very right. What may have begun as a stock you wanted to trade may end as a stock you want to accumulate.00. this is precisely how you should accumulate a position. it has moved up in price. We have all done it at least once. Never feel like you missed buying it simply because you did not buy more shares at $1.000 and you have an average cost of $2.000 shares by $ .25 profit. or because there is expectation of good news. you may have hit on something that will make you money.00. 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.First trade: 1000 ABCD @$1.75.00 per share.00 per share.000 shares times $. we have to assume the bid is $2.00 Second trade: 1000 ABCD @$2. Not necessarily 1000 shares at a time. but as the price moves up and you like the news and volume. Remember. We will soon touch on when to sell and how to establish sell price targets. Now here is what you do not do: Never ever! This is an example of cost averaging down.75 and you are sitting on $2250 profit. It could move up because there is good news.00 per share.75.75.00 The average cost on 3000 shares of ABCD is $2. which equals a $2. By paying $3. each time you buy the stock. average cost is $2. You invested $6. and it last traded at $2. or as an investor.
00 The average cost of 3000 shares of WXYZ is $2. and the cost average of the investment is the same.00 1000 shares of WXYZ@$2. NEVER. for whatever reasons. even at the lower price.Go into the market and buy 1000 shares of WXYZ @ $3. the news is good. This is called cost averaging down. To summarize these trades: First trade: Second trade: Third trade: 1000 shares of WXYZ@$3. You had to be prepared to buy more shares 42 . and obviously there are others buyers besides you or you wouldn’t have paid higher. But ask yourself this simple question: Which position would you rather have? And why? Momentum is the key to the answer. YOU NEVER COST AVERAGE DOWN A LONG POSITION. When you compare ABCD and WXYZ.00 per share. ABCD is going up.00 per share. starting with the trend is your friend. 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. The share amounts are the same.00 per share. you buy another 1000 shares of WXYZ @$1. The volume is good.00 per share. so you go in and buy another 1000 shares of WXYZ @$2. the positions look exactly the same at the end of the day. it is heading higher. A week later. This method of trading has killed more Jews than Hitler and more roaches than Raid! This is wrong in every sense of the market. the money invested is the same. Let’s also compare the reality of how the stocks traded.00 1000 shares of WXYZ@$1.
and I care even less about what the tipster or hypester is telling you.000 shares.50.00. Let’s look back at WXYZ.as it went up. Volume may be good and going up.50.00. that is selling pressure as opposed to buying pressure.00 was paid the bid is obviously lower than $1. 43 . like we witnessed in ABCD. even though you will probably only receive around $1000 after all is done. You will need to unwind this position sooner rather than later. Remember the chapter about selling and starting over? This is probably as good a time as any to take that opportunity.00 and ended it at $1.000 portfolio valued at $8250 Cost averaging down: WXYZ: Invested $6. portfolio valued at $1500 I think the numbers speak for themselves. So let’s say the bid is $ . Although you bought WXYZ three times and the average cost is also $2.00. Let’s compare: Cost averaging up: ABCD: Invested $6. Depending on the spread between bid and ask. You started your buying at $3. and definitely before the $1500 goes lower.500 of the $6. you are losing $1. So all in all you have 3000 shares of ABCD and depending on the spread between bid & ask at least a $750 paper profit. I don’t care what your broker is telling you. we do know that if $1. or a total of $4.00 and the bid is $ . If the cost average price is $2. The stock was going down because there were more sellers than buyers.50 per share on 3.00.000. the difference is your last buy was at $1.000 invested.
The lesson to be learned is to avoid cost averaging down entirely. If you are learning the dangers of cost averaging down for the first time. 44 . the money you paid for this book will be worth it 1000 times over. and if you follow what is said about it here in these pages.
we take a directly opposite position and have a completely different philosophy than the short players.Chapter 12: Shorting in the Market is Okay with Me! Ladies and gentlemen. At some point. Investors also fight off the shorts. The idea is that the short player can cover and buy back the stock he sold after the stock goes down. which is only accomplished with a buy back of the short. locking in a profit. thus placing selling pressure on the stock. as investors and shareholders. Buying and holding is the opposite of shorting and covering. This selling will make it appear that there are many more sellers and that the amount of shares in the float is growing. this is known as a short squeeze. you do. We are the longs. the short player buys back the stock for less money than the stock was shorted. The short squeeze is the short player’s worst enemy and the long’s best offensive weapon. The short player only makes money if the stock goes down after it is sold short. When the longs mount an attack against the shorts. your portfolio value is subject to attack by ruthless short side players. When they sell the stocks they do not own they are short selling the stock. 45 . Now to really confuse you. so you are long. These shorters stand at the ready to sell the stocks you hold long in your portfolio even though they do not own them. the short position needs to be covered and closed out. Investors buy stocks and hold them. the only natural stock buyer on Wall Street is the short player. Shortbusters work hard to make sure the shorts have to pay more money to buy back their short position than they sold it for. As investors and shareholders. In other words. Shorts sit and wait to buy at the right time.
Shorting a stock is treacherous. how you put the short on will determine how much free time you will have for yourself. other than traders.Buying the stock for higher than it was sold results in a loss for the shorter. Selling Short: Selling a security without owning it. have unlimited funds to lose. You better have likeminded friends also shorting the stock. or preferred. In fact. b) exercising a derivative or option such as a call or put. Once you make a commitment to short. your day job. All of your activities. know exactly what you are doing. most stock market professionals. Here are some basic but essential definitions if you want to sell short. are leery of being short. and you must know what to do if you get squeezed. such as your therapy session or your dentist appointment. will have to take place before or after the market opens and closes. Shorting stocks is certainly not for unsophisticated individuals. You must have spectacular record-keeping capabilities and access to realtime price quotes. Selling Naked Short: Selling a security without owning the stock and with no way to cover the sale other than buying back the stock. Most of Wall Street is made 46 . and your family. Selling a Covered Short: Selling a security without owning the stock but with the ability to cover the sell by: a) borrowing the stock. or d) securitizing with a registration document. option. and have knowledge and access to professional execution of your trades. c) converting a warrant. Do not short a stock unless you have traded for many years.
If you think the stock market will go up. They profess the technical and fundamental reasons to buy stock and provide research and advice to do so. This is a fee you pay to your brokerage firm. and this information is used to calculate the bullishness or bearishness of a stock. like the Hatfields and McCoys. If you think the market is going down. Bears hate stocks and sell them in the belief that the market is going down. you must add 47 . 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. buy stocks. bad news will seem to follow. 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. the bulls believe that the larger the short the better the buy unless the shorts know something the longs don’t.up of long players. When you add up your cost of shorting. you are bearish. bad news is bearish! There are measurements of short positions calculated and reported in the stock market. you will have to borrow the stock you intend to short from the stock loan department. They profess the technical and fundamental reasons to sell stock and provide research and advice to do so. The minority of Wall Street is bearish. comprised of short players. remember that as a retail stock person. Good news is bullish. In other words. strangely enough. and believe the market is going up. There are two camps. Once the short is on. Another reason why you better be right. which is bullish. you are bullish. Oh by the way. the bulls and the bears.
borrow it. Margin is another word for a loan to you.000 in your account. and significant income to the brokerage firm. So long as you have an overall net gain. Your third trade is to sell 1000 shares of EFGH at $5. Margin accounts are another major fee charged to your account. or the bank. so understand that you will be paying points to the brokerage firm for margin money. Example #1: You sell short 1000 shares of EFGH at $3. The money from the sale is cash. By selling first at $3 and then again at $4. They have access to all of the accounts in the firm and of course they do that first. you will not have a margin call.00 per share as you cost average your short sale up. you have just sold 2000 shares of EFGH for $7.00 per share. Now there is $12. you have just created cash in your account by selling. Stock loan is a very profitable event for the brokerage firm. Your broker’s clearing firm can also shop your stock. 48 . You sell short 1000 shares of EFGH at $4. and loan it to other firms on the Street.000. You also have to read your account statement inversely when you short stocks (cash is from short sales of stock to be covered later). flat position or small loss in your positions. so you can rest assured that they will work overtime to find the shares to lend you. because your statement will show a sale of stock in your cash/margin account. available cash to trade so long as you do not have a margin call requiring you to put up more money in your account.the stock loan fee to the sell commission when you first sold short. Instead of sending in a check to pay for your purchase. If you have a margin call it is because you have exceeded the limits allowed for leverage by the clearing firm.
75 ASK 6.00 6.80 5. which equals $18. The mark to the market is $6 or $18.000 The value of the account is derived from the mark to the market on the bid side of EFGH.000.000) loss 49 .000 -$12. Your account had $12.000 cash from the sale of 3000 shares.20 7.000. EFGH BID Jones Smith Lazar 5. Take a look below. which you will see is $6.45 If you had to cover your shorts at $6 per share of EFGH.90 5. The mark to the market is the low offer when you are short at the close of the market.000 $ (6. $18. you would pay $6 per share X 3000.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.
At some point in the very near future. It is also known as instantaneous gratification. Today EFGH announced that their earnings fell below expectations due to lack of sales and lower margins. 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. like a stone in the ocean. You watch the stock plummet. Cost averaging up by shorting more as the stock goes up is only for the strong at heart. Here is what happens if you are right with your short.20 3. You smile.45 50 .75 ASK 3. go to hell in a hand basket. Bad news is your very best friend when you are short.80 2.90 2. The next day you wake up and immediately check the market. Example #2: EFGH BID Jones Smith Lazar 2.00 3. BOOM! BANG! BAM! Down she goes. Do not pass go. Rather.
00 per share. stock loan fees.asp OTC Equity Short Interest Overview NASD Rule 3360 has been expanded to require FINRA member 51 . Traders with a trading account at a brokerage firm have a distinct advantage over all other traders. Once you subtract buy and sell commissions. Not bad.Now let’s mark the stock to the market. You sold 3.000. Let’s have fun and track some shorts. which totals $9. covering a short is always easier than finding a new buyer. and margin. Shorting stocks in a trading account does not require borrowing the security first.000.com/asp/OTCE_Short_Interest.000 shares EFGH for $12. You bought 3000 shares of EFGH at $3. I estimate the total profit net would be around $2500. Tracking the shorts: http://www.otcbb. Your profit is $3.000. huh? Here’s a clue as to how I traded on Wall Street: LONG IS WRONG! As a trader.
The reports must be filed by the second business day after the reporting settlement date. 52 . 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 mid-month short interest report is based on short positions held by members on the settlement date of the 15th of each month. Effective September 7. 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. 2006. the short interest is then compiled for each OTC security. Publication Schedule Semi-monthly short interest information will be available on this site after 4 pm ET on the Media Date. Once the short position reports are received. 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 short interest data is compiled and provided for publication on the 8th business day after the reporting settlement date. Please refer to the Short Interest Reporting Deadlines for the current reporting schedule. 2007. the designated settlement date will be the previous business day on which transactions settled.
Publication Schedule. and deleted issues for OTCBB securities. Page 1: List of new issues.m. The Daily Lists may be updated during the trading day from 8:00 a. Click this link to obtain explanations of the column headings in the data download..m. Eastern Time (ET). to 8:00 p. 53 . symbol and name changes. To have the most upto-date information during the trading day. market data distributors should process each of the updated files for all Daily Lists.
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. What was the short position before the big drop? Was there bad news. We will select a few of these companies and check for several points of interest. 2010 on NASDAQ.com/technician/market-indicators/nyseshort-interest.Checking short interest on the NYSE: http://www.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. NASDAQ and AMEX Stocks! Short Interest Site.
63%) 0. Profile. More 55 . Profile.64 Jan 8 1.12 (9. More PEDH 1.211 Chart. Profile.40 (10. Inc.145 Chart.14%) 600 Chart.58 Jan 8 0.17 (12. Profile.40 (13. More ESYS 3.13 (11.45 (11.23 Jan 8 0. Profile. More ENTN 4.813 Chart. NYSE Last Trade 1.30%) 285. Inc. Profile. Profile.93%) 0. Hanmi Financial Corporation Elecsys Corporation Kent Financial Services.96 (12. More 11.27 (9.518 Chart. Inc. Profile.17 Jan 8 Corporation 0.15 (9.59 Jan 8 Change 0.55 Jan 8 0.90 Jan 8 0.13%) 5.17 (9. Peoples Educational Holdings.59 Jan 8 2.79%) 6. I Willamette Valley Vineyards Entorian Technologies Inc.69 Jan 8 0.63%) 7. Profile.901 Chart. Profile .34%) 11.39%) 1. More SAPX 2. More HAFC 1. US Symbol OLCB NASDAQ AMEX Name Ohio Legacy Corporation Seven Arts Pictures PLC Ameritrans Capital Corp. Profile.32%) Volume Related Info 12. Voxware. More 334 Chart. Profile. Inc.526 Chart. More AMTCP MVISW 6. More WVVI 3.400 Chart. Profile. More KENT VOXW PATK 1. Microvision. More EMMS Emmis Communications 1.849 Chart.02 Jan 8 0.25 (11.173 Chart. Patrick Industries.50 Jan 8 0.50 Jan 8 0.36 Jan 8 1.60 (11.30%) 915.47%) 208 Chart.31 (16. More 14.66%) 0.000 Chart.
41 Jan 8 6.22%) 3.43%) 9. More FCFL First Community 2.04%) 74.49 Jan 8 0.885 Chart.108.24%) 20. More REED LWSN 1.55%) 25. Profile. Profile. Escalade. Bay National Corporation (Maryland) Community Central Bank Corp.290 Chart.806 Jan 8 0. More FTBK 3.14 (9.FFNM First Federal of Northern Michigan Reeds.86%) 6.634 Chart. Profile. 2.94 (17.27 Jan 8 0.965 Chart.13 (9.05 Jan 8 0.15 (8.60 Jan 8 0.21 (7. Inc. More CCBD 1.816 Chart. More PABK 2.358.30 Jan 8 0.58%) 5.055 SNTA Synta Pharmaceutical 4. More 56 . More ESCA 0.66%) 15. More 0.415 Chart. Incorporated TigerLogic Corporation PAB Bankshares.45 Jan 8 0.60 (8. Inc.29%) 8. Profile. 0.551 Chart. More BAYN 1.5001 Jan Bank Corp. 8 Frontier Financial Corp. 1.20 (7. Profile. Profile.092 Chart. Profile.968 Chart.53 Jan 8 Inc.52 Jan 8 Corp.39 Jan 8 0.16 (7. 0.25 (7.03%) 24. Profile.28 (7.278 Chart.1935 (7. More DXYN The Dixie Group. Lawson Software.18%) 1. More TIGR 3. Profile.154 (7.57%) 4. Profile. Inc. Profile. 2.264 Chart.
Stock Sinksat Fox Business (Fri 3:54pm) Synta slated to sell up to $29M in stock at bizjournals.6M from stock sale AP (Fri 10:46am) SYNTA PHARMACEUTICALS CORP Files SEC form 8-K.94 on Friday and made the following announcements: Synta Prices 5. Entry into a Material Definitive Agreement. Other Events. went down $. Financial St EDGAR Online (Fri 9:18am) Synta Pharmaceuticals Prices $25 Million Public Offering of Common Stock Business Wire (Fri 8:43am) I.Synta Pharmaceuticals Corp.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. Systems.D. Cyclacel Pharma: Early Volume Plays at TheStreet.6 Million Shares.
978.88 % -9.90 % -6 -11 .000 9.916 3.18 % 1. Average Earnings Per Share PE Ratio Record Date Sector Industry Exchange $ 4.300 26.3 2.77 2.581. Trading Volume – Today Trading Volume – Average Trading Volume .Today vs. 5 ) % From 52-Wk Low ($ 1.300 4182.98 % 680.29 % -20.45 % 2 .20 % 14.Short Quote™ Synta Pharmaceuticals Corp.471 3.068.60 2009-DecB Healthcare Diagnostic Substances NAS 58 .9 74 . 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 ($ 9.30 % $ 153.300 9.35 ) % From 50-Day MA ($ 4.40 % 25.290 80.358.28 % 73.94 ) Price % Change (52-Week) Shares Float Total Shares Outstandi g % Owned by Insiders % Owned by Institutions Market Cap.20 % Fr m 200-Day MA ($ 3.52 -0.
the cheaper the stock is to purchase in the secondary offering. This. The stock was affected by the news because the financing price is contingent on the price of the stock in the market.300 and on Friday. my friends.58%) 15 Lawson Software. The lower the price of the stock.60 (8. Inc.60 on Friday January 8.39 Jan 8 0.com (Fri.358. In this case. Jan 8) Healthvision acquired by Lawson Software for $160Mat bizjournals. As a rule. is an absolutely common practice and one in which almost every hedge fund on the planet partakes in. Average daily volume is 80. in the new stock offering and cover their shorts. Having fun yet? Let’s try another one of these for giggles. acquisition AP (Fri. Holy cow! Obviously there was enormous selling pressure on SNTA. the news was about a financing. Interesting that the shorts can buy stock. went down . Jan 8) Lawson Buys Healthvision for $160 Million Cashat The New York Times (Fri. Lawson Software. Jan 8) Lawson shares fall on weak forecast.290. January 8. LWSN 6. SNTA traded 3. Inc. Indie Research(Fri.The glaring number to me is the increase in volume. 2010. news precedes volume. Jan 8) Lawson’s Stock Slumps After Cautious Outlook 59 . mostly institutions.
53 % 46. 4 ) Price % Change (52-Week) Shares Floatof Tota Share Out anding % Owned by Insiders % Owned by Institutions Market Cap.415 1.Average Trading Volume .759.Lawson Software Inc.887.291. Trading Volume .72 % 3.300 3.108.235 Application Software NAS 60 . LWSN Short Interest (Shares Short) Days To Cover (Short Interest Ratio) Short Percent of Float Short Interest – Prior Short % Increase / Decrease Short Squeeze Ranking™ % From 52-Wk High ($ 7.932 6.Today Trading Volume .50 % $ 1.800 465.153.25 % -2 35 % 40.79 % 1.40 % 73.172 5.76 % 0.60 3.51 ) % From 52-Wk Low ($ 3.096.300 1. Average Earnings Per Share PE Ratio Record Date Sector Industry Exchange Technology $ 6.90 2009-DecB 4 202.6 3.Today vs.40 ) % From 200-Day MA ($ 6.39 -0.49 % 5 -17.1 % 105.31 ) % From 50-Day MA ($ 6.945.16 39.
used $129. only with each other. Will the jockey fall off the horse. there actually was honor among thieves. wild. Tracking shorts is like reading the daily racing form and trying to figure out which horse is going to lose. January 8. Surviving in this wild. but into the late nineties. 2010. They would wear this distinction as a badge of honor. The news was of an acquisition. At one point.” Traders were and are a different breed of junk yard dogs. Yale or Princeton. An MBA or PHD could never work in a trading room unless they shed their ties.000. had a quick trigger finger for moving markets and only cared about making money and not advancing up the ladder or having a “career. Inc. fighting over a 1/32 or less or box position on the bid or offer. In some cases. Markets changed in an instant and guess who changes the markets? You got it: the same 61 . and one of the analysts released an opinion that the acquisition was weak and probably dumped his position. all bets were off. Lawson Software. lost their manners. They never have to deal with the public.Lawson Software. west atmosphere required tactics not learned in Harvard. 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. these broker dealers were one or two hit wonders. had news on Friday. Inc. as the Internet was delivering news in real-time.000 cash to buy a company.
Every OTC stock is traded by traders who specialize in not losing money for themselves. It is his profit and loss that matters. The traders would get together and hang out with the same guys they fought tooth and nail with all year long. Colorado in the 1990s. 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. which was the best way to protect a new issue. As a retail customer. I remember one such conference in Vail. but combat stories and recollection of monumental days and trades in the market were boasted about back and forth. I managed the aftermarket trading of more than 50 IPOs. I have a very jaded viewpoint indeed. and then a profit in the trading account. It was as if intelligence was checked at the door. you are competing against a trader who could care less about you. That’s exactly why we did it: huge profits.traders who are shorting you the stocks you cannot wait to bury in your portfolio. we could buy the shares back for less than we sold them. I also managed 400 stockbrokers and 13 OTC stock traders. thus locking in a trading profit. Went to this one only and after that I never bothered to go to another one. Trader’s conventions were really bizarre. 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. not whether you own X or Y shares. The way we saw the trading in new issues was that our retail clients owned the IPO and bought more stock in the aftermarket. So we made commissions in the underwriting account and syndicate account. because as an underwriter of IPOs on Wall Street. Even less important is 62 . The firm had access to all the shares held by clients.
and miss it again as it moves higher because others are buying it as well. 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. Let’s examine another scenario. And even if you can afford it. You know how you want something so badly when you can’t have it? Instead of walking away from the mess. I understand that these things happen.50 bid and $6. You raise your buy price to a $6 limit. you think Uncle Harold. Traders are everyone’s adversaries. These are superseded by your directive of a market order to buy at any price. The market opens and your 5000 OHNO @ $5 did not get filled and it has moved up. change your order. Well. or good until cancelled (GTC) orders. don’t go for it. here goes. went in and got it before you did.whether you make or lose any money. you really have to have it. Firstly.B. Market orders override your other orders such as: limit order. the stock has moved to $5. You indulge yourself and decide that your brother-in-law could be right this time. It’s called chasing the stock. that S. and that is a death nail. but also that you just took the lid off how badly you will be screwed by the traders. Secondly. But here’s the real tragedy. I do not condone this foolish behavior. A market order means you are willing to be filled at the market price or any price the trader can buy your stock at. just in case you were wondering how it works. You find out you own the 63 . no limit. which means your price is not set but openended. You now know you will own your OHNO. but unless you can afford to lose this money.00 offer. It is very amateur hour. You change your order to a market order. Your next move is the killer where you put your life and limb at risk. and open order until filled at the market price paid.O.
Here is a good example that will help you understand. and that once the buying has dried up. which would have been the right trade. remember the EF Hutton TV commercial: “When EF Hutton speaks. No sir. She didn’t get information that ABCD was taking over WXYZ and she didn’t buy calls on WXYZ. the stock will miraculously fall back down to $6 per share or lower. just illegal. Now what? Buy more and cost average down? Yikes. As they say. Here’s the rub. famous. Her broker whispered that a company whose stock she owned was going to have bad news. It was a great commercial but a real bunch of BS. Martha Stewart. DO NOT FALL INTO THE TRAP OF CHASING A STOCK UNDER ANY CIRCUMSTANCES! And don’t blame Uncle Harold. or hot stock tips because 99 out of 100 times will lose you money. wealthy.” then silence as everyone listens to their words of wisdom. There is always another bus coming into the station that you can get on. so she sold out her stock position before the news 64 . Making money in the market is never done with scared money.5000 OHNO at $7 per share. She didn’t buy on the rumor. She goes to jail and loses tens of millions of dollars. Don’t be a chaser. Don’t ever panic buy or sell! You must learn to resist the temptation. he fell off a truck onto his head when he was just a kid. sophisticated. gets a stock tip which ends up being construed as inside information. desperate money. or rush to get in on a tip she heard from her hairstylist. cost averaging down killed more whales than the Japanese! The lessons here are numerous and not humorous. If you are old enough.
She sold in a panic. I recently had a reminder of who the smartest people as a group on Wall Street are. 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. No. like on the planes of the Sahara desert. But Martha simply could not resist not acting. You are wondering. the companies avoiding transparency. or the money managers who bought all the bust-out mortgages of the balloon payment era. 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. 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 expose the companies that lie through their teeth in their financial statements. They are not the UC California and Stanford software designers of the electronic trading prowess. She got out before the immediate world.000.came out and soon thereafter the stock went to hell in a hand basket. who all sold on the bad news becoming public. the convicted felons operating under 65 . Think about the result had she not sold: so she loses maybe $500. This is amazing but true. the companies on the regulatory watchdog lists. and not only avoided losing money but locked in making money because she acted on the inside information. They are not the Ivy League brains that created the derivatives which have ultimately cost the market billions. it is not the research analysts paid very well to find undiscovered gems. which led to the fall of Lehman. She didn’t want lose money so she ended up with more trouble than it was all worth. and the war in the market every day between shorts and longs.
tireless. or genius that comes close to the brilliance of a short-side digger. When they are right. Always begin with the largest holders of shares first. These short players are absolutely methodical. that the news reports out of Brazil stating 66 . Let’s say. 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. and they are not afraid to hire private detectives to uncover any crap they can. I am telling you there is not a long-side analyst. taking no prisoners. When examined. much like commodities brokers. leaving no stone unturned. executives are operating without full disclosure.assumed names or hiding behind others. the shareholder lists can be extremely fruitful. researcher of the highest reputation. and they usually are. or under assumed names. In some cases. The commodities markets are a little bit more policed today than in the past. These players will spend real money to dig up dirt when finding that dirt could be the key to what they need. Short players are very creative. and ruthless. because it stands to reason: the bigger the position the bigger the player. See. and the bigger the potential profit to that individual which also means these individuals have the most to lose. from the C suite officers and large shareholders. to the ownership of the original shell. for instance. the act of selling illegally can be traced right from the shareholder list. Valuable information to a short player begins by identifying the players in the deal. Evaluation of trading volume and identifying where selling pressure may be coming from can turn up a mountain of information. they are incredibly savvy on playing the short card for the most money they can make.
Mr. In fact. Chanos. Just this itty bitty little news story leaked through the Lauderdale Lakes Gazette turns into a limit down on the commodity. the reports were nowhere near the whole truth. but news like that would drive the price of orange juice down considerably. Chanos is warning that China’s hyperstimulated 67 . Now Mr. “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. Contrarian Investor Sees Economic Crash in China by David Barboza Friday. Chanos is the poster child for shorting stocks. James S. Short players are known to go to extremes to benefit from little itty bitty planted news stories. 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. in 2010 he decided to take on the biggest short of his career: China. 2010 provided by James S. Can you imagine how damaging a news report like.that the orange crop was robust and going to reach record levels weren’t always telling the whole truth. January 8. After years of success shorting companies. a wealthy hedge fund investor. is working to bust the myth of the biggest conglomerate of all: China Inc. As most of the world bets on China to help lift the global economy out of recession.
Kynikos Associates. meant to lift exports and consumption among Chinese consumers." he frets. You may short at $50. coal. its eye-popping growth rates of more than 8 percent.or worse. and then more at $60.Mr. looks like "Dubai times 1. short more at $55.000 -. Mr. Chanos’ narrative runs counter to the prevailing wisdom on China. a little crazy. is hardly the only skeptic on China. steel and iron ore. I think shorting Chinese stocks in a bullish market you must be fearless. and way smart. Being short requires holding power and a ton of cash. Still. As America’s pre-eminent short-seller . based in New York. Because foreigners are restricted from investing in stocks listed inside China. Your average short is $55. rather than the sustained boom that most economists predict. Cost averaging a short up is a major tactic for a short player. 51. Most economists and governments expect Chinese growth momentum to continue this year.economy is headed for a crash. buoyed by what remains of a $586 billion government stimulus program that began last year. has $6 billion under management. betting against China will not be easy. whose hedge fund. Its surging real estate sector. if 68 . He even suspects that Beijing is cooking its books.he bets big money that companies’ strategies will fail . But he is certainly the most prominent and vocal. It doesn’t hurt to have uncovered some information which. buoyed by a flood of speculative capital. Chanos. If you simply put one trade on at a price. Chanos has said he is searching for other ways to make his bets. Mr. faking. the stock could trade higher on you quite rapidly and then you are sitting with a loss. among other things. including focusing on construction and infrastructure-related companies that sell cement.
would be detrimental to the company. bad for the stock but very good for you. 69 . that is.exposed.
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. 9. You guys are the best. Actual short lists 70 . 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. Trades made after the close of the market 13. such as: is it the same broker out hitting bids everyday at the same time? 11. 3. Every CEO of a public company should know how to begin to track such things as: 1. I am pumped to share some good stories about the topic of “finding the so called shorter. 6. 2. 8. 7. Block trades (big size trading as a block) 12. 5.” It all starts with tracking.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. terms of right Convertible debt instruments that convert into stock Time of day trading patterns (sells at the close). 4. 10. Alright with that said.
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. to uncover the dirty rat who is shorting the stock. “How dare they short my stock. but a seller well-known to management. 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. the seller is usually a real seller with stock to sell and not some fabricated son of a bitch with an ax to grind. 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. officer. There are specialists out there who actually build a business. They want to sell and sell undetected by management so management and their attorneys cannot stop them or challenge their actions. Good productive hour after hour is wasted with banter of how this guy is shorting or that guy is shorting. such as a disgruntled employee. Or the seller can suggest it must be someone else to distract the attention away from the actual seller. its game on. or waiting for the stock to pick up in price. But once they determine they want to sell. which trace the movement in and out of stock 71 . They usually stick around for a while waiting for their shares to free up. They must be ex-IR guys who were exstockbrokers and so on. and it is huge. If you look at the transfer sheets.” says the CEO. not necessarily the innocent. like private detectives. or board member with a block of free trading stock.I won’t mention names to protect the stupid. CEOs can be so trusting of their inner cabinet but the fact is. but they usually are at a loss for proof.
mostly pubco CEOs. investments trusts.positions. Tracing a corporation is much more difficult than tracing an individual. these trades have names attached to them. Our conference host provided the group a special visit to the NASDAQ headquarters on Times Square. creating equity distribution to an entity. which is a great method of disguise in terms of changing names on certificates. all certificates are traceable back to an original dictate of a document. With the visit came a NASDAQ Vice President to speak to the group about the benefits of being a NASDAQlisted company. which is a no-brainer for most CEOs. The tour went well. or trying to avoid tax in their own name. were in town for a financial conference in NYC. when the tour of nothing ended. and I even got a photo op and souvenir picture. But make no mistake . and it will always come up when tracked. Names stand out on the shareholder list. Although disclosure is the law. Having said all of this. we were shepherded into a conference room for the inevitable pitch by the NASDAQ pitchman. Everyone piled into the conference room and found themselves an available chair at the shiny wooden conference table. at the Penn Club. Twenty business folks. kids’ names. to hide his or her identity when selling. The name of this entity is listed in the corporate books and records. Many insiders utilize placement of shares in their corporations. digging deep to uncover actual ownership is a skill. On one wall was 72 . Sometimes the names are corporations. No matter how you slice it. girlfriends’ names. or other nominee names in order to disguise ownership. listen to this true story. Finally. that even included picture taking. especially if they are insiders.the shares undoubtedly are owned by a person trying to hide ownership. I will set the scene.
yada yada. resorted to the rote doctrine of what is probably written in the NASDAQ guide book. as everyone knew their own name. the market making system of posting trades in an orderly fashion. and from the opportunity for me to show up the pitch guy by asking questions he couldn’t answer. or answering questions from a dunce that no one else knew the answer to. I have sat with a NASDAQ Level 3 machine on my console. soaking it all in: the history of the NASDAQ trading system. “I know my stock is being shorted. so we should look at the conflagration of this question in that context. Being that you are from NASDAQ. obviously having heard this question before. let’s not forget one major important factor . ready for use in the forthcoming sales pitch. and poised myself for the pitchman’s reaction and then his answer. He seamlessly referred the dunce to where a CEO can go for information: the NASDAQ reports that show short positions based on 73 . seemingly rehearsed to the second for a perfect delivery. But before we get into that.NASDAQ went public themselves. 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. for 15 years during my career. I amazed myself in maintaining my control. and then it happened. So the pitchman. I was thinking. 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. A CEO in his infinite wisdom. Then the pitchman began and the audience was rapt. blurted.a plasma screen. I waited quietly and the roll call went without a hitch. including Instinet.
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. Insight into the taboo can demean or lower the credibility of the professionals making markets on NASDAQ. I raised my hand. 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. 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. That puts him at risk and his job at stake. Even offline. naked or covered. uncovering shorts. Ohio tourists thinking there was a matinee after the lecture. I wish I could have pulled this book out of my attaché case and handed it to this guy right there and then! 74 . and I said. is a cottage industry. “Suppose the stock is short with unreported non-borrowed shares. and the stock is naked short?” Well. By this time I was bursting to say something to diffuse the confusion being manufactured every nano-second by the banter. these dudes don’t open up and tell the truth. Let me tell you right here and now. I had openly spoken taboo. He now wanted to know what I knew about uncovering the guys shorting his stock. Perfect answer for college students. the word naked emanated throughout the room and the hush made whomever was going to speak next very uncomfortable. and whereby the standard short positions are reported for the public. or most IR guys but not with me in the room. I was called on. Remember.borrowed and reported shorts.
but also due to the large ROI generated from successful trades. each contract covers 100 shares. it represents an obligation to SELL the underlying security at the strike price if the option is exercised. each contract covers 100 shares. not only because of its simplicity. For the writer (seller) of a put option. 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). For stock options. Buying Call Options: Call buying is the simplest way of trading call options. For the writer (seller) of a call option. 75 . 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). The call option writer is paid a premium for taking on the risk associated with the obligation.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 BUY the underlying security at the strike price if the option is exercised. For stock options. The put option writer is paid a premium for taking on the risk associated with the obligation. Novice traders often start off trading options by buying calls.
and it is deposited in a margin account. every now and then one of them makes some sense.Buying Put Options: Put buying is the simplest way to trade put options. sold financial instruments short. Margin: In finance. 76 . This risk can arise if the holder has done any of the following: borrowed cash from the counterparty to buy financial instruments. This led me to wonder. His advice to an investor was to own a very liquid stock. When the options trader is bearish on particular security. He also recommended adding puts to exercise in order to buy stocks at prices he expected to go down. just what I love to do myself. collect a dividend. or entered into a derivative contract. and write calls. he can purchase put options to profit from a slide in asset price. 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. 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. 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. 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). The collateral can be in the form of cash or securities.
which therefore creates another opportunity to increase the stock 77 . But the stock still pays a dividend and is still marginable. Here is the formula: Example: Buy 1000 Shares of ABCD common at $40 = $40. and write calls against the converted preferred? Let’s add up the potential earnings and mitigated risk.000 Minus commission of $400 Collect $4 per share dividend = $4. If the stock is called away through exercising of the call option.000 dividend income Sell 10 calls of ABCD at $5 = $5. collect an even larger dividend.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.000 profit Minus commission of $400 Stock called away at $45 = $45. Downside risk is that the stock goes down and the call premium evaporates. the stock call price minus the stock cost price equals your profit.000 Minus $1.250 Grand total= $12. The calls yield a premium fee every 90 days.why not buy convertible preferred stocks.000 Minus commission of $450 Profit= $14.
position and perhaps go to 2000 shares and write 20 calls. Market orders will get exercised for sure. just do not do it. But rather than maverick the whole stock market play. Changing your order from a limit order to a market order is as dangerous as writing uncovered calls. 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. including options. This includes every security/equity in your portfolio. it’s far wiser to figure out both your desired profit margin and your loss tolerance before you sell. Your stop limit sell order can get passed like a truck on the autobahn. Stop loss trades are made expressly for this purpose. and stick by these numbers no matter what happens. which is absolute suicide. 78 . you assumed that if the price of the stock in the market place exceeded the exercise price of your call. 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. Just remember this one crazy possibility: If the market tanks and stocks start dropping like bird poop. This fancy prelude to setting limits of stock loss and stop orders is just about the most boring factor in the entire market. hang in there unless you can definitely get out without too much damage. Regardless. At any point the market could drop like a stone. especially options. the call option would be exercised or called away from you at the call option price). stop loss orders may not get exercised. this system is like printing money. I would love to make $5 a share during a 90-day or 180-day stretch with little to no risk.
or guaranteeing a loan. Would you be willing to share it with others. or the guys in the card game. or it could require attending meetings. it has to be legal. it is too good to be true. or was it one of the boys in your golf foursome? Did you read about it in the Riverside Policeman’s Gazette. or in the Wall Street Journal? You get the idea. if it seems too good to be true. Minister or Guru who introduced you to this gem. That way. Usually. Was it your Priest. Special situations usually require a commitment of some kind.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. selling a product. A special situation needs to be believable. I also know that my entire loss is 79 . It could be as simple as writing a check and that’s it. it must make sense. and it has to undergo and pass critical due diligence. Whatever it is. it has to stand up to intense scrutiny by your professionals. 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. I personally like to know both my way in and my way out right off the bat. Rabbi. If it’s going to work. let’s establish what the qualities of a special situation actually are. If it’s so special why isn’t everyone taking advantage? Why me? Why am I so lucky? First. not another special situation. 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. My advice is to avoid locking in to situations that require future payments with liabilities if you do not meet the date for payments. and the reward must be worth taking the risk.
you already own a very good stock and you would like to own more. For instance. or doing a limited private offering to existing shareholders so that you have the opportunity to act. Rather than going out into the market and paying retail.only the money that I invested and if I lose it. 80 . I do not want to be under obligation to supply more money to a loser. It is doing a private placement. Key safeguard is to know the difference between a special situation and inside information. If the investment is going south. I consider a special situation to be offered to the few. you have an opportunity to take advantage of a special situation. or a rights offering. The special situation is from the company. I lose it.
followed by the crushing and most damaging blow possible. some trading companies give you 100 free trades. even if you trade 20 times a day? Obviously. Even in bad times. You make a bunch of money early in your trading career. Bearer bonds were amazing. and addictive. You spend a bunch more money and time trying to repeat the feat. Sure.did you ever see one go out of business? I didn’t think so. The discount brokers encourage trading. they do well. But stop and consider. Managing your own account is a vast departure from what your parents did when and if they invested in stocks. from margin charges to ticket charges. you have to open an account and put money into the account so the brokerage firm can make money on your money. intoxicating. Heck. Trading is fun. The best part of the old bonds was that they were bearer bonds. I promise you that our grandparents all bought bonds which were safe and which paid interest that they could later live on. to someone fully consumed with trading. All it takes is a few bucks and the idea that you know what you are doing. It’s very easy to go from an interested bystander to severely overwhelmed. how much money can the brokerage firm make. Each bond came with redeemable coupons attached. Here’s how it generally goes. from casual trader to active trader. they make their money by lending out yours and charging fees to borrowers. They were purchased and delivered and held by an investor. Let’s first realize that whether our parents bought stocks or not. At $4 a trade.Chapter 16: How Much Time Does It Take to Manage My Own Account? Size matters. especially in a trading account. It’s just like a casino . These coupons were clipped and brought to a bank 81 . along with extra fees for every other service possible.
When I got married in 1987. The bonds could go up or down and only rarely was the yield volatile. “Nice to meet you. Can you imagine how fantastic that would be if available today? Market old timers loved bearer bonds. no questions asked. Almost all construction of the United States of America’s infrastructure was bondfinanced.000 face value bond. I’m your Uncle Jackie. gramps put his savings into 10% of a 1965 utility bond.” I was feeling no pain at the moment he grabbed me under my arm and took me aside. For example. and I understand that you are on Wall Street. this is where the expression “real wealth is in owning bonds” comes from. He said to me.000 a year in tax-free interest. or annually. Stocks were not the rage they are today. no taxes. Even World War ll was financed by war bonds. not by any means. no recourse. He asked me with a very serious face and serious tone of voice. his house cost next to nothing. semi-annually. His Cadillac cost him $3. how perfect? These coupons had real value. so folks. grandpa strolled right down to the local community bank and cashed in his bearer bond interest coupon.and redeemed for cash either quarterly. Why not? The interest payments were untraceable. one of my mother-in-laws wealthy relatives took me aside. Regardless. he got himself $10. Uncle Jackie. “Do you ever come across any bearer bonds?” I said. but I got straight really quickly. how clean.500. If gramps bought himself a $100.” 82 . when the end of the quarter rolled around. “Hi. How simple.
Just let me know. Uncle Jackie had money alright. call me day or night.Jackie was determined to give me a standing order for untold amounts of money if I could come up with some bonds for him. and it seemed like a doable chore to make a bunch of money. The bond coupons were redeemed anonymously and paid by the bank in cash directly to the bearer of the coupon presented. This was at my wedding. he probably had the bearer bonds. Hey. he said he was real. Bearer bonds may have been the all time perfect investment. or general obligation. They paid interest before dividends or payments to shareholders. Perfect. one hundred thousand or one million or whatever. They had safety. he was a buyer. at home or in my business. They do not issue bearer bonds any longer and by now every bearer bond is probably cashed in. No hassle. “Listen kid. 83 . As long as they were bearer bonds. I learned a very valuable lesson from old Uncle Jackie: look for value without heavy tax ramifications. called. I asked my new father-in-law about Uncle Jackie and sure enough.” Maybe I should have called over to Bernie Madoff. How difficult could that be? I was counting my commissions. no fuss. I have the biggest client of my life all I have to do is to find $1M in bearer bonds. So I thought. this was my wedding day. what could be bad? I look back on it now with a fondness for the old days. collateralized by municipal revenues. or first lean against a corporation. just cash. and interest was virtually guaranteed to a bond holder. or expired.
or maybe I should track these newsletter recommendations for performance. Yikes. How much did they get paid to send these out to me? How many shares are being liquidated (notice the word I used. to ponder some very strange thoughts like: perhaps I should follow whether this emailer is telling the truth. 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 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. minds that never get caught up in scam mentality (no way. 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 if millions are getting this ridiculous email maybe that alone is an incentive to buy the recommendation before all the other idiots do. under different email addresses. or what can I find out about these companies. I wondered if they all came from the same service. not us).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 do more due diligence on this recommendation. knowing the source has probably been paid in stock to blast this to you and millions more like you and I. not knowing where it really came from and worse. or what’s a few bucks on a gamble when I’m not doing that great on my own picks. liquidated instead of sold) into the frenzy of buying that these emailers plaguing the web are creating? 84 .
The company stepped into a minefield and did a toxic spiral warrant with no bottom price attached through an unscrupulous financier. because it is not always his fault that his shares are being pumped and dumped. 4. or some such loosely conceived notion. or maybe it’s the result of a desperate deal done under the table. both honorable and not so honorable. I know. 1. Perhaps it was part of a legitimate underwriting or private placement. He doesn’t always know what is going on. look at big stakeholders to whom the company has provided the paper in a money raise. 5. Shorting. Instead. or get out of an uncomfortable financial position. the result of which created free trading stock for sale. but I can’t leave it out. 2. let’s examine some of the potential culprits and possible scenarios behind the scam. CEOs always need money for an assortment of reasons. a huge industry and a way for companies and insiders to either make big money.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. Someone may simply hate the company. 3. We should always start with the company. in fact. I belabor this shorting thing. Next. The company may want to exercise warrants and a higher stock price is essential as they lower the exercise price to receive ready 85 . Let’s not completely blame the CEO. This email blast business is.
the investor will hire an emailer just to get himself the liquidity necessary to liquidate his position. you will hate the fact that I have just blown your cover. and then acting on them. 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. There is no such thing as good manipulation in the stock market. I received this email a few months back: 86 . Just getting these emails should notify you loud and clear that: a) there is a seller in the midst. Remember. Exercised warrants money goes directly to the company. you are the seller. Even 144 sellers have been known to play in these murky waters. Yup. sorry.money from exercisers of warrants. of course. There is no c). Oh and if you already are a seller out there doing this. but are you getting the idea here? These emailers are benefitting from you and me reading these emails (some of which are totally bogus). Unless. Then there are very profitable manipulations out there. 6. Let’s look at and laugh at some samples. anyone can hire an emailer. Perhaps an investor is stuck in a stock with a large position and has a less than cordial relationship with management. 7. There are lots potential reasons. That is pretty much what it is all about. not just the company. like an inexpensive underwriting. Lack of liquidity will incite activity at the point that 144 shares become free trading. that’s right.
Please note: PennyStockFarmer employees are not registered as an investment advisor in any jurisdiction whatsoever. This emailer must be a market genius!) Click here to read my newest blog post! (And learn how to self destruct your portfolio.) Make sure you still have CZHC on your radar. (He means it!) The disclaimer is to be read and fully understood before using our site.com Howdy. The bulls remain in control and continue to push the market higher! (What a great come on. but I’m looking for another move too. you should have already made some nice profits on the first move. 2010 12:47:14 PM Dow Jones Looking Pretty! From: Penny Stock Farmer <support@pennystockfarmer. or joining our email list. April 26. 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. 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. 87 .Mon.
or is available from public sources and PennyStockFarmer makes no representations. he’s selling when you’re buying. PennyStockFarmer has been compensated $15.) Any opinions expressed are subject to change without notice. (Oops. 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. or injury (monetary or otherwise) that you may incur. damage (monetary or otherwise). doesn’t it?) The information contained herein is based on sources. (Exudes enormous confidence. (In other words. did we say that?) PennyStockFarmer encourages readers and investors to supplement the information in these reports with independent research and other proadvice.000 by a third party for investor awareness marketing campaign for CZHC. warranties or guarantees as to the accuracy or completeness of the 88 . 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).Release of Liability: Through use of this website viewing or using you agree to hold PennyStockFarmer. (Third party? Some investor.) All information on featured companies is provided by the companies profiled. 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.
but the unsuspecting public jumps in hook line and sinker and then stresses over when to get out. if there is one.com > View Contact Dear Fellow Traders. How lucky am I? Okay let’s read on: Tuesday Premarket Analysis From: HyperGrowthStock <info@HyperGrowthStock. believable. and make some money.disclosure by the profiled companies. Any claims or Statements should be deemed apocryphal. nor any of its affiliates are not registered investment advisors or a broker dealers. This is not a solicitation to or sell any securities. jump right in. Here is another one of the emails I have personally received. And what a cool name. as if they are lucky to receive it and should act swiftly. (Huh?) PennyStockFarmer. Penny Stock Farmer. Maybe the best time to get out is the next email blast. It is clear to me that most investors treat this information as if it is accurate. (Since when are we on the same playing field?) 89 . Doesn’t premarket analysis sound intriguing? Perhaps I have been chosen to receive a premarket analysis. 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. Yuck.
thank you.hypergrowthstock. but I am going to slowly give a bit more education in the daily newsletter from time to time. but I still managed to take a small position just in case it would make a parabolic move. And another: 90 . 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.BGOI opened very strong on Monday.) On this you can go see today’s post: http://www. (No. If it breaks this it will be acting as my stop loss. (How is that?) I rarely cover this on the daily newsletter.com/2010/02/02/tuesday-feb-2premarket-analysis The whole purpose of that email is to recommend the buying of BGOI. (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. as I take for granted that you know the basic elements of technical analysis. managing my average cost. There is no identification of what market it trades on or if it is on an exchange. (Oh really?) This would confirm that the stock stays in the same uptrend as the one we entered.
) There are still signs of strong buying in TLAN but volume is starting to drop. (This guy is desperate for something that he’s recommended to actually work.com.com> Add to Contacts Dear Stocknewsnow@yahoo. The stock could drop to a low of $0.com/2010/05/16/monday-may-17premarket-analysis 91 . Their pullbacks on Friday should provide us with another opportunity to take some profits. We should see another move higher when volume picks up again.hypergrowthstock. (Does this mean he is going to make another email drop?) It is a similar story for CZHC. 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.025 but this would present a good buying opportunity. (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.Monday’s Premarket Analysis is Ready From: Hyper Growth Stock <support@hypergrowthstock.) You can read our full premarket analysis at: http://www.
right) HyperGrowthStock. (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. selling at this time looks like a smart idea. HyperGrowthStock. or a 92 . lives in Montreal and is a French Canadian.com is not offering securities for sale. consider the facts.com profiles are not a solicitation or recommendation to buy. The stock is trading at good volume and the price is moving higher. And I thought they only played hockey!) ****************** Written below is the Caveat Emptor. the stock looks good on paper. last-in buyers are always left holding the proverbial bag. HyperGrowthStock.com is not liable for any investment decisions by its readers or subscribers. Before you read. sell or hold securities. All statements and expressions are the sole opinion of the editor and are subject to change without notice. however. also known as the cover your ass (CYA) disclaimer and disclosure statement. It is strongly recommended that any purchase or sale decision be discussed with a financial adviser. (Yeah.Have a Great Trading Day! Francis (By the way. So long as the company keeps plugging away with email blasts. The liquidity is questionable and there is a wide spread between bid/ask. Francis is a guy. Remember. if you bought in early. and so long as the email blasts are working. Verify all claims and do your own due diligence. or a broker-dealer. You do not want to be in the last buyers group.
Investors are cautioned that they may lose all or a portion of their investment in this or any other company. HyperGrowthStock.com and its employees or members of their families may hold stock in the profiled companies. HyperGrowthStock. assumptions or future events or performance are not statements of historical facts. plans.com statements and opinions and such statements and opinions cannot be considered independent.) The information contained herein has been provided as an information service only. goals. reporting.com nor any of its affiliates. interpreting. caused in whole or part by its negligence or contingencies beyond its control in procuring.com is owned and operated by HyperGrowthStock. objectives. Any statements that express or involve discussions with respect to predictions. or delivering this Web Site or e-mail and any contents. they will call you stupid and out of control for ever buying any of these.com. All statements are based on expectations. beliefs. projections.member of any financial regulatory bodies. (Even though if you do. Since HyperGrowthStock. Neither HyperGrowthStock. there is an inherent conflict of interest in HyperGrowthStock. compiling.com and its management may benefit from any increase in the share prices of the profiled companies. expectations. The accuracy or completeness of the information is not warranted and is only as reliable as the sources from which it was obtained. 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. 93 .
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. This is Caveat Emptor! 94 . So it’s about getting in early! It’s about being as close to the writer as possible! That’s the challenge. 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. this is catch if catch can. The great dilemma: To do. That’s the edge you want to gain. the stock can appreciate in value and can also give you an opportunity to buy and sell with a profit. HyperGrowthStock. this should be viewed as a definite conflict of interest and as such. the reader should take this into consideration. And there you have it.hypergrowthstockcom/disclaimer. or not? After all. Over the course of an email blast campaign. It is not about whether or not the company involved has good management or sound fundamentals.com may be selling shares of stock at the same time the profile is being disseminated to potential investors. It’s all about getting an email early. For more disclaimers on past compensation please go to www. watching it closely and selling at the first opportunity of profit with liquidity to get out. Email blasts may actually work to hype a stock. acting upon the information. 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. All of the rudimentary market and stock behavior patterns and all of the trading knowledge and portfolio management expertise go out the window. or not to do? Do I act on the email blast in my inbox. ladies and gentlemen.
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. how many there are.AwesomePennyStocks. 2.com Free Email Sign Up. Free Alerts. If I am making money doing it.com Mingle With Winners. Is this legal? (Let’s not be naïve.PremierePennyStocks. Let’s Google the phrase “penny stocks.28 seconds) Sponsored links 1.com We are the best rated on the web 2. 4.” About 388. Free Ebook. No Spam. 1. and where they come from. The Hottest Penny Stocks www. Make 2500% 95 . Receive penny stock alerts for free Get Up To 3000% Gains In Days.) 8. 3.Here are a few questions to ask of yourself.PennyBreakouts. 6. Could I be disgorged from my winnings by regulatory authorities? Let’s get an idea of who these emailers are. 900% Jumping Penny Stocks www. Best Penny Stock Picks www. 5. 3. Avoid Losers. How many shares did the email blaster receive? Were these shares free trading? How is that possible.000 results (0. why not continue? 9.
Similar 2.com/ .thehotpennystocks. Stock Newsletters : Browse The Latest Read the latest Penny Stock Newsletters from the top OTC websites. NASDAQ.Cached .Cached . Stock Newsletters . 5. Penny stock picks and top penny stocks promoted by penny stock newsletters..Stock Chat .00 a share that are on the NYSE. Stock Picks .com/ .1 hour ago Cached . is the one and only penny stock newsletter for all your penny stock picks and hot penny stocks needs.Cached ..com/ . Stock Picks :: Penny Stock Finder By reviewing popular stock message boards and penny stock newsletters you will know which penny stocks are the best to buy right now and that means a . www. Global Penny Stocks The only penny stock site recommended in Barron’s and by Forbes.com/ .Similar Penny Stocks .pennystocksite. picks stocks trading at under $5. Penny Stocks.Search Results 1.HSCC .Similar Penny Stock Picks.Cached . www.thehotpennystocks.. and AMEX.pennystock..Similar 96 4.Similar 3. Browse hot penny stocks and see which one is the top pick of the day! stockreads. Hot Penny Stocks. www. .THRR www.com/Stock-Newsletters/ .Hot Penny Stock Newsletter Site about the best penny stocks.
Trade Hot Penny Stocks The Top Penny Stocks newsletter for active penny stocks investors looking for penny stocks and Pink Sheet stocks. www..Cached . . www. 9.com/ ..Similar Think Penny Stocks .Similar Small High-Growth Companies..pennystocks.Cached . Peter Leeds is an online newsletter specializing in penny stock picks. There is no reason to invest in penny stocks without some guidance.. links to the newsletters and summaries of their stock picks.Cached . 1.thinkpennystocks.Similar 7. You can profit as we reveal undiscovered companies of .com/ .Your Guide To Penny Stock Research Sites and .Welcome Penny Stocks by Peter Leeds.. 8. Penny Stocks by Peter Leeds . 10.Cached ..6. www.com/small. stockeinstein.html .hototc.Similar 97 . Penny Stocks Visit Tip Reporter for reviews of several penny stock newsletters. They divide the stock .wall-street. There are several penny stock research and newsletter sites that you can choose from to .com/ . Penny stocks do not usually last long. 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.Similar Penny Stocks Alerts daily.com/ .....Cached . www.
s threw in the towel after Irving and Pops had added enough As to become AAAAAmerican Trading Company. and his partner.B. but to these newsletters all I need is a pulse and an email address. It all ended when the S. ran ads in the yellow pages. 98 .O.Do I look like a Penny Stock Trader to you? Maybe not. had put an ad in the book and now had the listing above theirs. Some S. My father and Irving were racking their combined brains to figure out how to beat these guys at their own game. One day.com? I remember an old story about my Dad. the listing is key. Irving. You can be sure that the other guy added a fourth A in the next edition. and their phone rang all the time with new customers. They called the guy but to no avail.O. I am receiving between 10 and 15 emails a day strictly from Penny Stock email blast sources. Some have great names don’t they? How about stockeinstein. In those pre-Internet days.B. Well.com? Or hotpennystocks. like Google. For years they prospered. the Yellow Pages phone directory was the marketing and advertising tool for small businesses. Marty and Irving were delighted to see their new listing in the telephone book as AAAmerican Trading Company. The name of their business was terrific: American Trading Company. when the next book came out. They checked around and they found out that another company had listed in the telephone book as AAmerican Trading Company. Well. Marty. They built a good business and a very strong brand. They had an industrial sewing machine business in the 1960’s and 70’s on Sixth Avenue and 17th Street in Manhattan. the two partners noticed that the phone was ringing less and they were flustered as to why.
17 x 5000 0.17 . AMCG.330 2.28 38.18 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 0.689.0. except where indicated otherwise. Let’s look at Amico Games Corporation. First.593. 99 . AMICO GAMES CORP (OTC BB: AMCG. It’s probably a good time to do a case study.19 x 5000 N/A 0.680 N/A N/A N/A N/A (N/A) Quotes delayed.0. The really big difference here is that one company probably owns 100 or 1000 different web addresses.Similarly.OB. we’ll take a look at Amico’s stats. Currency in USD. these Penny Stock blasters are trying to top each other.21 0.07 .OB) Last Trade: 0.01 (7.26%) 0.22 0.19 0.
Quarterly ReportEDGAR Online(Wed. Apr 14) 100 . May 17) Amico Enjoys Smooth Growth in New Game Users in February 2010Marketwire(Fri. Reports a 70% Increase in Revenue in Its Second QuarterMarketwire(Tue. Files SEC form 8-K. Reaches 23. Regulation FD DisclosureEDGAR Online(Tue. May 14) AMICO GAMES CORP. Highlights Growth of Chinese Telecom 3G Networks and Mobile SubscribersMarketwire(Thu 7:30AM EDT) Amico Games Corp. May 19) Skymark Research Initiates Independent Research Coverage on Amico Games Corp. May 19) Amico Games Corp. May 11) AMICO GAMES CORP.906 Registered Users as of March 2010 for Its K-JAVA Mobile Phone GamesMarketwire(Mon. Amico Games Corp.876. 1d 5d 3m 6m Step One: Headlines .GlobeNewswire(Wed. May 18) Amico Games Corp. Adds Another 1 Million Registered Users for Its Mobile GamesMarketwire(Wed. Files SEC form 10-Q. Plans to Upgrade Its In-Game Graphics in Journey to the West OnlineMarketwire(Thu 4:00PM EDT) Amico Games Corp.Make lots of press releases.
0 (Sell) 101 .5. Apr 6) » More Headlines for AMCG.OB Add AMCG. financial summary.Reuters Investment Profile(May 15) AMICO GAMES CP (AMCG=US) 2-weeks forecastPechala’s Reports(May 14) » More Reports for AMCG. 3yr and interim financials.OB Headlines to My Yahoo! Amico Games Corp: Business description..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 . Amico Enjoys Smooth Growth in New Game Users in February 2010Marketwire(Tue.
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.Step Two: Continue to pump good news out through email blasts. AMCG yesterday received a 0. despite strong market fears and a market that is near 2010 lows. For all our new subscribers. Even companies such as Apple were down about 5% today.com Hi Everyone.000. We have very high hopes for AMCG in the short and mid-long term. Welcome! AMCG for a fourth straight day traded record volume today. AMCG holds strong despite markets sinking! From: PennyStockGains <picks@pennystockgains. and managed to not retract more than a penny.com > Add to Contacts To: email@example.com TargetPrice and StrongBuy recommendation by renowned research firm Venture Research. but at the current usergrowth rate we believe we could get a surprise soon! 102 .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. putting the total user count at about 25.
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. reporters and newsletters everywhere! We think it is likely only a matter of time before it reaches new highs. and we still believe that there is much more to come. 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.The 0. Mobile gaming is so huge and AMCG is positioned in one of the best spots possible! AMCG is catching the attention of investors.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. 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 . Apparently we were right.
with an increase of approx. .AMCG is rapidly growing the red hot online gaming market! Similar companies such as Zynga and Playfish are making billion dollars 104 . AMCG is gaming company specializing in the development of fun and interactive online games and more specifically mobile games. AMCG announced that they reached 22.We believe it’s definitely not too late to get in! .AMCG is still at bargain levels in our opinion! . and will be in a much more secure position! . such as MMORPGs. 1 million users per month! Interested to know more about AMCG? Read below: . showing both that the company will be more profitable in the future.For those of you who don’t know.5 million registered users (gamers).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.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.
AMCG has been a cutting edge interactive 105 . China is the world’s most rapidly advancing country. AMCG is! . 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. With the population getting access to more and more credit cards. Chinese gaming companies are perfectly placed to monetize and profit from this huge population. AMCG is showing an extremely promising future! Want more information about Amico Games Corp. computers and internet.AMCG is rapidly growing and penetrating into the HUGE China market. Each of these people have access to advanced cell phones.AMCG specializes in the extremely popular MMORPG market. and thinking outside the box as much as possible. . and AMCG is once again right in the middle of the action! .AMCG is determined to provide the most amazing gaming experiences to its players By adding new technologies and new marketing methods.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. Which one of us hasn’t heard of World of Warcraft. (AMCG)? For about 10 years.
and AMCG is clearly onto the same road! Find the research report here: http://www.com We strongly believe that AMCG is a fantastic company. which was one of the first game developers in China. as well as the first company to provide games over China’s WAP network (the world’s largest network). and that is way.pdf 106 . specializing in developing multiplayer networked mobile phone games that are played over the mobile internet in China. another privately owned Chinese gaming company. way up! Our last few picks did absolutely fantastic for our subscribers. AMCG acquired Galaxy Software Ltd.claymahaffey.. we have a good feeling that things are just getting started! We believe that AMCG can only go 1 place from here. given the great momentum we are observing. and that the company really knows what they are doing! Finally. AMCG’s recent growth shows us that their games are attracting more and more people.amicogames.entertainment media company. Make sure to check out their awesome website at www. with incredible potential in the rapidly expanding gaming market. Last year.com/ initiation_amcg.
They are seemingly dependent on one another.com trading. 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. Here is the www.26%) Volume: 38.1855 0. Your PennyStockGains Editor Step Three: Analyze the tape. 2010 After Hours: $ 0. (AMCG) $ 0.Make sure to add AMCG to your radar if you haven’t already! Happy Trading.67 k 107 . 2010 4:14 PM EDT May 20.otcbb. reflective of the market making and trading of AMCG.0137 (-7. from the same day as the above announcements and email blasts. This is the trading time/sales level two. Markets Quote Depth/LII Charts Depth/Level II for Amico Games Corp.6 million shares. holy cow! Where is all the selling coming from? I guess we figure the buying is from all the email blasts and company announcements.00%) Volume: 454.175 News Filings Streamer -0.0105 (+6.69 m 3:59 PM EDT May 20.
To the unsuspecting and trusting. on a Monday morning. please answer the following questions for yourself: 1. a penny stock promoter blasts several claims that he expects a blockbuster announcement to come out by Wednesday. The promoter not only knows what the next Wednesday announcement is going to be. What does the Dow Jones have to do with the stock being recommended by this promoter? 2. and which establishes the credibility with which they are sending emails. and is in possession of the next half dozen pending announcements. By doing so. So yeah. and that everyone should load up on their positions in advance of the announcement. advised the company when to release it. wow! He is either right all the time due to a miraculous intuitive capability. gets great inside information and is generous enough to share it with investors for FREE. they attempt to prove that they were right. Such a deal! When you read this posting by Hypergrowth. Why would anyone believe they should run out and buy the stock recommended in this email blast? 108 . but he probably already helped write it. or he is connected real close to the company. Who gave this promoter the credibility he claims in his posting? 3. which is a big plus. he knows and can say unequivocally that he knows a blockbuster announcement is due out Wednesday. For instance.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.
The bulls were able to recapture the 10. (Why?) There are signs that buyers are also taking advantage of lower prices in CZHC and KNDR. 2. A strong open could attract even more investors to the marketplace.hypergrowthstock. 3. 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. we should see investors re-enter the market and drive these stocks higher. As fear begins to dissipate. This optimism should also provide some momentum for our recent stock picks.200. No one.000 level and pushed the Dow Jones above resistance at 10. Nothing.Answers: 1. (Why?) You can read our full premarket analysis at: http://www. Beats me. Volume is rising and is helping to drive the stock higher. we should see another strong move today.com/2010/05/27/friday-may-28premarket-analysis Have a Great Trading Day! 109 .
this chapter heading may sound goofy or unreasonable. These shares are valued by their market price.Chapter 18: No Earnings? Give Good News. That’s why we don’t trust MOU’s and LOI’s. assuming there are no earnings and no unused collateral. but put yourself in the public company CEO’s position. Philosophically. I know CEOs that scramble to release an announcement because they have to feed a hungry audience. 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. 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 . or the CEO has hired and paid a promoter and the promoter needs an announcement to boost his content for his email blasts. remember? Good news is anything that sounds positive. Any Good News You Can. I have seen press releases announcing that there were going to be more press releases coming. CEOs are constantly pressured to provide reasons to shareholders to buy or hold the issuer’s stock.
Other promoters have catchy names and brilliant slogans like. Unfortunately. including hiring promoters. Now follow me here for a minute. “Penny Stock Winners Only. Penny stock promoters will use any device at their fingertips with no tool too fragile. What a perfect segue way into penny stock promoters. the sellers could be the same promoter telling us to go buy the damn stock already! 111 . The promoter expects that we will read more than one of emails. maybe all 29 I got today came from the same source. Then it’s a grand slam homerun if one of us buys any shares. Who knows. the more he thinks we will read. I knew one promoter who boasted having over 1. We got us a sexy cowgirl from the Penny Stock Farmer. So the more he sends. 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. someone is selling every time we are buying.” and so on. but then again the whole point of this book is to smarten us all up to avoid these scams because as we know.” and “No Bull.) 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. maybe he’s right in certain cases. just remember this: desperate CEOs do desperate things. expensive. getting you and me to read them.000 different websites on which he could post similar or same stories on the same stock. or unavailable if it means them getting emails and even more importantly.Research coverage begun Strongest (So long as it’s not paid for.
look at HSCO today . Us country folk like to shoot straight.BEWARE! HSCO went against us. Case in point. However. I know most newsletters don’t do this because they want to appear perfect without ever making any bad trades. if you did not honor your stop loss.down even further! Had you gotten out yesterday and cut your loss. you 112 . we have a nice little lesson though. Ya can’t win them all! In regards to this.com> Add to Contacts To: stocknewsnow@yahoo. With momentum trades like this. not only did you tie up your money today. The gapping nature of the stock drew in the bears and unfortunately they won the day. and that is the nature of trading stocks. I am a big believer in learning from ‘actual’ situations. but that is not my style. I’m telling ya now . and the HSCO trade gives us a nice opportunity to learn.Ya Win Some.com Howdy Stocknewsnow@yahoo. Ya Lose Some From: Penny Stock Farmer <support@pennystockfarmer. But you know what? It happens! Anyone or any newsletter that makes it seems like all trades are winners. HSCO was a rough trade. cut your losses and move on. you’d be using that money to play other stocks today and hopefully making money back.com. but now you have taken even a bigger loss! Money management is key! As long as you have capital. and that’s what I’m gonna do here. if the price goes against you.
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. and if you held on too long. always a possibility. a momentum trade. don’t get frustrated. I discuss this more in my blog post located here. Keep your chins up. The Farmer An update on July 4th. EVXA made us some nice profits. but AUMY was caught in the common color currently of the majority of stocks: red. Heck. I’ve been losing money. so decisions need to be made fast. even EVXA is feeling some pain and looks like it may be getting ready to head back down. but in a controlled fashion. 113 . The past couple of weeks have been rough out there for traders. take this as a learning example and grow from it! All the Best. Howdy Stocknewsnow@yahoo. but as I presented this from the start as. and it’s not an intended trade where you buy and wait (like our current TLAN trade).com.
there is? Oh my!) In short.87 .20 . (You know.There is a big difference between losing money and losing money in a controlled fashion.0.25%) 0. use your stop losses! I also break down the Dow Jones chart.10 x 500 N/A 0.96 0.00 N/A (N/A) 114 .98 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: 0.98 0.06 (6.3.85 x 2500 1. (I love this.95 278. this would be great if we needed a pen pal and it wasn’t our money getting pissed away.90 Jul 2 0. / (OTC BB: TOPZ.) The next stock to follow: TOPZ.826 75. so read the blog and let’s see what happens the rest of this week. TOPZA RESOURCES INC.582 82.OB.69M N/A -0.
and $ .) From: PennyStockGains To: stocknewsnow@yahoo. So here goes. the price is $ . in 115 .90 last) TOPZ has the attention of Wall Street! (Average volume: 83. $1.OB. volume before receiving this email: 279. First.) TOPZ an independent oil and gas company ("Topaz" or the "Company"). That is disclosed. The recommending newsletter writer indicates they were paid $5. and to all new subscribers Welcome! TOPZ is THE stock to keep an eye on this week! (As of July 6th 2010. in building and running drilling rigs. I wonder what compensation is not disclosed. introduced its team of 57 administrative and operations personnel. Give me a minute.000 shares.) TOPZ has a chart pointing North! (NO EPS market cap: $76 Million. 1d 5d 3m TOPZ . I will be right back. TOPZ. I will add the symbol to my yahoo finance page.) 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. (57 people must be quite a burn rate.000 shares.10 ask.Our hot Oil pick of the summer! (We must follow this one.85 bid.000 CAD from a third party. The Topaz management team has been involved in operating well and field activities.com Hi everyone.
TOPZ! We believe that TOPZ could be another HUGE WINNER! Lengendary Oilman T. (Does this make it 62 people?) Operationally.leasing of mineral rights and in arranging appropriate financing. central and west Texas. Topaz has an additional five personnel handling accounting. railroad commission work and general office duties. acquisitions and developmental drilling opportunities within proven producing areas of north. operations and payroll. We hope that everyone has been taking a close look at our new feature Company . 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. 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. Administratively. Topaz utilizes one reservoir engineer and one field engineer plus one drilling superintendent overseeing two rig crews of 22 personnel each. 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. "America is buying 700 Billion barrels of 116 . President and CEO. Strategically. "We are very pleased that we have been able to assemble a team as qualified and experienced as ours. Inc.Topaz Resources. 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." said Ted Munden. safety reports. (Let’s Google Ted…so far nothing bad. Boone Pickens.
Exploiting and drilling existing core properties to maximize reserve growth. We need American Energy Solutions.2 TRILLION cubic feet of gas in one of the largest natural gas fields in the world. acquisitions and developmental drilling opportunities within proven producing areas of north. Petrohawk and coal giant Consol Energy. and Maintaining a conservative financial position to preserve financial flexibility. Washington is putting $150 billion behind the switch to natural gas. TOPZ could be sitting on 1. (How much is TOPZ to receive?) Exxon.Foreign Oil a year or 70% of our consumption. 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. TOPZ objectives are to increase shareholder value. Achieving operational control of properties in order to manage costs and development schedules. (Any investments in TOPZ?) 117 . Pickens buying any TOPZ?) TOPZ is an independent oil and gas company focusing on production. (Is Mr." Companies like "TOPZ" address this major US dependence on foreign Oil. Driving growth through internally generated projects. central and west Texas. investing mega-millions in natural gas. Strategic reserve and leasehold acquisitions to supplement cash flow and to complement drill-bit growth strategy. central and west Texas where their management team has a competitive advantage.
Boone isn’t alone.”) Happy Trading. Inc. our natural gas supply is more than abundant and the plan could work. we should turn to it [natural gas] as an immediate replacement for foreign oil in fleets and heavy duty vehicles. As some might say. let’s watch this puppy and see what kind of a dog it really is. That’s why I’m so excited about my latest discovery Topaz Resources. the fourth largest coal company in the world are on-board with natural gas as you see in a few minutes. 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. Inc. Your PennyStockGains Editor 118 . you can see from T. BP and even Consol Energy. Says Pickens.With shale gas coming on stream. Exxon. (TOPZ). 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. Boone Pickens calls it. T. (HUH? Okay. 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.
48.85 .30 UP How would you feel on July 22.37 388.535 July 9. YES .30 .30 .575 July 15.000 . Dow Jones: 9686.100 July 21 NO 10.25 .10 .70 . Bid Ask Last Volume Announcement Market UP or Down . hedge funds.322. Speculators. 2010.30 .30 DOWN .35 .53 DOWN .45 . NO 9743.154.33 . They want to know if they buy in or lend money to the company.37 228.097.063 July 16.96 UP . and market experts judge a stock by the amount of money the stock trades over a period of time.BB.33 . NO 10.50 .92 266.87 264.32 . if you paid $.41 .918 July 19 NO 10.62 .88 . multiply the volume by the last price each day and then add the total.46 . 119 .90 286.92 .61 389.229.86 1.120. let’s start watching and see what happens. 2010.72 UP . I began to think the worst about what was going on in the trading of TOPAZ.640 July 22 NO 10. NO (YIKES!) 10. So I began to add up the number of shares that were trading. YES .198. YES* .37 277.545 July 6.90 on July 6? On Saturday July 17.Starting from Tuesday July 6.828 July 20 NO 10.30 141.30 115.34 . If you want a rough estimate in total dollars.967 July 8.990 July 7.03 UP . The trading volume was very good by most standards.33 138.51 518. YES 10.52 .34 148. Liquidity is a prerequisite of buying or shorting.366.46 . They want to gauge the stocks liquidity. TOPZ.36 .99 UP .62 UP .975 July 14.46 . will they be able to exit profitably? That is their main concern.
361 to $. Double reporting would double the volume. email blasts and who knows what else that is creating all of this volume and liquidity. and there are sellers obviously. the regulators have forced traders to switch from fractions to decimals. $2M bucks in eight days. It is a very big spread between bid/ask as well. to see what price the stock had traded at before the last trade. or is only one side being reported.09 spread and an almost 30% markup for the trader). are not protecting the bid. Next. the sellers either hit the bid or were filled in the middle. but here’s my line of reasoning: who stands to gain? 120 . There is an obvious promote going on. At this point. I checked the trading range and it seems the stock was trading from $. Traders love big spreads. on July 14. the sellers would offer the shares on the offer/ask side of the market. I want to analyze if the buys and sells are each being reported. which would also double the amount of money the stock is trading. the stock closed at $. and the stock traded at $. 15.37 last. For instance: July 15. I notice that in eight days of trading. This is an indication that the market maker filled a sell order at $. the company made four press releases.46 and sales at $. let’s assume it is one side reporting. In fact. and 16.TOPZ has traded approximately $2M over eight days. I would look at time and sales that day.37 (a $.36. In other words. I also noticed that the sellers.36 bid and $. To protect the bid.37 with the bid $.46 ask. I didn’t see buys at $. especially toward the trading day’s end. So here’s the big question: who’s the seller? I am really not sure yet. Tie the announcements to the email blast that I received and it’s way obvious someone is paying for this flow of announcements.381. a narrow spread for the market makers. Well. which seemed to have disappeared. averaging almost $250K per day. Regardless of this exercise. A public company averages 22 press releases annually.
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 . Now my interest is piquing. A promoter in a deal with the company who was issued free trading stock from a third party. The information indicates that TOPZ was a reverse merger into a shell (formerly Kids Germ Defense Corp). A company attempt at a short squeeze against someone they know is short. An insider who freed 144 stock (pretty easy to trace) and has free trading stock. shareholder lists. but we do have access to public records. 2. These are six good possibilities. 2010. A large shareholder holding free trading stock. 6. 3. This could get interesting. 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. I have pulled the TOPZ 10Q. The beneficiary seller committing a fraud. 4. which is reflective of the company’s financial position as of March 31. I am going to see if there are any 144 filings. or DTC sheets. isn’t yours? We do not have access to the company records. 5. transfer sheets. A funder converting debt into equity.1. The possibility of a seller arises from the transaction involving the original shell owner.
They have until August 15th to file the June 10Q. the next filing should be a June 10Q. If March was the last filing they calendar reported.Having fun yet anybody? TOPZ is required to file a 10Q each quarter. but I cannot wait to read that filing! 122 . I don’t know about you.
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.O. Box 2057 Denton. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. INC. D.C.UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON. including area code: (940) 243-7744 123 . TX 76207-2057 (Address of principal executive offices) (Zip Code) Registrant’s telephone number.) of incorporation or organization) 1012 North Masch Branch Road P. (Exact name of Registrant as specified in its charter) Florida 26-4090511 (State or other jurisdiction (IRS Employer Identification No. For the quarterly period ended March 31. 333-158721 TOPAZ RESOURCES.
an accelerated filer. 2010 and 2009 (Unaudited) 3 3 4 124 .000 shares of the Registrant’s $0. 2010 (Unaudited) and December 31. 2010.0001 par value common stock outstanding as of May 14. (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). TOPAZ RESOURCES. Yes [ ] No [X] There were 84. See the definitions of "accelerated filer. 2009 Condensed Statements of Operations Three months ended March 31. INDEX Page No. a non-accelerated filer or a smaller reporting company. and (2) has been subject to such filing requirements for at least the past 90 days. Financial Statements Condensed Balance Sheets March 31. large accelerated filer and smaller reporting company" in Rule 12b-2 of the Exchange Act.100.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). Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer. Part I. INC. Financial Information Item 1.
Default Upon Senior Securities Item 4.Condensed Statements of Stockholders’ Deficit Three months ended March 31. Exhibits Signatures 12 12 12 12 13 125 . Other Information Item 1. Other Information Item 6. Submission of Matters to a Vote of Security Holders Item 5. Unregistered Sales of Equity Securities and Use of Proceeds 12 Item 3. Legal Proceedings 11 11 Item 2. 2010 and 2009 (Unaudited) Notes to Financial Statements (Unaudited) 5 6 7 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation 9 Item 3. Controls and Procedures Part II. 2010 (Unaudited) Condensed Statements of Cash Flows Three months ended March 31. Quantitative and Qualitative Disclosures About Market Risk 11 Item 4.
10.974 --------199.000 shares issued and outstanding at March 31.000 and 83. (formerly Kids Germ Defense Corp.0001 par value.108 ------------ $ 35.330 8.000 ------------53.300.0001 par value.388 ----------- Stockholders’ equity: Preferred stock. 83. $0.254 --------25.000. none issued and outstanding Common stock.330 126 . Inc. 2010 and December 31.108 ------------2. 2009 --------- $ 199.388 18.974 ---------$ 199.974 $ 25.300.) (A Development Stage Company) Condensed Balance Sheets March 31.254 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable Due to related party Total current liabilities $ 2. respectively -- -- 8. $0. 2010 -------(Unaudited) ASSETS Current assets: Cash Total current assets December 31.000 shares authorized.254 --------$ 25.PART I--FINANCIAL INFORMATION Topaz Resources. 700.000. 2009.000 shares authorized.
866 (28.634) ----------------Total stockholders’ equity 197.877 26.134) ----------------$ 199.974 $ 25.670 -(500) 200.Additional paid in capital Stock subscription receivable Common stock payable Accumulated deficit 64.000 -(75. 127 .254 ---------------The accompanying notes are an integral part of the condensed financial statements.341) (62.
Loss from operations Net loss before taxes Income tax expense Net loss Net loss per share Weighted average Number of common shares outstanding 8.300.344 -----------(12. 2009 (Date of Inception) (Date of Inception) Three Months Ended through through March 31.341) -----------(75. (Formerly Kids Germ Defense Corp.707) ------------(12.707) ======== $ (0. Inc.00) ========== 500 149 -----------(649) -----------(649) ------------(649) ========= $ (0.833 22. 16.000.341) -----------(75.) (A Development Stage Company) Condensed Statements of Operations (Unaudited) Period Period Jan. 2009 Jan.363 4. 16. 128 .707) ------------(12.000 ========== 63.000 =========== The accompanying notes are an integral part of the condensed financial statements. March 31. 2010 2010 2010 ----------------------------------------$ -$ -$ -- Revenue Operating expenses: Legal & Accounting General & Admin.Topaz Resources.00) ========= 52.341) ======== 83.508 -----------(75. March 31.
134) Payment on stock subscription receivables (January 14. 2010) (unaudited) ------500 -- 500 Capital contribution from shareholders (February 16. 2010) (unaudited) ----38. 2009 (Date of Inception) through March 31.207 129 .000 -- 28.670 ---------- ------(500) (62.----------------.634) ---------------(62.Topaz Resources.-----------.----- Shares Amount ---------.000 8. 2010 and For Each of the Years From January 16.330 --- -- 6.030 --26.$ -$ -- $ -- $ -- $ -- $ -- Issuance of common stock for cash ($0.300. 2009) 20.-----------------.300. January 16. January 16. December 9. 2009) 63.0001. 2010 Common Stock ----------------------Amount Par Value Shares $0.----------.207 ---38.-----Balance.) (A Development Stage Company) Condensed Statements of Stockholders’ Equity For the Three Months Ended March 31.500 -------26.634) (28.$ -$ -.001. December 31. 2009 83.-----------Preferred Stock --------------------Deficit Accumulated Additional Common Stock During Paid-In Stock Subscription Development Capital Payable Receivable Stage Total ------------. (Formerly Kids Germ Defense Corp.000.0001 --------.970 -(500) Net loss for the period -----------. Inc.000 6. 2009 $ -.----------- Balance at Inception.634) (62.300 --(300) --Issuance of common stock for cash ($0.000 2.
2009 (unaudited) 83. 2010 (unaudited) -------(12.341) $197. 2010) (unaudited) -----200.000 $ -.-----.-----------------------------------------Balance.000 --.200.Issuance of common stock and warrants for cash ($0.707) -------.300.000 $8.25.877 $200.000 Net loss for the three months ended March 31.$(75.330 $ -.707) (12.$ -. March 31. March 26.866 ======== ====== === === ======= ======= ===== ======== ======== 130 .$64.
108 Net cash used by operating activities (7. 207 (33. 2009 (Date of Inception) (Date of Inception) Three Months Ended through through March 31. March 31. March 31.) (A Development Stage Company) Condensed Statements of Cash Flows Period Period Jan. 16.280) --- 38. 16. (Formerly Kids Germ Defense Corp. 207 2. 026) 131 . 2009 Jan. Inc. 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.Topaz Resources.780) (649) (35.707) $ (649) $ (75.341) 38.
000 Proceeds from issuance of common stock 500 --------Net cash provided by financing activities 182.974 25. March 31.000 --------235.000) 200.351 ---------$ 199.000 35. 2010 --------------(unaudited) FINANCING ACTIVITIES: Proceeds from advances from stockholder -Repayment of advances from stockholder (18. 2009 Jan.720 CASH. 16.974 ---------$ 5.351 (18. 16.000 5. END OF PERIOD $ 199.000) Increase in common stock payable 200. BEGINNING OF PERIOD Period Period Jan. 2009 (Date of Inception) (Date of Inception) through through March 31.254 --------CASH. 2010 2010 --------------------------(unaudited) (unaudited) -- 18.Three Months Ended March 31.500 NET INCREASE IN CASH 174.974 132 .000 --------6.000 199.000 --6.
and the Period January 16. (the "Company") is a development stage enterprise that was incorporated in the state of Florida on January 16. 2010 and 2009. Accordingly. The Company is an independent oil and gas company focusing on production. ACCOUNTING BASIS In the opinion of management. 2009 (Date of Inception) through March 31. (b) the financial position at March 31. to Topaz Resources.) (A Development Stage Company) Notes to Condensed Financial Statements Three Months Ended March 31. 2009 (Date of Inception) through March 31. have been made.Topaz Resources. the Company's activities have been limited to raising capital. Texas. 2010. the Company changed its name from Kids Germ Defense Corp. The accompanying condensed financial statements and notes should be read in conjunction with the audited financial statements and notes of 133 . Inc. The unaudited condensed financial statements and notes are presented in accordance with SEC Form 10-Q. 2010 and 2009 and the Period January 16. GENERAL ORGANIZATION AND BUSINESS Kids Germ Defense Corp. To date. (Formerly Kids Germ Defense Corp. Effective April 16. Inc. organizational matters and structuring its business plan. 2010 and December 31. The corporate headquarters are located in Denton. acquisitions and developmental drilling opportunities within proven producing areas of North-Central-West Texas. 2009. 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. 2010. 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. and (c) cash flows for the periods ended March 31. 2010 (Unaudited) NOTE 1. 2009. 2010.
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. For the three months ended March 31. In view of these matters. 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. Actual results could differ from those estimates.707 and $75. the AICPA and the SEC since the last audited financial statements. 2010 and since inception through March 31. The results of operations for the three month period ended March 31. 2009. the Company has had a net loss of $12. NOTE 3. including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. 134 . 2010 are not necessarily indicative of those to be expected for the entire year. RECENT ACCOUNTING PRONOUNCEMENTS Management has reviewed all recent accounting pronouncements issued by FASB (including EITF). respectively. Since inception. As of March 31. 2010. the Company has financed its activities principally from loans from the executive officer and sale of public equity securities. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets.the Company for the fiscal year ended December 31. or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. 2010. 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. the Company has not emerged from the development stage. NOTE 2. GOING CONCERN The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern.341.
000.000.000. the Company issued 63. the Company and an investor signed a subscription agreement to purchase a total of 800.000 shares of common stock with a par value of $0.000.000.500 in cash proceeds.000 to 700. Effective April 22. STOCKHOLDER'S EQUITY TRANSACTIONS The Company's Board of Directors has authorized 700.000. NOTE 4.0014 per share. 2010. the Company has received the $200.50 per share for a total amount of $200. On January 16. 2009. 2009. On January 16. Effective April 16.0001 to be issued in accordance with the terms and conditions as determined by the Board. the Company changed its name from Kids Germ Defense Corp. As of March 31. As of December 31. 2009.000 shares of the Company's common stock at $0.300. The Company also effected a forward stock split of the Company's common stock on a seven for one basis.000.000. to Topaz Resources. The Preferred Stock ranks senior to the common stock as to dividends and liquidation. such that its authorized shares of common stock has increased from 100.000 from the sale of its stock. the Company authorized a Private Placement Offering of up to 21.000 shares of common stock at a price of $0.000.000 135 .0001 per share for a total of $6.000 warrants to purchase shares of the Company's common stock at an exercise price of $0.000 common shares and had received $28. the Company effected a forward stock split of the Company's common stock on a seven for one basis.0001 and 10.000.000 to 700.000. 2010.000 shares of preferred stock. The total amount raised in this financing was $29. par value of $0.000. 2010. and $500 in a stock subscription receivable. 2010. 2010 the additional $500 had been received for the total of $29.000.000. SUBSEQUENT EVENTS Effective April 16.000 shares of common stock at $0.25 per share plus 30. As of March 31. such that its authorized shares of common stock has increased from 100.and does not believe that they will have a material impact on the Company's present or future financial statements. NOTE 5. the Company had issued 20. Inc.
either cash or cashless exercise is permitted as determined by the holder of the warrant." "PROJECT. AND FUTURE NET CASH FLOW. INCLUDING BUT NOT LIMITED TO "MANAGEMENT'S DISCUSSION AND ANALYSIS". The warrants expire in 2015." "COULD. 2010." "ESTIMATE." "PLAN.000 shares of common stock. ITEM 2. REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS." "SEEK. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM 136 . AND VARIOUS OTHER MATTERS. AND ECONOMIC CONDITIONS.50 per share. 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. THIS FILING. MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL.000 shares of the Company's common stock. WITHOUT LIMITATION. GENERAL ECONOMIC AND BUSINESS CONDITIONS." "WILL. 2010 that requires recognition or disclosure in these financial statements. at any time. THE WORDS "ANTICIPATED. SOCIAL. THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS. AMONG OTHERS. INFORMATION REGARDING FUTURE OPERATIONS." "MAY. INCLUDING.000. at an exercise price of $0. SUCH STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES. No other material subsequent events have occurred since March 31. FUTURE CAPITAL EXPENDITURES." "INTEND." "EXPECT. CONTAINS FORWARD-LOOKING STATEMENTS." AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE. CHANGES IN FOREIGN. POLITICAL." "BELIEVE.subscription price and recorded a common stock payable for the 800. The warrants entitle the holder to purchase 30.
we believe either course is acceptable. 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 MAY NOT UPDATE THESE FORWARD-LOOKING STATEMENTS. Such discussion represents only the best present assessment of our management. This is critical to insure our survival and to preserve our shareholder's investment in our common shares. WE HAVE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE THESE FORWARDLOOKING STATEMENTS TO REFLECT NEW INFORMATION. or that any conclusion reached herein will necessarily be indicative of actual operating results in the future.LOOKING STATEMENTS AS A RESULT OF SEVERAL FACTORS. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future. 2010.341 from inception of the Company January 16. 2009 to our year ended March 31. OR OTHERWISE. EXCEPT AS REQUIRED BY FEDERAL SECURITIES LAWS AND WE CAUTION YOU NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS.974 in cash. Concurrent with our search for additional financing for our existing business. At this stage in our operations. EVEN THOUGH OUR SITUATION MAY CHANGE IN THE FUTURE. We currently have $199. The principal components of our 137 . as our operations have not been profitable and our Company will fail without further significant financing. OVERVIEW The following discussion and analysis should be read in conjunction with the financial statements. we are also actively seeking business opportunities with established business entities for the merger of a target business with our Company. 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. Our immediate priority is to either secure suitable financing to continue with our existing business or change our business and conclude a merger.THOSE ANTICIPATED IN THESE FORWARD. RESULTS OF OPERATIONS Our Company posted losses of $75. included herewith. 2010. acquisition or combination with a business prospect. FUTURE EVENTS.
As of March 31. Because of a minimum amount of cash. or on terms that are acceptable. 2010 were related to the preparation of our Annual Report. LIQUIDITY AND CAPITAL RESOURCES From inception of the company January 16. we may not be able to proceed with our intended business plans and our business will then likely fail. In view of these matters. the Company has an accumulated deficit of $75. which was funded by proceeds from the sale of common stock. 2010. Effective April 22. There is no assurance that such financing will be available in the future. 2010.000. There can be no assurance that additional financing will be available to us. legal and audit fees. 2010.780 and $649 of cash from operations during 2010 and 2009. 2009 through March 31.000 subscription price and recorded a common stock payable for the 800. The Company used $7. 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.25 per share plus 30. legal and administrative fees. respectively.losses for the three months ended March 31.974. evaluation and combination or merger with a suitable business opportunity. or to fund the identification. the Company has received the $200. the Company and an investor signed a subscription agreement to purchase a total of 800. During the period from January 16.50 per share for a total amount of $200.707 and has incurred significant losses since inception. the loss of $649 was primarily related to the start up expenses. 2009 to year ended March 31.000 warrants to purchase shares of the Company's common stock at an exercise price of $0. Consequently. there is substantial doubt that the Company 138 . 2010.000 shares of common stock. As of March 31. 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.000. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. 2010 we had cash of $199.000 shares of the Company's common stock at $0. 2009.341. the Company incurred a net loss of $12. For the three months ended March 31.
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. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets. and results of operations. ITEM 3. 139 . Our management believes that inflation has not had a material effect on our results of operations. there can be no assurance that the Company will be successful in its efforts to secure such cash flow. Any failure by us to timely procure additional financing or investment adequate to fund our ongoing operations. 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. including planned product development initiatives and commercialization efforts. QUANTITATIVE AND QUALITATIVE DISCLSOURES ABOUT MARKET RISK Not applicable. ECONOMY AND INFLATION Except as disclosed herein. or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. will have material adverse consequences on our financial condition. results of operations and cash flows. However.will continue as a going concern. liquidity or capital expenditures. revenues. 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.
and (ii) accumulated and communicated to our management. Furthermore. including our Certifying Officers and other persons that perform similar functions. 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. or is reasonably likely to materially affect.OTHER INFORMATION ITEM 1. which is required to be disclosed. if any. Under the supervision and with the participation of management. LEGAL PROCEEDINGS The status of our legal proceedings. 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. 2010. The Company may be party to lawsuits from time to time arising in the ordinary course of its business. is accumulated and communicated to management timely. PART II -. to allow us to make timely decisions regarding required disclosure in our periodic filings. summarized and reported on a timely basis in accordance with applicable Commission rules and regulations. as of the end of the period covered by this report. The Certifying Officers have concluded that the disclosure controls and procedures are effective at the "reasonable assurance" level. 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. processed.ITEM 4T. 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). the Company's internal control over financial reporting. that materially affected. as disclosed in our Annual Report remains unchanged. The Company provides for costs relating to these matters 140 .
50 per share for a total amount of $200.1 3. 2010. Effective April 22.25 per share plus 30. DEFAULT UPON SENIOR SECURITIES There have been no defaults in any material payments during the covered period. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 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. the Company did not issue any unregistered equity. ITEM 2.000 shares of the Company's common stock at $0. the Company and an investor signed a subscription agreement to purchase a total of 800. 2010.when a loss is probable and the amount is reasonably estimable. the Company did not submit any matters to a vote of its security holders. 2010.000 warrants to purchase shares of the Company's common stock at an exercise price of $0. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the three months ended March 31. EXHIBITS No. 2010.2 Exhibit ------Articles of Incorporation* By Laws* 141 . ITEM 5.000. ITEM 6. ITEM 3. --3.000. ITEM 4. OTHER INFORMATION The Company does not have any other material information to report with respect to the three months ended March 31.
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.1 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. (Registrant) /s/ EDWARD J. 333-158721.C. 2010 142 .31. File No. 2009. Munden President and Chief Executive Officer (Principal Executive Officer) Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Dated: May 17. as filed December 8. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934. the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.S. TOPAZ RESOURCES. MUNDEN ------------------------------------------Edward J.1 ---------- * Incorporated by reference to the exhibits included with the Registration Statement on Form S-1. Section 1350. INC.
to ensure that material information relating to the small business issuer. particularly during the period in which this report is being prepared.Exhibit 31. in light of the circumstances under which such statements were made. (b) designed such internal control over financial reporting. Inc. or caused such internal control over financial reporting to be designed under our supervision. including its consolidated subsidiaries. (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. certify that: (1) I have reviewed this quarterly report on Form 10-Q of Topaz Resources. Edward J.. results of operation and cash flows of the registrant as of. as of the end of the period covered by this report based on such evaluation.1 CERTIFICATION I. Munden of Topaz Resources. fairly present in all material respects the financial condition. and other financial information included in this report.. Inc. (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. 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. and for. the financial statements. and 143 . not misleading with respect to the period covered by this report. (2) Based on my knowledge. the periods presented in this report. (3) Based on my knowledge. 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. or caused such disclosure controls and procedures to be designed under our supervision. is made known to us by others within those entities.
Inc. Principal Executive Officer and Principal Financial Officer of Topaz Resources. Section 1350. in compliance with 18 U. Munden. and (b) any fraud. 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. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 hereby certify. to the best of my knowledge. 2010 /s/ Edward J. (the "Company"). Chief Executive Officer and Chief Financial Officer Exhibit 32.C. based on our most recent evaluation of internal control over financial reporting. Date: May 17. the registrant's internal control over financial reporting. process. that: 144 . or is reasonably likely to materially affect. Edward J. whether or not material. and (5) The registrant's other certifying officer(s) and I have disclosed. 2010 as filed with the Securities and Exchange Commission (the "Report") on the date hereof. that involves management or other employees who have a significant role in ( the registrant's internal controls over financial reporting. Munden President.1 CERTIFICATION I. summarize and report financial information. Munden -------------------------------------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 connection with the Quarterly Report on Form 10-Q for the period ended March 31.S.
2010 and as you have been reading. It infers you can trust the source implicitly. after the stock has seen uncompromised selling pressure. This leads me to assume that while we are reading all of these bullish (did I spell that right) press releases. I am feeling pretty good about the fact that I do not own a share. We have been following Topaz together and now today the following “press release” has been made. The phrase independent research coverage is so ridiculous I am over-the-top perturbed. and The information contained in the Report fairly presents. Date: May 17. we began our own following of TOPAZ at more than twice the price it is now. Chief Executive Officer and Chief Financial Officer Today is July 14. As a reminder. Obviously. it implies the coverage was unsolicited and unpaid for in cash or stock or options or warrants or some other barter arrangement. Even the headline runs shivers down my spine. 2010 /s/ Edward J. that might have been called taking on a position or initiating coverage of Topaz.The Report fully complies with the requirements of Section 13(a) or 15(d). It implies that the research was inaugurated by a skilled. of the Securities Exchange Act of 1934. licensed expert in the resource sector of the market. the price begins to plummet. Munden President. someone or plural of 145 . I randomly chose to follow Topaz Resources. Are you beginning to get the picture? Now all of a sudden. in all material respects. The word independent is an important term in the world of research. Munden -------------------------------------Edward J. Had I been an investor or research analyst. the financial condition and results of operations of the Company.
Emerging Stock Report Initiates Independent Research Coverage on Topaz Resources.38 -0.Emerging Stock Report.OB 0. 9:15 am EDT CALGARY. 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. a leading provider of sector specific independent investment research. Companies: Topaz Resources. 2010. 2010 (GLOBE NEWSWIRE) -. Inc. July 14. I know it seems crazy that this goes on in the market. 146 .News). Let’s keeping reading and follow TOPAZ to its inevitable end. Alberta. trying to make a buck. today initiated coverage on Topaz Resources. Inc. the innocent investors trying to be treated fairly in the stock market.04 Press Release Source: Emerging Stock Report On Wednesday July 14. I know it is awful to dupe you and I. Inc. Emerging Stock Report is currently offering a complimentary trial subscription to the investment community.that is selling into this newly and deliberately created buying market. (OTCBB:TOPZ . Related Quotes Symbol Price Change TOPZ.
The Company was formed to engage in the business of manufacturing. Emerging Stock Report 147 . To view our research reports on a complimentary trial basis and take advantage of our other services.com/register. or go directly to our registration page at http://emergingstockreport.php.emergingstockreport. (OTCBB:TOPZ .com To get our alerts AHEAD of the market follow us on Twitter: http://twitter. Inc. market commentary and the ESR newsletter. sector specific research. 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.To view the Report in its entirety visit: http://www.emergingstockreport.News) is a development-stage company. wholesaling. realtime news and financial data.com and click on the complimentary trial subscription button on our home page. 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. About Topaz Resources. (OTCBB:TOPZ .com/EmergingStockRe About ESR: Emerging Stock Report is a leading provider of independent investment research for North American companies.News): Topaz Resources. Inc. marketing and sales of germ defense products for children 0 to 10 years of age. Our services include research analysis on emerging growth companies.
for complete risks and disclosures. Please read our report and visit our Web site.has not been compensated by any of the above mentioned companies. and all the promoters are long gone onto their next deal and the next payday.40. http://www. Truly by accident.” Today is July 22. The announcements are done. So basically you guys that bought it are left holding the inevitable bag. but surely not the new shareholders’ pockets. which meant of course that the dump did work. I think this stinks and you should. I have uncovered what appears to me to be a classic “pump and dump.EmergingStockReport. The volume has dried up and with it the stocks liquidity. The naked eyes are in the heads of investors who bought the shares of TOPZ for more than $. As shown earlier.com. They are followed by their brethren and revered as if they are gurus. too. 148 . a few million shares traded and several bucks ended up in someone’s pocket. 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. 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.
Invariably. which of course we know is just a result of not being able to sell at a profit. generally has no influence on the share volume or price. done that. 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. pubco CEOs are under extreme pressure from the usual suspects in their small world to make things happen. why not again? 149 . the contradiction is the investor who loves the technology.Chapter 19: CEOs Historically. but of course difficult to prove and when intended to induce a shareholder to stay and not sell. and not really loyalty at all. Sure. 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. Been there. The list begins with people who bought and paid for their stock and are disappointed they haven’t made any money. prays a lot and has a family who trusts in God and the CEO. investment banker or lawyer for example. such as another officer. Sold him once. access. Leaking out positive news is illegal. Sometimes the CEO is hard to reach. 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. or that they are sitting in a losing position. but until then he holds. The second instigating element of creating pressure on a CEO is the length of time the shareholder has held his shares. Length of hold is oftentimes confused with shareholder loyalty. The potential seller waits for the good news to come out publicly and then may sell. or deal with. the greater the brand of influence placed on the CEO by the shareholder. sound like you? Depending on the size of this position.
My concern is the nature of the transaction and the closing. Wouldn’t you rather hear that the CEO of your favorite holding made a press release announcing the closing of a transaction. the credibility of future announcements is severely reduced. Once the CEO has made one announcement of low import just to make an announcement. To some this is material. liabilities and final results. or break apart during negotiations. only to be incredibly disappointed and shaken by the end result. Not an announcement of something yet to come. and perhaps the stock has a bump in volume and price. not a deal pursuant to due diligence and financing capability. For instance. 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. Don’t we get pissed off when this happens? Raise your hand if this has happened to you. Suppose the inevitable happens. The CEO made the announcement. The public has been alerted to some deal and is now poised to hear about the terms. and more often than not they become timed out without a contract. “Wow. which is that nothing is done. A closing is a material event that should be disclosed. Okay put your hands down and let’s move on. ABCD CEO announces the signing of a Letter of Intent (“LOI”). describing how it was financed. The LOI is signed alright. The LOI signed between ABCD and EFGH gets distributed along with the announcement throughout the various newswires and repackaging services. benefits. although we all know the devil is in the details. who handled the details. it is still good news right? WRONG. but it is really dissected by the same group putting pressure on the CEO to make an 150 . It is a requirement which is scrutinized by everyone from us shareholders to market makers or specialists to analysts and investment bankers.But let’s get down to the nitty gritty. what a great deal for our company!” And although not earnings. the professionals involved and the end result? The details are not my main concern.
announcement. 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. CEOs may begin to grope at straws and simply play the announcement game. Hopefully. Is this an incorrect assumption? Is it that only some CEOs run their pubco business by the book? My 151 . At the same time. By the second or third failed closing of an LOI/MOU. For fun. Sarbanes Oxley tightened the reins on CEO carelessness or regulatory disregard. 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. no earnings and no major positive material events. Many CEOs tend to walk the fine line and live in the gray area. making them personally responsible. the stock will not respond positively and the CEO’s integrity will be diminished dramatically. follow the stock after the first or second time the CEO announces an LOI or an MOU. or worse potentially good news prior to a closing. see how many announced Letters of Intent or Memorandums of Understanding (“MOU”) actually close. Most of them are written in conjunction with an IR firm or business development person and may likely be filled with fluff. giving what is to be perceived as positive or good news when there is no news at all. Just know what to look for in the announcements a CEO issues. Regardless. The whole business of press releases gets sticky in this regulatory guided environment. if you can still smile. you would expect that every CEO gets SEC legal approval before every press release. they found out about the closing of the transaction the same time we found out. compare what we just construed as integrity to what you as a shareholder read from your individual CEOs when they make announcements. 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. bluff or ridiculous stuff.
Always check on Pinksheets. and 8Ks are undoubtedly material in nature and must be compiled.com for guidance in reporting stature of Pink Sheet stocks. but many do not. Pink Sheet companies can comply. 10Qs. and some do comply.opinion is that 10Ks. 152 . approved and released to maintain listing on an exchange.
Typical of a $.. 2010.dglp. Here goes. earnings are non-existent. the CEO figures he is going to bolster his revenues. Calif. reported financial results for the second quarter ended June 30. is a $. a leader in the digital media-sharing and social networking space. IRVINE. compared to $376.400 in second-quarter 2009. (OTCBB: DGLP . DigitalPost Chief Executive Michael Sawtell commented: "The factors that contributed to first-quarter results continued into the second quarter.Chapter 20: Interpretation of Press Releases Let’s start this analysis by stating that the acquiring company. at which time we expect to begin consolidating revenue from their operations. So. but during third and fourth quarter this year we expect to return to our earlier positive trend. market capitalization is micro-cap. Inc.com). the recent launch of Ritz Camera & Image’s interactive video gallery and the Q4 scheduled launch of Lucidiom’s FamilyPhotoZoo. DGLP. In addition. eliminate his losses and become profitable by announcing the acquisition of Rovion.05 stock. revenues are either small or pre-revenue.News) (http://www. Aug. 2010 (GLOBE NEWSWIRE) -DigitalPost Interactive.com family website platform are expected to begin attracting new subscribers and recurring revenue. Our acquisition of Rovion is expected to close by the end of the third-quarter. 153 .05 stock.700. The decline was due to a reduction in the number of recurring subscribers from B2B partnerships and lower professional services provided. Second-quarter revenues were $144. and the company is probably relying on press releases to draw in investors and gain attention. 17.
2010. On Thursday August 5. Inc. 8:30 am EDT IRVINE.DigitalPost Interactive to Acquire Rovion Inc. Calif. Related Quotes Symbol Price Change DGLP. services and sports industries. 2010 (GLOBE NEWSWIRE) -.00 Press Release Source: DigitalPost Interactive Inc... foodrelated. e-commerce.com). (http://www. Inc. 5. Aug. Inventor of InPerson(TM) Virtual Spokesperson Ad Unit Acquisition Adds Online Rich Media Ad Business.com). healthcare. entertainment. a leader in the digital media-sharing and social networking space. retail.rovion. Founded in 2001. today announced the signing of a definitive agreement to acquire Rovion.dglp.News) (http://www.05 0. 154 . Rovion offers a broad range of online advertising products and services to its active client base of more than 1.DigitalPost Interactive (OTCBB:DGLP .000 companies in the automotive. a privately held Boston-based developer of the innovative InPerson(TM) virtual spokesperson ad unit. Substantial New Revenue Companies: o DigitalPost Interactive.OB 0.
Rovion InPerson(TM) technology has also been used to represent celebrity spokespeople such as Megan Fox. the $40 billion online industry average click-through-rate (CTR) for traditional display or banner ads ranges from 0. Toyota. delivery and reporting of rich media ads as a turnkey solution for ad agencies. Our goal as DigitalPost/Rovion is to 155 . DigitalPost Chief Executive. and Summit Entertainment. so here is the size of the industry propaganda. Food Network. Saatchi & Saatchi. Ford. Online rich media advertising is growing rapidly. potential expense ratio reductions.1%.) In contrast.01% to 0. Matt Lauer and Lamar Odom. with most estimates projecting double-digit annual revenue growth through 2012. The creation. Tiger Woods. While.0% average. Walter Thompson. Rovion InPerson(TM) ads boast an average CTR of 5.0% over more than five years of verified data. Technology to incorporate online video into ads that reach millions of highly targeted users through the Web’s largest publishers. commented: "This acquisition significantly increases our base of annual revenues and enhances our growth potential as well. Michael Sawtell.Rovion’s client list includes industry-leading brands such as Chevrolet. and J. The acquisition of Rovion as an additional business unit is expected to provide DigitalPost the following benefits: Substantial additional revenue. Lebron James. The ability to offer businesses high performance ad units with a 5% Click-Through average. Sony Pictures. (OOPS! No sales numbers for Rovion. and major advertising agencies such as Digitas. and rich media claims a 1.
remarked. Rovion Chief Executive. The stock didn’t move an inch and the volume was a non-event.make InPerson video technology available to businesses of all sizes in all markets." (By how much will the revenues be increased? CEO makes a bullish statement with no backup. He thinks he is going to be in the chips and his shares are worth a fortune." (This guy has no public company experience and no money. He’s doing this deal for shares only. (This is where shareholders have to take a deep breath.) Adding Rovion gives DigitalPost a second very viable business unit. (Again. Has he closed transactions in the past? Does the company have the cash to support the acquisition?) Rovion’s operations. We look forward to working together to create innovative technology that significantly changes the way businesses advertise on the web. Where’s the money to pay for R&D and marketing?) Obviously the market couldn’t care less about this press release. DigitalPost will acquire Rovion for restricted common stock. 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. while the DigitalPost corporate headquarters will remain in Irvine.) Under terms of the agreement. instant additional revenue. Brian Goss. creating a much bigger footprint on the Web. the $40 billion. What 156 . "Everyone at Rovion is excited to join the DigitalPost team. management and technology team would remain in Boston. The synergies that exist between our respective platforms will deliver immediate and significant benefit to the expanded organization. (Restricted common stock? How many restricted shares of common stock? How many millions of shares?) The acquisition is expected to close within 30 days.
TIE Technologies. This ain’t new information. including the OilDam (TM).) "Scientists believe that up to 79% of the spill. The next press release for me to analyze is another micro-cap company. and TTCS Pink Sheets. still remain in the Gulf. Inc. to protect both low energy water flow coastlines and higher energy areas. I am laying down important considerations from this press release. In fact.happens 30 days from the announcement is something to watch. who operates a portfolio of Homeland Security assets focused on environmental disaster remediation and security driven by proprietary smart logistics.News). "Oil from the Deepwater Horizon spill formed an underwater plume of hydrocarbons the size of Manhattan." (We know the danger. I interviewed him on SNNLive at a financial conference. "We are planning to 157 ." Edward Andercheck. Only trouble here is that although the company may be prepared to immediately implement its plan. scientists said Thursday. Thirty days becomes 90 days and where is the money coming from to pay the lawyers? I am not picking on DGLP. announced today that it has completed engineering and is prepared to immediately implement its plan to roll out a multi part oil protection system.) According to an article appearing in the Wall Street Journal Friday August 20th. (Pink Sheets: TTCS . Chairman and CEO of TIE Technologies stated. I happen to know the CEO. TIE Technologies. it hasn’t found anybody to pay for it. (I have a soft spot in my heart for companies trying to make money saving the environment. tens of millions of gallons of crude oil. raising fears of a lingering cloud of trace chemicals in the Gulf with an unknown long-term impact. telemetrics and advanced IT solutions. 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.
they are not getting anywhere. with other threatened locations to follow..08/17/10) . and no comment or quote from MMB.) ABOUT TIE TECHNOLOGIES." For additional information.Clean Coal Technologies. TIE TeleMetric’s Services and Acumen architecture are designed to provide real time actionable intelligence to help team’s secure critical assets. This next press release is an example of getting mileage from a press release. from large logistical challenges. CCTI (Pinksheets:CCTC . Inc.deliver and install the first sections of our solution to protect Weeks Bay. I suppose. but unless they are on the BP radar. Alabama within the next two weeks. please visitwww. TIE is actively evolving smart solutions and proprietary critical path technologies for the environmental and security needs of government and institutional customers. TIE Technologies is traded on Pink Sheets under the symbol "TTCS. On top of that. TIE Technologies is a science and technology driven systems integration. there are no names attached. very weary of this kind of come-on. Strange. FL--(Marketwire . I couldn’t find a website for MMB Global Advisors. INC. All this company did was hire a consultant.com." (Nice try. TIE’s Smart Technology Solutions strive to provide better ways of doing things in every market it touches. security. announced today that it has signed a consulting agreement with MMB Global Advisors ("MMB").tietechnologies. smart logistics and telemetrics company. a clean energy technology company.News). CORAL SPRINGS. but I sure hope we have learned something from ole’ Shelly boy by now and that we are very. down to small business needs and mobile smart phone applications. 158 .
etc. and develop new global client relationships predicated on the commercialization of CCTI’s products and technologies.37 seconds). "Our company is very pleased to have this consulting agreement with MMB. capital market and investment management with blue-chip corporations in the world’s energy sectors. China. have considerable expertise and relationships in the energy. 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. says. coupled with increasing international environmental concerns.790 results (0. trading. 159 .MMB will provide various strategic consulting services. corporate finance. mergers and acquisitions." After reading all this. MMB’s associates based in New Delhi. let’s do a Google search. and the financial markets of New York. including consulting. including redefining CCTI’s global corporate structure. and re-aligning the Company to attract key personnel while facilitating the development of strategic partnerships and alliances. Hong Kong. This hiring has made its way through a gigantic series of promotional websites and tout email blast sites. which when combined with MMB’s resources. London and Hong Kong. mining and finance sectors and have a broad range of applicable skills. which I am confident will help CCTI’s efforts in commercializing our technology within India. We get about 2. Given the strategic importance of coal as the primary fuel source for Asia’s growing energy needs. we believe CCTI’s technology provides a compelling solution. CCTI Chief Executive Officer and member of the Board of Directors of the Company. and New York. This is the mileage. Beijing. Robin Eves. and other targeted countries.
17 Aug 2010 07:58:00 GMT. Check Out Stock Marketing Inc Today!! morewealthlesswork.msnbc.com/company/global+consultants+inc. ..Cached 3.. 2010 .Latest company news & analysis.com/5181/mmb-global-advisors-cctc/ ..Bing News. recent events www.Cached Show more results from morewealthlesswork. Clean Coal Technologies Signs Strategic Consulting Agreement .com/news-search-Global-Advisors. Tue.com ... ..10 related articles » 2..html . that it has signed a consulting agreement with MMB Global Advisors("MMB").bnet.Cached 160 .6 hours ago Clean Coal Technologies (PINK: CCTC) (CCTI) recently inked a deal with MMB Global Advisors. 2010.Cached 4. mmb global advisors | More Wealth Less Work Aug 17. 17 Aug 2010 17:24:00 GMT.. . morewealthlesswork... in which MMB will provide various strategic consulting services .. Tue. x1news. mmb global advisors cctc | More Wealth Less Work Aug 17. Beacon Equity Research (blog) . mmb global advisors .1.com 5. News for MMB Global Advisors Hot Penny Stock Highlight . X1 News Global-Advisors Aug 17.com/5779/mmb-global-advisors-19/ .. Global Consultants Inc.Company News & Executive Profiles | BNET Global Consultants Inc. mmb global advisors cctc ..Bing News. . 2010 .
CCTI PINKSHEETS./product-compint-0000308098-page..htm . Inc... Mar 29. Hot Penny Stock Alert – Clean Coal Technologies | MicroStockProfit Aug 23. announced today that it has signed a consulting agreement with MMB Global Advisors www.. (OTC PK: CCTC) today announced that it has entered into a consulting contract with MMB Global Advisors (MMB). a clean energy technology company..html Cached . Clean Coal Technologies (PINK: CCTC) (CCTI) recently inked a deal with MMB Global Advisors. Clean Coal Technologies Signs Strategic Consulting Agreement Aug 17. Stock Alerts Aug 23. Hot Penny Stock Highlight | Beacon Equity: Penny Stocks.. 161 . 2010 .earthtimes. 2010./strategic-consulting-agreement. announced today that it has signed a consulting agreement with MMB Global Advisors www.. SC | Company Profile... 2010..org/... in which MMB will provide various strategic .Similar 10.1424724.. Aug 17.beaconequity. Research .marketwire.com/. Clean Coal Technologies Signs Strategic Consulting Agreement .consulting agreement with MMB Global Advisors goliath. Clean Coal Technologies. www.html Cached 7. Springs Global US Inc.. 2010 .com/hot-penny-stock-highlight-2010-08-23/ 9.....6..../Clean-Coal-Technologies-Signs-StrategicConsulting-Agreement-1305421..Cached 8. 2010 .. Inc. Clean Coal Technologies.ecnext.. | Fort Mill.com/..
. August 17th 2010 10 posts . Obviously. 12. CCTC Intraday Thread for Tuesday. announced today that it has signed a consulting agreement with MMB Global Advisors ("MMB")./clean-coal-technologies-signs-strategicconsulting-agreement/ .790 results (0...22 a share. a clean energy technology company.www..Cached 13.com/. a clean energy technology company. announced today that it has signed a consulting agreement with MMB Global Advisors www... it seems really undervalued 162 .9 authors .com/.ecodirt. .. Global Online Communities (GOC) . but still nothing has happened! Here’s an example of a micro-cap company that has written a nearperfect press release.Last post: 5 days ago .Clean Coal Technologies Signs Strategic Consulting Agreement Aug 17.... 2010 .. 2010. earnings growth and really bright management. Global Online Community .htm .microstockprofit.com/usubmit/2010/08/17/4959544..tmcnet. Without getting into the due diligence of this company at $./hot-penny-stock-alert-clean-coaltechnologies/ 11... they have growing revenues..Clean Coal Technologies Signs Strategic Consulting Agreement Aug 17. that it has signed a consulting agreement with MMB Global Advisors … www.Cached Page 2 of about 2.53 seconds) CCTC announced MMB and it’s all over the email blast and blog promotion circuit..
TUALATIN.805 in the first quarter 2010. innovative technologies along with its wholly owned subsidiaries.716.--(BUSINESS WIRE)--Waytronx. (Wow. Ore. up from $7.(OTCBB:WYNX News). earnings growth. 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%. especially in comparison to some of the other somewhat inflated stocks. Waytronx’s president and CEO. its Japanese subsidiary. These numbers represent a 40% quarter-to-quarter increase in revenues. a provider of electromechanical components and CUI-Japan. development.) As explained by William Clough. 2010. Significantly.668. and Comex Electronics. (Fantastic. and commercialization of new. SG&A reduced. 2010. today announced that it posted results for the second quarter ended June 30.to me. Inc..479. CUI Inc. Waytronx produced consolidated revenues of $10. 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%. “We are especially encouraged by these numbers and the trend in growth 163 .494. For the three months ended June 30. what a beautiful three lines!) This revenue growth and operating profit was accomplished while the company’s Selling. a partially owned (49%) Japanese subsidiary. a platform company dedicated to the acquisition. General. The company maintained 37% gross margins and continued to focus on operational efficiencies.227 and EBITDA of $6.
“This growth in revenues and profitability and the retirement of $9.000 in debt in the last five months are all part of our larger. along with restructuring the company and expanding our Representative network. lowering our SG&A as a percentage of revenues. they also retired $9 M in debt!) 164 . He should be commended. 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.” continued Clough. focus on operational efficiencies.” (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.and profitability.” (Just when you thought you were impressed with management.” (No hype.” Clough stated. and the GasPT2 natural gas metering device – all of which are expected to be in the market later this year. while. “These results and this quarter-to-quarter year-over-year growth rate and profitability again demonstrate the effectiveness of our new technology/licensing model. “These strategic improvements have allowed us to get into the design cycle much earlier and much more effectively. and continue to restructure and/or retire corporate debt.) “These numbers demonstrate the effectiveness of our calculated decision to build out infrastructure and engineering support. long-term plans to expand our product line.200.
(Pinksheets:WDMG . WinSonic can privately place its common shares as strategic opportunities arise and equity financing is attractive to the Company. Roswell has committed to purchase.08/23/10) . Now that’s a deal! It’s not the intent to close. That’s meaningful. The Agreement does not prohibit the Company from raising additional 165 . You know how much I love “promise less and deliver more. a facilities-based digital media company.” concluded Clough. they are actually completed. they are not announcing an LOI or an MOU. up to an aggregate of $5 million.“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.) I realize Waytronix has revenues and growth and acquisitions and they understate. (I don’t know about you. meaningful press release. The Equity Funding Facility is a cost effective and flexible financing instrument that places WinSonic in control of how and when it raises equity.News) (www. but I love this guy. announced today the completion of a $5M Equity Funding Facility with Alpharetta. no mirrors. GA--(Marketwire . Georgia based Roswell Capital Partners. shares of the Company’s common stock for cash consideration. just an announcement of the completion of a $5 million equity deal. profitability. with both sides commenting.winsonic. No smoke. Ltd. Here is another cool announcement.net). and increased shareholder value. whom I know personally.WinSonic Digital Media Group. is uniquely qualified and confident and sets a great example to be followed by other micro-cap companies. Let’s close this chapter with this real.” Bill. ATLANTA. over a period of two years.
its members have served in the Private Equity Markets as the Principal or Investment Banker for over 125 public companies." said Winston Johnson. other than financings that duplicate the terms and structure to this agreement. 166 .debt or equity financings. Since 1994. Paul Gorski. added." Roswell Capital Partners. Ltd. Chairman and CEO of WinSonic Digital Media Group. "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. "WinSonic is excited to work closely with Roswell Capital on this financing and looks forward to exploring additional opportunities with previous financing partners. Senior Investment Officer at Roswell. LLC is a fund management company focused on private equity investments in small-cap publicly traded securities.
In fact as an investor. in time for the 2010 proxy season. vacation time and pay.Chapter 21: Management Compensation. and PIKS (payments in kind) which could be escrow for. the rules require a proxy statement description of board supervision of the corporate risk function. as an example. When CEOs begin to discuss their compensation and the rest of management’s compensation. the rules recognize that company executives are responsible for day-to-day risk management and instead focus only on the board’s oversight role. In response to a perceived failure of risk management at some financial firms. Importantly. Late last year. 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. This question of compensation goes way beyond salary. Cash and Stock Disclosure This could easily be the most sensitive chapter in this book. in this day and age. as they became effective on February 28. these new rules were designed with you in mind. 2010. options and healthcare. Boards will need to address these new disclosure requirements promptly. 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. Enough shareholder rip-offs have occurred that once and for all the regulators have justifiably stepped in to regulate management compensation. options plans. It also includes cash and stock bonuses. the SEC adopted final rules that broaden the scope of required corporate governance and executive compensation disclosures in public company proxy statements. say. 167 . travel perks. a home purchase. 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.
Over the past decade. The new rules also expand required disclosures about directors and director nominees. and justify. legal and management time. 168 . mandating an annual discussion of the specific experiences and skills relevant to service as a director. Compliance with this requirement should not be difficult. 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. 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. and whether and why a company has a lead independent director. and accordingly these discussions will in many cases be the focal point for developing disclosures in response to the new mandate. You may have heard that the costs connected to being a public company are outrageous. Increased governance is a double-edged sword. including whether and why a company has chosen to combine or separate the CEO and Chairman positions. Although it truly increases the transparency. it adds enormous extra costs in monitoring. the rules impose longer look-back periods for disclosure of other directorships (5 years) and of legal proceedings (10 years).Audit committees of NYSE-listed companies have for some time been required to discuss policies with respect to risk oversight. with an expansion of the types of disclosable legal proceedings. in their proxy statements their leadership structure. it’s these SARBOX-related changes that have increased the costs of doing business. Well. In addition. Companies will now be required to describe. some companies have separated the Chairman and CEO positions while other companies have named a lead director. responsibility and accountability of management and directors.
This incredible creativity and productivity usually does produce loopholes that you can drive a truck through. That’s why in most cases. the past saw many CEOs and directors flat out steal from the coffers. government oversight usually goes overboard to prove to the electorate that their elected officials are doing their level best to protect their constituents. I tell you. fines and in some cases. the system breeds contempt and temptation in both lawyers and management as they scheme to figure out ways around the new rules and laws. stints in prison. Good luck. 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. or just taken for each or some of the rounds of financing that have come in? Skin is critical to big investors. As usual. an executive from a big board firm doesn’t make it in a micro-cap company.In a nutshell. and so on and so forth. and other perks with our money? Skin in the game. 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. He doesn’t fit into the culture and expects to play golf and belong to the country club at the company’s expense. No skin means the CEO is just a taker. so some new rules needed to be installed. We investors and shareholders want our public company CEOs to have “skin in the game. which tends to foster the creation of a new bill or rule to fix it. Let’s cut to the chase. options.” Why should they be granted all kinds of bonuses. Let’s remember to ask that key question of every CEO we speak with: Do you have skin in the game? 169 . and as soon as that happens it gets tested. Unfortunately. Skin in the game represents dedication and devotion and the right attitude in building a company.
taipanpublishinggroup.edu/perl/webwn In the USA. But to totally confuse you first.wikipedia. wordnetweb. 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. 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.org/wiki/Penny_stock A stock that trades at a relatively low price and market capitalization.com/investment-glossary. Companies with a market capitalization of less than $50 million are typically referred to as nano-cap stocks.princeton. Pink Sheets. usually outside of the major market exchanges. Pink OTCQX. Pink OTCQB.org/wiki/Micro-cap_stock 170 . en.wikipedia. A stock selling for less than $1/share.Chapter 22: Penny Stocks. NASDAQ.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. www. Micro-Caps This chapter is here to provide you with some initial definitions. en.
Regardless of where the company starts. great choices. cooperative professionals. 171 . Job one is to get audited financials for moving up the ladder. non-reporting penny stocks are the bottom of the barrel. Here’s the ladder! The Ladder NYSE/Amex/ Euronex . Reaching financial projections are a must! If you ever sat in a meeting or on a conference call with a good professional investment banker. Pink Sheets listed that publicly-traded. a management team that can be trusted. Moving up from this position requires an incredible amount of skill.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. and generally to be in an important sector that is desirable to investors. serious funding.Any good investment banker and CEO would want to move up the ladder. good management is looking upwards and striving to reach the highest market cap possible. a good market. the higher the financial requirement to be listed. you would hear all about the company moving up the ladder.
Recently people have added ‘micro-cap’ and ‘nano-cap.’ People have rules of thumb to determine category from market capitalization. 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 .Categorization of companies by capitalization Traditionally. population change. companies are divided into large-cap. and smallcap. mid-cap. $1 billion was a large market cap in 1950 but it is not very large now). and they may be different for different countries. and overall market valuation (for example. These need to be adjusted over time due to inflation.
People in the money world know all about these legal filings and refer to them all the time. Form 5 and the Manning Rule These are important filings to know. just refer to when needed. 14D. Form 3. 10-K 10-KSB (Annual Financials) (Annual Financials . Form 4.Chapter 23: Filings: Fully Reporting Companies 13D.com/help/sec_guide04-03-02. 10K.Concerning rule 16) 10-Q 10-QSB 8-K 10-C (Quarterly Financials) (Quarterly Financials . and laws. 144. 10Q. Don’t memorize. 15c211. financial advisor) is devoted to these various filings.Small Business) (Current Event) (Securities quote on NASDAQ) Proxy Statements SCD 13-D (Acquisition Statement) 173 . 8K.thomsonib. an entire section of the Series 7 exam to become a registered representative (stockbroker. In fact.htm The following list of financial documents is required knowledge.Small Business) 10-K405 (Annual Financials . For further information go to: http://research. rules. Thank you Wikipedia for the great definitions you will find here.
These filings may be a precursor to hostile takeovers. including. 13D filings allow the investing public to see who a public company’s large shareholders are and. by anyone who acquires beneficial ownership of 5% or more of any class of publicly-traded securities in a public company. company breakups. and other "change of control" events. the acquisition or disposition of 1% of the securities that are the subject of the filing. non-issuer) SC 14D-9 (Tender Offer . A filer must promptly update its Schedule 13D filing to reflect any material change in the facts disclosed. why they have an interest in the company. 174 .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. among other things. perhaps more importantly.SC 14D-1 (Tender Offer.
For example. 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).The Manning Rule prohibits an NASD member firm from placing the firm’s interest before/above the financial interests of a client. The rule is applicable both in normal trading hours and in the extended hours trading sessions. its securities. 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. F-1) has been filed within the last 90 days. and regulations are not completely understood by registered people on the Street. its business. In fact. I know several 175 . if: 1) a Securities Act registration statement (F-6. Many of these rules. the firm cannot ignore that order. and 4) the broker or dealer has on record information relating to the issuer. financial statements of the issuer and certain other data must also be on record. under SEC Rule 15C211 a U.S. According to Rule 15C211. The information requirement is satisfied. 3) the issuer is complying with Rule 12g3-2(b).The Manning Rule is a finance term based on the NASD regulation NASD IM-2110-2. 2) the issuer is complying with filing requirements and has in its records its most recent annual report. products and facilities. 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. laws. The firm cannot trade for their account using a price that would satisfy the customer’s limit order without executing the customer limit order. in simple terms.
That is a good upper hand position to be in.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. 176 . but by reading and understanding them you may actually be more knowledgeable than others.
revoked. I’ll leave you with a compelling article. most states required a licensing fee. each FINRA member is required to have the same licenses as I once held.gov is your 911 website. However. which meant that each broker must be registered with the NASD. and must possess a Series 7 license as well as a Series 63. 177 .finra.org/Investors/ This webpage is a good place to gain understanding of your rights under FINRA.Chapter 24: FINRA. including market-making and buying and selling. which was the 50 state registration. rules and regulations. or limited by FINRA. a broker cannot work as a broker. and an understanding of how the market works. Rule FD. FINRA was the NASD (National Association of Securities Dealers). Each firm was a member and each broker was an employee of the member. Without these licenses. The Securities and Exchange Commission oversaw the NASD. The SEC. It can be suspended. http://www. courtesy of news.com. options. The licenses required test taking and included a cross section of all the information required of a broker including margin. FINRA did not exist. Sarbanes Oxley. which required broker dealers to be members. This is your 411 website. SEC. Even today.GOV When I was a stockbroker during the 1980’s and 1990’s. which was charged to the broker. that discusses FINRA’s role in OTCBB trading.
publicly traded equity securities. 2009 that it was offering the assets listed above for sale. a number of new bidders have stepped forward and indicated an interest in submitting bids for the OTCBB. FINRA would continue to be the primary regulator of all over-the-counter trading activity. FINRA is proposing to divest itself of the ownership and operation of the OTCBB as an OTC inter-dealer quote system.com content. certain OTCBB. and the OTCBB trademark. the Financial Industry Regulatory Authority (FINRA) owns and operates certain quote and trade reporting facilities.com Web site URL and reservation rights. 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.Over-the-Counter Bulletin Board (OTCBB) Sale Re-Opening Announcement news. including the Over-the-Counter Bulletin Board (OTCBB). The OTCBB is an inter-dealer quotation system on which FINRA-regulated broker-dealers may post OTC quotations in unlisted equity securities. FINRA entered into good faith negotiations with the one bidder but has not been able to reach final terms. FINRA first announced on September 14th. FINRA is reopening the bidding process at this time and invites parties interested 178 . including: the OTCBB.com As part of its market transparency role. FINRA intends to sell to an independent third party certain FINRA assets. To achieve this. In the interim. As part of these changes. As a result.
2010.in the purchase of certain OTCBB sale assets to contact us. Interested parties should contact FINRA for additional information concerning the sale assets and bid form and content requirements. and administering the largest dispute resolution forum for investors and firms. For more information. FINRA Transparency Services Department.finra. writing and enforcing rules and the federal securities laws.org. About FINRA FINRA is the largest independent regulator for all securities firms doing business in the United States. please visit www. The War between FINRA (OTCBB) and OTC Pink Sheets 179 . Interested parties should contact: Christopher B. No FINRA contractual obligation whatsoever shall arise from the publication of this announcement. to change or limit the assets for sale listed above and/or to cancel the OTCBB sale process entirely. FINRA touches virtually every aspect of the securities business—from registering and educating all industry participants to examining securities firms. 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. informing and educating the investing public. FINRA reserves the right to accept or reject any and all requests to engage in discussions with third parties. providing trade reporting and other industry utilities. All new or modified bids must be submitted by July 30. FINRA intends to re-open the bidding on the sale assets until July 30. Stone. 2010.
FINRA has been in talks to sell the Bulletin Board assets for some time with Pink OTC Markets. "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. The number of quotes on the Bulletin Board has declined to about 8. Terms of the deal weren’t disclosed.000 a day.Rodman & Renshaw Agrees to Buy Bulletin Board Assets from FINRA Posted September 14. compared with about 54. reached a preliminary agreement to acquire assets related to the OTC Bulletin Board from the Financial Industry Regulatory Authority. 180 . which provides its own quotation system for over-the-counter stocks. according to Pink OTC. the most active placement agent in the PIPE market. New York-based Rodman said it expects the transaction to close in the first quarter of next year.000 a day on Pink OTC Markets’ listings. 2010 10:57AM PST Rodman & Renshaw Capital Group." Rodman chief executive Edward Rubin said in a statement.
This method of financing companies is not new but has changed over the years into an assortment of products. The company announces publicly or you find out from your broker or in some way 181 . being an accredited investor means you have more than $1M in assets. Thanks to the imploding of the real estate market. online. using an IRA or 401K. You are buying either common shares or preferred shares or warrants or options. Rights Offerings. 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. In most states. stocks. 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. This chapter is about how to be an investor in private equity of either a private or a public company. offering investors various exit strategies and different ways to earn a profit. First of all. Figure more than a million of cash. You are an investor in AABB and not a trader. most of these private investments require you to be an accredited investor. The outside the box that I am referring to has to do with public companies raising money privately.Chapter 25: Private Placement. you can have some fun with private placements. which for the most part you can follow in the newspapers or on a financial website. PIPES. or even a credit union. You leave it to creative investment bankers. For more information on you being an accredited investor. Private companies also raise money privately and then go public. and in others more than $2M. Assuming you are an accredited investor. and other liquid assets give you the right to be an accredited investor. you accreditation as an investor can no longer include your home in the calculation.00 per share in your portfolio. who love financial products almost as much as they love using acronyms to describe them. ask your broker or banker with knowledge within your state of residence. Imagine owning AABB at $2.
It works like this: If you own AABB trading at $2. PIPES are P(private) I(investment) P(public) E(equity). So you can either buy it at $2. The terms are listed in a private placement memorandum (“PPM”): cost. As the I(initial) P(public) O(offering) market shrank and new offerings were few and far between. Rights offerings.00 per share with a six month old holding period. however. over the years the holding period of private shares has been shortened. it is good to read what management’s plans are. Private placements are just that. For instance. This private stock cannot be sold for the term of at least six months.that AABB is raising money privately. use of proceeds. subscription documents and almost a full business plan and executive summary. There are numerous rules restricting the sale of private shares. which after six months is removed and the stock is registered with the transfer agent. the company can create a rights 182 .00 per share.00 and trade it freely. or buy private shares as an accredited investor for $1. Because the risk is high and the holding period is at least six months. PIPES have been used for many years by investment bankers to fund rounds of financing for public companies. information and build syndicates. IPO went by the wayside as the market resisted new issues. The private shares come with an actual legend stamped on the certificate. terms. the private stock could be $1. Even if you do not invest. So that’s the deal. these private financings grew to billions of dollars in funding. if AABB is $2. conversion. are incredibly inexpensive to the issuer and beneficial to shareholders.50 per share or even $1.00 depending on the interest in the deal.00 public. private stock. turning it into free trading stock with no difference to the existing trading shares. but investors adopted the idea of private placements readily. the price is going to be below the share price of the publicly trading stock. PIPES were so popular that conferences were created for investment bankers to attend and mingle with their industry colleagues to share ideas. rarely used these days. Buy private shares at a discount and hold them for six months.
00 per share. all shareholders of record have the opportunity to exercise warrants or rights. That’s called having skin in the game.50.50. For instance: AABB is a $2. Warrants are convertible into common stock.00 stock and the warrant is exercisable at $2. Warrants are similar to rights in that they are established with an exercise price. even to investment bankers. Stockholders would be much more prone to exercise a $1. Warrants are used less and less but are also an incredible way to benefit both investors and shareholders. Remember that I mentioned this in an earlier chapter? 183 .50 for a share when they could buy it in the open market for $2. Stockholders are not prone to spend $2. Warrants have an exercise price which allows an investor to convert a warrant into a share of common stock. a win-win situation for the company and the investor. Companies raise millions upon millions by utilizing warrants and rights in popular companies with sound liquidity. I have seen insiders exercise warrants and rights. or more warrants. The key to these transactions is that the money goes directly to the issuers.00. but never raised. exercising the right gives the shareholder/investor a share at $1.00. including insiders and management. thus putting money into their company.00.00 warrant while the free trading shares are at $2.00 and the right is $1. The issuer has the right to lower the exercise price say to $1.offering.50 and the money goes to the company rather than to another selling shareholder. Oh by the way. A little known fact. is that exercise prices can be lowered. thereby giving every shareholder of record a “right” to buy another share at a fixed price. For instance: AABB is $2. I LOVE rights offerings. So instead of buying more shares of AABB at $2. or both.
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. The leverage is very attractive. 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. privately. or buying stock directly from the company. you have to look at investing in private stock whether in a public or private company. you could have your checking account debited on a regular basis to make investments in the plan. You can also have the cash dividends you receive from the company automatically reinvested into more shares through a dividend reinvestment plan (“DRIP”). DSPs usually will not allow you to buy or sell your securities at a specific market price or at a specific time. on a daily.Let’s talk about Direct Investment Plans. you may be able to have your shares transferred to your broker to have them sold. or monthly basis — and at an average market price. Depending on the plan. without having to use or pay commissions to a broker. Some plans require a minimum amount of investment or require you to maintain specific minimums in your account. You may be able to buy stock by investing a specific dollar amount rather than having to pay for an entire share. the company will purchase or sell shares for the plan at established times — for example. But you may have to pay a fee for using the plan’s services. In that case. weekly. 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. Many companies allow you to buy or sell shares directly through a direct stock plan (“DSP”). I look at it 184 . but the plan may charge you a fee to do so. As an investor. Rather.
drip. so let’s just smile and get through this. 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. we know Drip or DRP isn’t a very good name. 185 . but you’re also "dripping" money into your holdings every month.. but for now it gets the point across: You’re reinvesting dividends. hopefully in this lifetime.like this: If I am interested in a particular company and I intend to be a long term investor.. Drip... Another easy user friendly investment device is called a Dividend Reinvestment Plan. Wishful thinking is a chronic diversion of the OTC market. I want to touch on it but if you don’t own stocks that pay dividends skip this section of the chapter. and usually on a monthly basis if desired. a reinvestment plan. why not find the best way to invest? For sure owning a convertible into stock commodity will result in heightened risk. thus the name "Dividend Reinvestment Plan. a few of those smelly doggies in your portfolio will clean up their act and take off. but also better leverage. The plans also reinvest all or partial dividends paid (it’s up to the shareholder) into more stock.. drip. It is exactly what it sounds like." Now. investing for dummies. I thought I would include it because someday.
although many of them are in the thousands of dollars per quarter range. 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." Advantages of Drips: Drips give a cost effective way for investors to put stock dividends to a better use -. not new shares. These are called Optional Cash Purchase Plans (“OCPs”). As a result. These discounts can range anywhere from one to ten percent. Many Optional Cash Purchase Plans have very low minimum investments. Most companies allow investors to purchase additional shares through a Dividend Reinvestment Plan for nominal fees -. allowing you to purchase stock regardless of how much money you have or have left. The amounts to participate can be as low as $10. You can open an account with as little as one share of stock.or often no fee at all. Let’s look at some other "perks. There are limits on almost all of these plans. the most obvious of which being: You don’t need a large amount of money to start.purchasing more shares of the company rather than simply spending the money or having it sit in a money-market account. Over 100 companies have DRPs that allow investors to purchase stock at a discount to the current market price. Almost all DRPs allow dividends to be reinvested at no fee. Some companies. however. investors adopt a long-term horizon and often 186 . only discount shares bought with dividends. DRIPs "force" investors to buy stock on a regular basis and hold on to that stock.The advantages of such plans are numerous.
Brokerage-run: Some brokerages will allow shareholders to reinvest dividends at no cost. although this is not always the case. Some companies go as far as to offer Individual Retirement plans (“IRAs”) along with the Drip program. Transfer agents are financial institutions that basically run DRIP programs for a number of companies.invest small amounts of money on a regular basis . these brokerage-run plans strictly pertain to dividends only and do not allow any optional cash purchases like an OCP would. In the long-term.P. 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. Because they can do this for a lot of companies. Drips are a way to begin investing with a very small amount of money. Some of the larger transfer agents include Boston EquiServe.. and to keep investing monthly (or as frequently as you can afford) in small or large amounts. These very often are the companies that allow you to buy directly through them without having to own a single share. Three Kinds of Drips Company-run: Many companies take it upon themselves to run their own Drips. The company-run Drips are simply administered from corporate headquarters. it’s a great and "patient" 187 . However. many companies have turned to third-parties called "transfer agents" as a way to make things simpler for themselves. Transfer agent-run: As management of Drips has become more cumbersome. First Chigago Trust and Chase Mellon. L. normally as part of the overall shareholder relations effort.money that they usually don’t even miss. while avoiding brokerage commissions and reinvesting all dividends. too. even if the company in question does not have a formal Drip plan itself. and optional cash purchases are a big part of what makes Drip plans so attractive.
“No. or you may have just opened yourself up to some serious potential accusations. one drip to another. Once you get past the acronym it does make sense if that’s your desire. “Oh. Well honey I have decided to invest in Drips. and you’re investing. no you don’t understand. ideally. 188 . in great companies that you can’t foresee selling at any time.” and so on. Drips are tough to explain to your girlfriend. Drip is an acronym for Direct Reinvestment Plan. as you have dollar-cost averaging working for you as well.way to grow money over time.” This one you just might want to keep to yourself. You better have a wonderful personality.
jail time. So if you turn yourself in. It is precisely at this moment when a good SEC attorney needs to be called. a line so fine that one misstep here or there and they are over the line. expect more like disgorgement. but don’t bet on that. Realizing that you are standing in deep doo da is no pleasure. loss of licenses. There is no turning back unless you turn yourself in. which is a whole story in itself. So many Wall Streeters walk the fine gray line every day. he realizes he has made a mistake and he decides to turn around. we cannot leave out the biggest crook of all time: Bernie Madoff. The moral of the story is that he still robbed the bank and a penalty must be administered. both licenses to kill! Beyond Michael Milken & Ivan Boesky. It can happen to anyone.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. family disgrace. keeping it is a completely different and difficult matter. From the inside looking out. He goes back to the bank. 189 . and your own dog may bite you in the ass. Let’s stop for a short story. Over the line means a law or rule has been broken. a felony conviction(s). apologizes and is arrested for bank robbery. good bye wifey. being a part of fraud like the ones listed below may have begun quite innocently. including yours truly. When he is about five blocks away in his escape. press crucifixion. and apologize. returns the money. return the money. I do not want to glorify these sons of bitches. Making money on Wall Street can be simple. total and thorough embarrassment. 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. but stuff happens. you can hope and pray for a slap on the wrist at best.
Disappointment and letdowns lead to over-reactions and frustration. telephone numbers. and every single press release you can find. If the CEO is trying hard and is telling the truth. they become jilted lovers of the stock and seek revenge. Too many investors blame everyone else for their own stupidity. CEOs have a tendency to exaggerate things like earnings. 8Ks. I hope you are not one of those. If what you find is incredibly suspicious and you are losing money in the investment. I often use the expression “follow the money. 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. You may even have to record conversations. and financings. Get the truth. you will have to become a good detective and record keeper. If the guy blatantly lied and you can prove it. and they possess the gift of sounding incredibly believable as they tell you exactly what you want to hear. or his naive belief in a CEO’s every word when the words were only partly true. Read 10Ks.” This is smart advice. 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.SEC.You as an investor must keep your both eyes on the ball. chances are you won’t win in arbitration anyway. financial conferences. if something jumps off the page at you. call the press. 10Qs. 190 . Never lose sight of the money. inquire about it. but chances are it could be ugly and you will feel like crap if the uncovered information buries your investment. You should never accept something you do not understand in a financial statement (or misstatement) and when reading a press release. contracts. A little knowledge can be dangerous in the hands of a scorned investor who has taken a loss way too personally. www. There are emails. You may love what you find out. notify regulators.gov. The guys to watch are the ones controlling the money. go after his ass with a vengeance. Sources of information are available starting with the company directory. but make sure you do your homework. hire an attorney. IR people and PR people.
He created more than 10. Barry 191 . Some of these cases are truly amazing." Who among us hasn’t "accidentally" taken two $500 bills from the Monopoly bank. eventually reaching a market capitalization of more than $200 million.Barry Minkow.Editor’s Note: The information included here is accurate as of September. With that in mind." Minkow appeared to be building a multi-million dollar corporation. Inc. we put faith in the investing world. Just as we trust our friends. Amazingly. Minkow shelled out more than $4 million to lease and renovate an office building in San Diego. the owner of ZZZZ Best.. these shareholders had no way of knowing what was really happening as they were being tricked into investing. but it also requires us to make a lot of assumptions. 1986 ." and "lie. ZZZZ Best Inc. Although his business was a complete fraud designed to deceive auditors and investors." "steal. posited that his carpet cleaning company would become the "General Motors of carpet cleaning. 2007. and that management is competent and honest.000 phony documents and sales receipts without anybody suspecting anything. we’ll look at some of the all-time greatest cases of companies betraying their investors. It is unfortunate. Investing in a stock takes a lot of research. we assume reported earnings and revenue figures are correct. Understanding how disasters have happened in the past can help investors avoid them in the future.. Try to look at them from a shareholder’s standpoint. Unfortunately. but he did so through forgery and theft. but words often associated with money and fortune are "cheat. ZZZZ Best went public in December of 1986. 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. But these assumptions can be disastrous. For example.
making millionaires out of ordinary people overnight. Centennial overstated its earnings by about $40 million. which lost $70 million. and the stock tumbled to pennies shortly after.Minkow was only a teenager at the time! He was sentenced to 25 years in prison. the company was really shipping fruit baskets to customers. 1997 . Centennial’s stock rose 451% to $55. between April 1994 and December 1996. which lost $100 million. Amazingly. when the gold mine proved to be fraudulent. At its peak. 1997.50 per share on the New York Stock Exchange. which was reported to contain more than 200 million ounces. Bre-X Minerals. 192 . Bre-X had a market capitalization of US$4. 1996 . the CEO of Centennial Technologies. was said to be the richest gold mine ever. Over 20. and the Ontario Municipal Employees’ Retirement Board. The employees then created fake documents to appear as though they were recording sales. the company reported profits of $12 million when it really lost about $28 million! The stock plunged to less than $3.000 investors lost almost all of their investment in a company that was once considered a Wall Street darling. and his management recorded that the company made $2 million in revenue from PC memory cards. The major losers were the Quebec public sector pension fund. Emanuel Pinez.In December 1996. which lost $45 million. Centennial Technologies Inc.This Canadian company was involved in one of the largest stock swindles in history. Its Indonesian gold property. According to the Securities and Exchange Commission.. The stock price for Bre-X skyrocketed to a high of $280 (split adjusted). But the party ended on March 19. the Ontario Teachers’ Pension Plan.4 billion.
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. 193 .on.ca/Regulation/Rulemaking/Current/rrn_part4 _index.osc. an entire new method of valuing resource company minerals in the ground was created. b) has experience relevant to the subject matter of the mineral project and the technical report. 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. known as the 43-101 required documentation.) 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. NI 43-101. mine development or operation or mineral project assessment. It covers oral statements as well as written documents and websites. together with its Companion Policy 43-101CP and Form 43101F1 Technical Report can be downloaded from the Ontario Securities Commission (OSC) website: (http://www.jsp).(Would you believe I actually owned a substantial position in this piece of crap? This deal so tarnished the Canadian Regulatory’s reputation.gov. or any combination of these. and c) is a member in good standing of a professional association.
with 194 . recorded fictitious revenues. 2001 . Enron. and the share price dove from over $90 to less than $. basically imploded after David Duncan. a Houston-based energy trading company was.Not long after the collapse of Enron. Through some fairly complicated accounting practices that involved the use of shell companies. $3. Enron was able to keep hundreds of millions of dollars worth of debt off its books. Enron’s chief auditor. the company felt that office pens. Additionally.70." WorldCom recorded operating expenses as investments. 43-101CP and 43-101 F1 Standards of Disclosure for Mineral Projects and then view/download the files from the appropriate links there. Andersen.8 billion (yes. Telecommunications giant WorldCom came under intense scrutiny after yet another instance of some serious "book cooking. 2002 .S. Enron’s auditor. WorldCom.Prior to this debacle. run by Enron executives. In total. Doing so fooled investors and analysts into thinking this company was more fundamentally stable than it actually was. essentially recording one dollar of revenue multiple times and creating the appearance of incredible earnings figures. Enron. ordered the shredding of thousands of documents. The fiasco at Enron made the phrase "cook the books" a household term once again.You will need to scroll down the page to 43-101. the shell companies. based on revenue. Apparently. the equities market was rocked by another billion-dollar accounting scandal. the fifth leading accounting firm in the world at the time. it took down with it Arthur Andersen. 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. the complex web of deceit unraveled. Eventually. As Enron fell. the seventh largest company in the U.
2002 . The next ones to feel the betrayal were the investors. siphoned hordes of money from Tyco in the form of unapproved loans and fraudulent stock sales. WorldCom reported profits of around $1. Kozlowski and Belnick arranged to sell 7.With WorldCom having already shaken investor confidence.which should all be recorded as expenses for the fiscal year in which they were incurred . Before the scandal. Kozlowski used the funds to further his lavish lifestyle.a ‘b’) worth of normal operating expenses . Dennis Kozlowski. usually disguised as executive bonuses or benefits.3 billion. as it plummeted from more than $60 to less than $. an infamous $6. and a $2 million birthday party for his wife.tens of thousands of them lost their jobs. This little accounting trick grossly exaggerated profits for the year the expenses were incurred. healthcare. Tyco International (NYSE: TYC). the scandal slowly began to unravel and Tyco’s share price plummeted nearly 80% in a six-week 195 . These funds were smuggled out of the company. In fact. In early 2002. which included handfuls of houses. without shareholder approval.000 shower curtain. During his reign as CEO. and safety equipment. who had to watch the gut-wrenching downfall of WorldCom’s stock price. its business was becoming increasingly unprofitable. manufacturing electronic components. In 2001. who was reported as one of the top 25 corporate managers by BusinessWeek.20. Who suffered the most in this deal? The employees . Tyco was considered a safe blue chip investment. Kozlowski received $170 million in low-to-no interest loans.were treated as investments and were recorded over a number of years.5 million shares of unauthorized Tyco stock for a reported $450 million. Along with CFO Mark Swartz and CLO Mark Belnick. the executives at Tyco ensured that 2002 would be an unforgettable year for stocks.
experiencing rapid growth and acquiring a number of other healthcare-related firms. 2003. Scrushy arranged political contributions of $500. The scandal unfolded in March. prior to releasing an earnings loss. CEO and founder Richard Scrushy began instructing employees to inflate revenues and overstate HealthSouth’s net income. the company was one of America’s largest healthcare service providers. 2003 . The information came to light when CFO William Owens. when Scrushy reportedly sold HealthSouth shares worth $75 million. An independent law firm concluded the sale was not directly related to the loss. Amazingly.45 in a single day. allowing him to ensure a seat on the hospital regulatory board. but investors should have taken the warning. The SEC works hard to prevent such scams from happening. but with thousands of public companies in 196 . which in turn costs investors/taxpayers even more money. working with the FBI. The repercussions were swift. These scammers can pick a lifetime’s worth of garbage and not even come close to repaying those who lost their fortunes. The first sign of trouble surfaced in late 2002.4 billion. when the SEC announced that HealthSouth exaggerated revenues by $1. especially when your boss instructs you to falsify earnings reports. The executives escaped their first hearing due to a mistrial. In the late 1990s. caught Scrushy on tape talking about the fraud. The worst thing about these scams is that you never know until it’s too late. but was later convicted on charges of bribery. At the time.period. the CEO was acquitted of 36 counts of fraud. HealthSouth (NYSE: HLS). Apparently. but were eventually convicted and sentenced to 25 years in jail.000. Those convicted of fraud might serve several years in prison.Accounting for large corporations can be a difficult task. as the stock fell from a high of $20 to a close of $.
Oehmke and Bryan Kos.. When considering the potential for disaster.North America. a stock promoter.7 million respectively. To Securities & Exchange Commission gumshoes.3 million and $1. 197 . How do the Pink Sheets describe themselves? While SEC uses the word service. Last June. the duo allegedly cranked up a stock-promotion scheme replete with phony analyst reports. pocketing $11. according to the SEC. By then. it is nearly impossible to ensure that disaster never strikes again. Just have a quick read below. Pink Sheets uses the words system and venue. But on Aug. don’t overlook the importance of the description of the Pink Sheets: Pink Sheets quotation-and-trading service for unlisted stocks. it was a classic case of pump and dump.and its share price plunged to $2.90.51 the next day. press releases. 2010. Oehmke and Kos had dumped shares. Concorde’s stock price soared from $3 to $8. Concorde America Inc. 11. With the new company. and spam e-mails. 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. Wall Street’s Dirty Rotten Little Scoundrels The SEC has a new plan to turn up the heat on small-time Wall Street fraudsters. Concorde’s management issued a press release disavowing any involvement in two earlier rosy releases -. financier Donald E. merged a small private labor-recruitment company into a shell corporation that Oehmke controlled. trading on the Pink Sheets quotationand-trading service for unlisted stocks*.
S. increase issuer disclosure. provides the leading inter-dealer electronic quotation and trading system in the over-the-counter (OTC) securities market. or full service brokers.htm. I’m saving the best for last. but was not able to do so. online. It reminds me of the way the FBI tracks down criminals and how they would look at the inter-relationship of mobsters.pinksheets.com Pink OTC Markets Inc. 198 . broker-dealers.S. it’s amazing. 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. We create innovative technology and data solutions to efficiently connect market participants. Credit for the next amazing piece goes to: C:\Users\shelly\Desktop\Wall Street Follies . enabling investors to seamlessly trade these securities through their institutional. I tried to find out more information about Wall Street Follies.ABOUT PINK OTC MARKETS From www. Ok. Pink OTC Markets operates the third largest U. I want them to get the credit because I love the creation below.Diagrams. and better inform investors. improve price discovery. Pink OTC Markets offers widespread access to all U.
never say that I am not a connoisseur of art. I stumbled across this marvelous art while I was writing a Wall Street rap song with a rap star buddy of mine. I agree. Two of the most popular political careers that grew from this situation: Elliott Spitzer and Rudy Giuliani. disgraced. So folks. Bernie Madoff can’t get off Enron rocked Wall Street. but take my word for it. Build the reputation and it’s the old catapult to fame from the capture of the latest white collar thief. and discouraged others. is hanging on my office wall. a scandal disgorged. a white collar criminal can get more jail time than a capital murderer in our society.Ladies and gentleman. Here’s an example. Sort of like Eliot Ness capturing Al Capone. The criminals make it into the worldwide news reports. Lou Pearlman got 50 years. and then rocked on Broadway I know. and then take the credit. In the old days of Wall Street. of course. but really it’s endless. And as an added kick in the pants. this is how political careers are begun and elections are won. and the Web to mention a few places. they hit the lecture-speaker circuit. capture the bad guys. the print media. In case you haven’t noticed. 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. dismissed. In jail they write their memoirs and after release they do book-signing tours. I’m not quitting my day job. Here are two lines from the work in progress: Ken Starr went too far. I have no interest in making comparisons. but in today’s world. I mean. DO YOUR HOMEWORK. Believe me. DO YOUR 200 . Bernie Madoff got 150 years. sure as shooting. the next thief is lying-in-wait to have you invest in his or her planned scam. the scumbags are vaulted into primetime. somebody spent a great deal of time creating this poster which.
you will be swept off your feet. you will be led down the path to the point where your greed will overcome you sensibility.DUE DILLIGENCE. Start from the first moment of introduction. 201 . don’t sit on them. Use your brains. In fact in each case. the culprit is trying to get into your pants. It’s very similar to what happens when you meet a new gal or guy. The first meeting is always the best. You will be impressed.
Find out what states he is registered in. has he recommended low price stocks or stocks listed on the Pink Sheets? When you receive a confirmation. Do a background check on the broker from available sources. How much money do you throw at any given situation before you just say: “The hell with it. outcomes possible. there is a class action you can join.gov. Does he have any yes answers on his license (U4)? Has he changed firms often. you may find he’s done it before and there’s history. There are many characters involved. Standard operating procedures: SEC. FINRA and Google websites. maybe lots of it. and if so. channels and paths to follow. decisions to make. has a value. and time to be invested. or worse for him and better for you. It could be your lucky day.” But sometimes as an accuser of someone’s wrongdoing. Find out how many actions he has been involved in. A stockbroker lied to you and you can prove it. in which case you own him. I am going to throw out some ideas at you and we can go from there: 1. or just the fact that you were cheated. costs to analyze. with what cause? Does he have any arbitrations listed on his U4? Historically. How much money you feel you have been cheated out of. avenues to travel. 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). Answer: Pursuit of the broker. 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 . It isn’t worth pursuing. Many attorneys out there are looking for the first plaintiff in a class action lawsuit.
directors. Just get your confirms compared (market language) and compare your mail to their postings every day. out of balance and completely screwed. Create a spread sheet with each of their names. consultants etc. just like you do your checking account. you must micro-manage your account. You thought they were sold and you had more to go. So do not go spending the $50. 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). Incredibly so. 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. ticket charges. The company has lied and you can prove it. Bernie Madoff and his firm falsified records of trades and stock positions for years. Brokerage firms are notorious at making mistakes in their favor. or you received a wrong price fill. Develop a background check of each person and create an historical dossier of their professional careers. Chances of them making a mistake in your favor are possible. Sometimes 203 . Errors usually show up in commissions charged. will be short lived and inevitably will be corrected when you least expect it or want it to happen. the CEO. wrong symbols or wrong stocks. and immediately check your exact position to compare yours to theirs or you could end up short. were at the time you purchased the stock. Chairman. This keeps everyone on their side honest.000 that hit your account by mistake under any circumstances. When it comes to trading your money and your money in general. well then we come to: 2. Start with identifying where the management. CFO.with time and sales on the OTCBB website for accuracy? Remember. President.. and it went on for more than a decade. Especially be weary of partialfills of buys or sells.
204 . For instance. Of course if everything is kosher and they follow procedures and are absolutely compliant within the rules of full disclosure and SOX. there could have been an early escape from a bad previous situation. So watch patterns closely and for sure be on the lookout for successful financial gains. Structure is another key area to discovering a pattern. You see. and more often than you think it’s the same folks bringing it back in another form again and again. and IR folks all have patterns. you may have invested in the shell that they previously destroyed. then you just might have a very difficult time collecting. Or worse. brokers. Tracing stock lineage was a hobby of mine when I was trading on Wall Street. with a leftbehind bankruptcy or sale of a shell. All things are possible. In some cases. like Caveat Emptor). The consistency of managements hiring IR firms and how they compensate them is also pattern. Depending on their clandestine activities. Worse. leaving behind company shareholder death and destruction. even though you thought you could prove their wrong doing. for those will definitely be repeated. investment bankers. management teams will hire the same lawyers and accountants and use the same funding sources over and over again. 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. creating a pattern. or MOs. for short. you can bank on that. they will repeat the same modus operandi (Latin. Some public companies are recycled many times. too. I could detect fraud or backdoor payoffs by knowing the patterns of my traders. the same amount of shares issued and outstanding with the same shareholder base in each new company will follow a pattern.management teams hop. They will follow the same pattern almost to a T. These patterns are dead giveaways once you figure out what the pattern(s) is/are. one of the greatest tools in my tool bag on the Street was to know that traders.
I have seen every possible scenario and from my experience I say: “Keep your friends close but your enemies closer. long forgotten about. or there are undisclosed options.The next paragraph takes us beyond the normal transparencies into the great abyss of: Well. I don’t think it’s the stockbroker or company management so who else could it be? Depending on the public companies lineage. the shell had shareholders. you still represent a threat to them. Often times the IR firm plays a major role in what goes on in a particular public company beyond investor relations. After all. IR firms often know funding sources. purposely hidden behind various corporate entities (of which their individual holdings are less than 5% each but added up are significant). although the S1 and 15c211 structure is a safer starting point due to transparency and financial filing requirements. market makers. 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. conferences. to mention but a few. at which time the restricted paper can be 205 . you might want to find out if the company began its life as a reverse merger into a shell. For instance. 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. such as 144 stock issued but trading in another market or just trading in another market openly. and sponsors. 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. there could always be a behind the scenes operator who is either camouflaged by management. Even an S1 and 15c211 public deal has lineage.” 3. If so. during which a whole new capital structure was installed. These old shareholders were completely diminished in shares by the controlling interest in the shell. but neither will admit it to you. You can always sue or arbitrate against them.
You wouldn’t want to mess with them alone. Jerrys and Pauls and Lucys. Kerrys and Kristins. Remember names and spell them correctly and don’t leave out middle names or nicknames.converted into free trading by lifting the legend on the certificate so the shares can be freely sold into the market). Storyboard what happened. and if they have written and released all the company’s press releases. who are merely trying to reduce the IR firm’s compensation. All parties have a love-hate relationship with IR firms. because it’s the IR firm that is called upon to help the company out of its self-made jams. along with denial of wrongdoing. someone is getting richly rewarded with compensation that may be of a “gray” nature. the management team has survived to live another day. Just as a good measure. A scorned and hurt IR firm can be like a wounded animal in the jungle. There are many Iras. Survival at any cost. Many an IR firm holds a public company hostage or worse. “It is not the money you make but the money you keep” that determines true wealth. hopefully within bounds. As you sort through what you know and what you don’t know. secrets (knowing where all the bodies are buried). act as if you are a detective working for CSI. you as an investor must always watch what the insiders are doing with their stock. as investors and entrepreneurs. for the sake of paying the piper later because remember. but I guess by now you get the point. Once saved. whether it’s an IR firm or a shareholder. including dates. especially if they hold paper. however. 206 . So in agreeing to help the company. be it overhanging stock or the emergency need for money. short memoryitis sets in. IR firms sometimes take the brunt of ferocious attacks by management. I never indicated the importance of the CEO’s survival skills. They love their help but hate paying for it. So long as the company survives.
inspectors and administrative personnel. Regardless. you have to show a real loss in value to your portfolio. The extra army of badges is in the mix. because that will just piss me off. they weren’t hired just to use up the budget money provided by the federal government. Believe me. I am saying that if you have been screwed. FINRA had to hire almost 19. but even as this is being written. 207 . It is a vicious cycle. 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.000 more examiners. or being closed for net capital or just because they can’t make any money. There are enough scumbags in this business to keep FINRA and the SEC busy 24/7.In summary. or you should have made more money sooner. new BDs are opening and existing BDs are withdrawing. In fact.
simply because the case could end up on his 208 . turned around against you? So we’re talking about almost 25 questions that raise one real question. Do you really want to put yourself through the torture. 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. 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. Just remember that the person you are going against is going to have his own major league SOB fighting hard in his corner. 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. 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. but I can sure give you insight to evaluate your expectations.
209 . The mark on his license would lead to a lot of settlements. the possibilities begin to arise. That means there is a settlement offer. which you may or may not accept.” Those words are like music to your ears. which you also need to keep in mind. on its way. The target of your attack. will offer you something of this sort. if he feels he is losing after hearing the panel’s questions or by the body language of the panel.license if you win and he doesn’t. Remember these words: “Without admitting or denying any guilt. So let’s say that after answering every question you still have a major bone to pick and you go for it. Depending on the severity of the case and how well your lawyer may have done in the early stages of arguing the case.
and the more risks you are able to take. I believe this thinking has a lot to do with the fact that the younger you are. I will tell you that the common opinion is that the younger you are. Watch the bills carefully as they spiral down. And as they get older. Do not pass go. land on Chance (just like in Monopoly). I have had one theory. or replace lost money with extra labor or a bonus.” Here’s how it goes: You the speculator. Now flush. Lucky you. You tear them in half to prevent backing up the toilet and having it overflow. one after another. Repeat this until all the bills are gone and 210 . They have been brainwashed. income. even if it takes a few years. Reach into the bag and pull out a handful of the loose hundreds. responsibilities. and drop them directly into the toilet in front of you. tear the bills up. all the way down the drain. Figure out who you are. 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. and drop them into the toilet. Fantastic. Reach back into the bag and grab another handful of cash. they forget to take into account that they are not as young as they once were. wants and monetary requirements than a single 30 year old woman. the more earning years you have. tear them in half. the risk taker. sometimes needless and stupid risks. 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. and profit objectives have in common? They all play a huge role in how you will answer the above question. in their portfolio.Chapter 29: What Should I Do with My Money? What do age. Say $10 grand in total. A married 40 year old woman has very different needs. the more time you have to earn back lost money. and take a bag of $100 dollar bills. risk tolerance. Throughout my entire career on Wall Street. and it is called the “toilet bowl theory. Now take the money and go directly to the bathroom.
take a deep breath before telling me how you feel. Not too good. and pharmaceuticals? They are playing ball on their own field. Many are money managed by “professionals. which they were reading in earnest. but that you do not win. Once finished.” therefore the penny stock market is their casino. and if you can count cards. here is a true story which must sink in to your head for a number of reasons. Hey. so to speak. Doctors love the stock market because to them it represents an opportunity to make money without facing malpractice lawsuits. while winning big with beginner’s luck has the potential to ruin you for years to come. The racetrack is another story. but the exercise of flushing or burning money up in a fire is not one of those times. aka toilet bowl money. I hope you have fun. What better stocks to play with than biotech. It is just too damaging a concept. For your sake. So why not? They are smart. Here’s a “tip”: kids’ and pets’ names oftentimes overcome the need to look like you know what you’re doing. So visit the racetrack with the money burning a hole in your pocket and get it out of your system. They have gone through years upon years of education. Losing is the best preventative medicine. try blackjack. even great. You must know. I bet. it does happen. 211 .the bag is empty. life sciences. So why piss money away in the stock market and hate yourself the next day? If you just want to take a shot. med-tech. remember that black or red is 50/50 in roulette. I knew many a stockbroker that would open the Wall Street Journal at their desk simply to cover the Racing Forum. blindly investing in penny stocks. blowing $10 G’s can often times feel okay. Odds are best in craps. For those of you who are out control. That was an indication that gambling was in their blood. At least you get free drinks in the casino. and above all else they have a load of discretionary income.
Anonymous (fictitious of course). or roughly $32. They were both stocks. and he always wanted to know the closing bid and ask price.000 shares. a surgeon from Bloomfield Hills. Dr. no clue as to the difference between Nastech and IBM. 212 .32 ask. “Doc. he was addicted. or the moment a block of stock traded. a staggering move. picked up. And the best way to find out was to call the originating IPO brokerage firm. he had fallen in love with a company that owned the patent on the nasal delivery of drugs. 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). A. especially as I had no idea what I was doing and worse. The stock was trading at $. Michigan. it’s your lucky day.000. I had been buying the Nastech shares for months when finally it began moving up. but he took buying stock a bit too seriously. we were it! Dr. But I decided to call Dr. Dr. In the case of Nastech Pharmaceuticals. He wanted me to call him the moment there was news. Then one day the inevitable happened.Back in the mid-1980’s I was trading a $. It shot from $. I had a client that needed to sell a substantial block of Nastech stock. because their market was usually the most real. I could have called a number of my clients to see if perhaps they were interested in buying the shares. He had accumulationitis.20. Do you want them?” I knew he couldn’t resist. size and buy/sell availability was to call a broker. A was a nice guy.01 penny stock called Nastech Pharmaceutical. A. because the only way to find out prices.28 bid to $. right? Well anyway.000 shares of Nastech for sale on my desk at this very second.03 to $. I have a block of 100. The phone rang. Sometimes he called several times a day in between patients and surgeries. I said. was accumulating and correctly cost averaging up the Nastech stocks. It was my first stock and inaugural recommendation as a Series 7 licensed stockbroker. and the block was 100.
“Well. Dr. there are tons of deals that did not work out quite as well. Here’s the punch line: Nastech Pharmaceutical actually became a big winner on Wall Street. huh. But for every one of these success stories. 213 . many of whom were not doctors. took dream vacations and basically upgraded their lifestyles.000. At 100. When do you need to have the money?” I responded. made a small fortune. put kids through college. achieving a plus $20 stock price and my clients. new cars.” He mumbled loud enough for me to hear. you know it’s a 3 day settlement plus an extension if you need extra time. buy them for me!” I ran the trade and the commish was delish. both biotechs. This and one other stock IPO I did had great results. Nastech Pharmaceutical still trades today (NSTK).000 shares to his position. “$32. “I have a gall bladder tomorrow morning and another…Okay.He said.000 thousand shares. A added another 100. I know many bought new homes.
I’m always eager to lend an ear. definitely clue me in on some of your wild west stories. Always remember that your stockbroker and his/her firm makes money on every trade. I am attempting to show you the way to a better understanding of the financial markets and more importantly. And all you readers out there. tame your kids. rebuild your house. The cheap or free trades are a loss leader. I now leave you on your own.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 am going to miss sharing my experiences and my opinions with you in my never-ending quest to protect your butts. which I will. take at least some of this knowledge and use it. find you a wife or husband or redecorate your dining room. DO NOT open accounts with stockbrokers just to have someone to talk to. the brokerage firm can utilize your cash account for inclusion in their net capital and loan against it and earn fees. how you should approach investing in micro-cap stocks. 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. Please. Imagine that! In fact. just delete them. you may be a recovering penny stock junkie. Don’t fall back into the traps laying in wait for you. Except that instead of helping you lose weight. 214 . I have known my share. Remember. or equity sitting in your account at their company. they are out to get your cash. Once there. If you are lonely and want to make friends. whether you have a winning trade or not. repair your family relationships. You don’t have to keep changing your email address to avoid penny stock newsletters. I have been asked to provide a blog.
She was asking for news about a company that I was not familiar with. no big deal. and there was none. We have been friends for a long time. “No Elaine. closed my books. speaking with my assistants throughout the rest of the afternoon.” “Elaine you are trading on inside information and you are using me and my staff to give you updates. I received a call from a regular client. but I felt she was either excited or nervous. which I tell her. she asked for me again: “Shelly check everywhere for news. went home and poured myself an Absolut on the rocks in a tall glass and began to think about the day’s events. and she was a sprite but older retired woman who knew her way around the stock market.Chapter 31: The Commercial You Have All Been Waiting For One day at Emanuel & Company.” She basically hung up after some small talk. Are you a bleep bleep? And furthermore how dare you do this and use me like this. Please check. So is there any news?” I check quickly. no news of course.” Now I am pissed and I hang up on her.” I hung up on her again. that’s all. during the winter of 1994. She called every ten minutes thereafter. Her name was Elaine. 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. that I did not even recognize. I was actually mad that I spent so much time 215 .” “Well Shelly. don’t get upset. but I checked anyway. I spoke to the CEO and he promised me there was news coming out today and I am waiting. at around 2:30 PM. no news you bleep. I know you have a Bloomberg machine.” I said: “Elaine what’s going on? You’re acting weird even for you. At 3:45 PM. I reported to her: “No Elaine. no news at this moment. But this day she had a greater sense of urgency than normal. I will hold.
I have probably read and watched more press releases and company presentations than anyone else in the world.com. Investors can search the site or archives for companies by sector. and pull up video press releases. Elaine led me to realize the need for investor access to real-time news and news direct from CEOs. name. The most popular videos reside on the front page. but different in that we specialize in video press releases (which can also have attached text). an investor’s portal. CEOs tell their stories and give updates to new investors. or symbol. radio. and new media. press releases. investment bankers. I have managed the company through acquisitions.that day dealing with Elaine but in retrospect. As CEO. Over the course of the last 15 years.com and microcapreview.. SNN Inc. new product launches. management decisions and now the marketing of all of its enterprises. I attend approximately 40 financial conferences annually. I have interviewed more than 2500 CEOs. SNNwire.com. CEOs record into a video camera and easily upload to SNN. stocknewsnow. high net worth accredited investors. Stocknewsnow.com and investors go to stocknewsnow. 216 . SNN is in some ways similar to businesswire or prnewswire as a news-release company.000 selected media outlets throughout the world including TV. SNNwire users can reach more than 500. CEOs go to snnwire.” is the first video press release website. and I have been glued to the Web for information from its earliest days in existence. “Where CEOs meet investors. newspapers.com.com are all dedicated to supporting micro-cap companies and their CEOs. SNNwire. CEOs use SNNwire for uploading and distributing usergenerated VPRs. as well as a media and entertainment company. like YouTube.com provides investors with a FREE informational financial portal dedicated to micro-cap companies. and millions of investors like yourself. My Company SNN Incorporated is a publisher. financings. magazines. websites.
“Well. bloggers and social network users to send their VPRs to. surveyed. 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. investment bankers. he was my stockbroker. stockbrokers. In theory. SNN and stocknewsnow. Two strangers in attendance sit next to one another in a pew and strike up a conversation. 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. money managers. and to put more transparency into the market place. although it is very exhausting. CPSs. has been my pleasure. and the data is transparent to SNNwire CEO customers. A stockbroker dies and several strangers unknown to the family show up at the funeral home in the Bronx. as well as lists of surveyed subscribers. One says to the other. indications of investor areas of interest. this provides CEOs and investors with a match. This maximizes search engine optimization and CEO/Investor interaction for company exposure to investors. PR and media. My whole purpose is to make it easier and more efficient for investors to get timely and accurate information. and professionals such as lawyers. All viewed videos are tracked by the SNN team. IR. And you?” 217 . financial advisors. CEOs get a menu of opted-in micro-cap investors. But it is how I have chosen to live the rest of my life. and questioned regarding areas of interest to become part of a targeted database for future RSS & email updates. In the balance. At these websites investors are polled. “So how did you know the deceased?” He answers.com service. wealth managers. and offers CEOs their own financial youtube.com is a financial portal and news distributor.com. Creating and operating SNN Inc.com operate in conjunction with one another.private equity holders.
Schwartz has a heart condition and goes to visit a heart specialist. Dr. Schwartz and after all the tests determines that Schwartz needs a heart transplant. Cohen examines Mr. a lawyer’s heart or a stockbroker’s heart.you had the choice of a doctor’s heart. Why did you pick a stockbroker’s heart?” Schwartz looks at him and smiles and says. “Schwartz. Cohen says. “Maybe. Cohen.” Dr. The doctor says to Schwartz. “He was my stockbroker also.” After about 2 seconds Schwartz responds to the doctor. Are you here for the same reason I am?” The other guy thinks for a minute and finally responds. Schwartz heals. “You have a choice of hearts. you look great but I have wondered all of these years . I don’t know about you. Dr. I wanted a heart that had never been used!” 218 . “I will take the heart of the stockbroker. Cohen and Schwartz are in Miami waiting on the same line to get into Moe’s Deli. and is a new man. “Well doctor. but I am just here to make sure he’s dead!” And the next joke is: Mr.The other answers. Cohen goes ahead and gives Schwartz the heart from a stockbroker. About 20 years later. You can have a doctor’s heart. a lawyer’s heart or a stockbroker’s heart.
Conscience: Something harder to find on Wall Street than profit. Liars: Everybody that says they are making money in the market around you.Glossary of Terms Frustration: Everybody is making money in the market around you while you have nothing but mounting losses. Herd Mentality: Just remember Pamplona. once the lipstick is on. someone will buy it. Great Trade: You didn’t lose money. Absolute Fact #1: Buy on rumor. Lipstick on the Pig: No worries. It should mean have no clue! Cut your losses: The moment you realize you’ve been duped. sell on Yom Kippur. Liquidity: Spirits you drink when you find out your stock has no liquidity. 219 . A Can’t Miss Opportunity: Impossible. The Trend: Is your friend until it turns the other way. as in don’t know a trade. Spain. Guarantee: Only at Midas Muffler. Market Breath: Somehow you just know when the market is breathing heavy. and it has nothing to do with cosmetics. Dead Cat Bounce: Another excuse for not really being a bull market. sell on news. Don’t try and catch the knife: Trying to pick a market bottom. Absolute Jewish Fact #1: Buy on Rosh Hashanah. and you must check for the pulse. DKs: Don’t know.
Pump and Dump: Nothing to do with social networking. Insider Trading: Those able to buy or sell before I did. profits invested in micro-caps. Buy on rumor. new definition is a stock now trading below $5 that started much higher. or worse. NOT.htm 220 . New Definition is blue chips rise big.sec. profits pay down margin. Link to Rule FD: http://www.gov/rules/final/33-7881. 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.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. Flash Crash: Oops! I hit the wrong button. Trickle-Down Effect: Old definition is blue chips rise big.
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