May 2006 Cheap Stocks, General Rant and Quarterly Market Review

Flowering Crab  
Spring Has Sprung - Finally

Quote of the day:  Lord, help me be the person my dog thought I was.
-- Any prior or current dog owner.

Globetel Communications (GTE) AMEX @ $1.30

There is not much of note to say about Globetel, except for the obvious decline in share price. I don’t see any
Stratellites floating around and I don’t see any Internafta agreements for some 600 million US dollars. I don’t see any
fluff PR’s either so I imagine not much is going to reverse this stock from its slow and steady decline.
Solid news and even solider bottom-line numbers would help.


While my cost basis is essentially free, my last average share price was $2.39. I am not a real happy camper right
now but that’s ok. I still think Globetel is still on the up and up but it is probably going to be a very slow ride.


The fun thing about penny stocks is PR’s can really move the share price and serious $$ can be made. I don’t think
GTE at this point is a stock that can be traded so it’s hold or fold. I’ll hold.


Homeland Integrated Security (HISC.PK) @ .06

HISC’s quarterly results are out and I think they are about $1500.00 to the good and no, I didn’t misplace a couple
zeros.


From their quarterly statement:
Homeland Integrated Security Systems, Inc. (HISC) announced today that its financials for the first quarter ending
March 31, 2006 are now complete. The company shows a net profit of $1,632 for the first three months of 2006, as
compared to a ($252,928) loss for the first three months of 2005. Gross profit increased by 369% from $120,574 to
$565,238; for the same period revenues were up 216% to $625,788 as compared to $197,937.


The balance sheet shows total assets increased from $1,218,758 on March 31, 2005 to $5,212,650 as of March
31, 2006, an increase of 328%.


The company’s main product is the Cyber Tracker and it has had some very good reviews. It is interesting
following this company. They came out with a pink sheet type PR stating they were moving some of their assets to
a shell on the NASD OTCBB:



Homeland Integrated Security Systems, Inc. (HISC) is pleased to announce that they have established the record
for the issuance of a stock dividend for all shareholders of record as of May 30, 2006.


Homeland Integrated Security Systems shareholders of record as of May 30, 2006 will receive 1 new share of the
NASDAQ Bulletin Board Company for every 50 shares of HISC they own as of the record date. Homeland
Integrated Security Systems shareholders will maintain their stock ownership of HISC and will receive a dividend
in the NASDAQ Bulletin Board Company.


Homeland Integrated Security Systems will unveil the symbol of the NASDAQ Bulletin Board Company shortly
after the completion of the ActSoft acquisition. Homeland Integrated Security Systems will remain a publicly
traded company trading under the symbol HISC.PK.


"This Dividend is a bonus for our loyal shareholders. The dividend will give our shareholders ownership in the new
Bulletin Board Company which we expect to start trading at $0.50 per share," stated Frank Moody, President and
CEO of Homeland Integrated Security Systems, Inc.



I have seen situations like this at least half a dozen times and I don’t see anything to get overly excited about.

The question I have not seen answered is if assets are being transferred to this unnamed OTCBB Company then
does that reduce the intrinsic value of HISC by a like amount? In other words if HISC transfers 2 worth of value from
its 6 share to this other company do you now have two shares, one worth 2 and one worth 4 ? I would kind of think
that is the case.


I am not holding my breath with this one either but I am holding enough shares that the outright purchase of a new
truck with the proceeds following a nice run-up is not out of the realm of possibility.


Service is King – When You Can Get It


Part of my long term strategy is the establishment of three dividend reinvestment plans (DRIP’s) in taxable accounts.
Long term capital gains are currently taxed at 15%, which makes after-tax accounts attractive to me. I want to be
exposed to three areas – a very broad one (GE), banking (CBSS) and manufacturing (MAS)


I established my first DRIP plan in General Electric (GE) about three years ago through Stock Bank of New York. This
was done through a couple phone calls. It was very easy to set up. I did not have to have a registered share in my
name to prove I was the owner. All that was required was minimal paperwork.


My second DRIP plan is in Compass Bancshares (CBSS). This was fairly easy to do as well. It was also done
through Stock Bank of New York. I had to have a share registered in my name to begin the plan, which is what I
expected. I had no real trouble.


Then came MASCO (MAS) and the Department of Homeland Security

Masco provides building materials for home construction. Any large hardware, building supply company will more
than likely carry products supplied by MASCO.


I did a little research and found that yes; I had to be the registered owner of one share of MASCO to start a DRIP
plan. Stock Bank of New York handles the transaction. No problem.


What follows is in more or less chronological order:

Month 1

Buy One share Masco from Schwab

Call Schwab to buy Share Certificate issued to me in my name.

Month 2

Call Schwab to find out why I have not received share certificate. They have no record of my request. The guy was
very nice and put the request through again.


Month 3

 Finally get share certificate and download paperwork from Stock Bank of New York.

There is now a requirement to take the certificate to the bank and prove to the bank that I am in fact myself,
whereupon they stamp a piece of paper stating I am who I say I am.


I gather up all the paperwork and send to Stock Bank of New York.

Month 4, Week 1

Receive a letter from Stock Bank of New York stating my share was received and registered and thanks for
registering the share.


Where is the DRIP account and other DRIP paperwork I expected to receive back? Not in the package.

I call Stock Bank of New York and the helpful person said there was a mix-up and they would send the appropriate
paperwork.


Month 4, Week 3

Open letter from Stock Bank of New York to find a form for redeeming my Masco Share. I also get a dividend check
for 12 cents.


I call Stock Bank of New York again and rather sarcastically explain that I still have not got the right forms and I don’t
want a dividend check for 12 cents. I want to reinvest the dividend. That is after all the purpose of a dividend
reinvestment plan.


The helpful person says she will send me the correct forms and adds that I can also download them after first logging
in to my account. ??????? Why didn’t they tell me that in the first place?


I log in to download the forms and my password doesn’t seem to work. After three tries my account is now locked.

I call Stock Bank of New York again and tell them my account is locked and can they please send me the forms
anyway. They agree to send the forms and unlock my account.


I will have to wait 7-10 days for a new password so I can access my account containing one share of MASCO.

It occurs to me that this is rather pointless.

Month 5, Week 4

Once again I get the wrong information. This time the letter contains directions for transferring my one share of stock
to someone else.


Once again I call Stock Bank of New York and I am now pissed. When I get someone on the phone I insist on talking
to an individual who actually knows what a DRIP plan is. The young man says that yes, he knows what a DRIP plan is
and how can he be of service.


I not very nicely recount my experience with Stock Bank of New York incompetence in completing the simplest of
transactions and he very nicely tells me that the correct forms are on the way.


I ask for his full name and that of his supervisor and guarantee that if he actually fills the request correctly I will put in a
good word.


I did not mention what I might say if the request is screwed up again.

Month 6, Week 2

I open the latest letter from Stock Bank of New York and surprise surprise; it looks like they actually sent the correct
paperwork. I fill all the stuff out; enclose my two dividend checks for 12 cents each and a check for $100.00. I also
send a cover letter explicitly stating that this is for a DRIP plan and I wish to buy my first $100.00 of MASCO stock.

Month 6, Week 4

I receive a rather thick envelope in the mail containing all my original documentation plus a letter stating that they
(Stock Bank of New York) are unable to process the transaction because I did not supply my SSN on the back of one
of the forms and because of heightened terrorism concerns, they did not feel there was adequate protection in
ensuring I was not going to use my @ 30.00 DRIP account to finance terrorism.


I am getting livid. For starters, in how many places and on how many forms does Stock Bank of New York contain my
SSN, including the current MASCO DRIP forms? At least a dozen.


Now, where am I supposed to include my SSN again? Why it’s on the back of this letter sized card that gives no
indication there is anything on the reverse side to fill out – like ‘See Reverse’ or something logical like that.


I call Stock Bank of New York again just on general principles and say WTF!! This is patently ridiculous! All this BS
over a lousy $30.00 DRIP account!


The very nice young lady is appropriately apologetic but says that due to heightened homeland security concerns, all
new financial accounts are thoroughly scrutinized and everything has to be checked and double-checked.


I respond that look, we are not talking tens of thousands of dollars here. We are talking about one lousy share of
stock and two 12 cent dividend checks. Let’s use a little common sense.


I think about that a second and add that yes, it does make sense considering this is the same institution that holds an
old man up during a metal detector check at the airport. The guy has metal knees and wears coveralls because it is
the easiest way for him to dress. The ‘Security’ guards insist on sending his shoes through the x-ray machine and
then won’t help him put his shoes back on. That’s his problem.


I then apologize for getting apoplectic and the lady assures me that if the forms are filled out correctly the account will
be set up.


I recheck the paperwork, issue a new check and wait.

Month 7, Week 2

My wife calls me to inform me we got another letter from Stock Bank of New York. With some trepidation, I ask her to
open it. She says that it looks like they are acknowledging the creation of a DRIP account and are using the enclosed
$100.00 for the first share purchase.


That is all well and good but I am not going to personally believe it until I see my first plan statement.

I am beginning to understand why in this new economy  Service Is King.

Quarterly Market Analysis and Prognostication

Oil and Energy related commodities serve as my basis for shifting a bit away from the value oriented strategy that
Served me so well last year.


My reasoning is pretty simple. Unless you are one of those late-night conspiracy theorists, it seems fairly obvious that
what is driving up commodity prices is demand.


Who is driving demand? Developing countries and emerging markets.

How to access emerging markets? Some good mutual funds and an ETF.

We’re talking returns up to and in excess of 20% last quarter with what I view as minimal risk.

ADRE - my first ETF I bought at the beginning of the year for $122.00 a share. It is currently trading @ $140.00 and
looks to go higher considering its commodity and financial exposure.


FECAX, NBITX or NBISX, FISMX, FIEUX, TAVIX and ARTIX have been doing quite nicely and are all either
international or Europe oriented.


Domestic funds I own have returned approximately half what the international funds have been doing so far.
Healthcare related funds (ICHCX, FSHCX) have not fared well at all. I think a shift out of them at the six-month mark
might be appropriate.


The new allocation breaks down like this:

Sector – Health – 5%
Sector – Communications – 5%
Sector – Technology – 2%
Sector – Large Cap Intl ETF – 5%
Sector – DRIP Large Cap Stocks – 5%

I am calling the ETF and the DRIP plans Sectors because of their narrow focus.

International Growth (Small, Medium and Large) – 40%

Domestic (Small, Medium and Large (emphasis on small and medium) 38%

And the Professional Opinion

My Guru Bob Brinker is content with being fully invested in the market. He sees high energy prices as keeping
inflation in check. He is broadening his  portfolios using extended index funds.


If he is happy, I am happy. Hopefully his overall timing continues to be excellent.

Bob has a newsletter that can be purchased from bobbrinker.com

He also has some excellent financial reading resources as well as some very good movie picks. Might I recommend
Strictly Ballroom if you have not seen it.


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