October, 2010

"It is sheer madness to live in want in order to be wealthy when you die."

~ Juvenal 

The Professional Opinion

DJIA: 10788.05


Double Dip:
Not likely and not predicted.  Only two double-dips have occurred since the 50's.  Probably only wishful thinking by the media.

Industrial Production:
 Increased .2%

Automobile Production:  Down 5%

Capacity Utilization Rate
: Increased .1% in August to around 74%, where the 20 year average is about 80%.

Business Spending:  Strong

Housing Starts:  The best reading since April, and up 10.5% since July

Building Permits:  Weak.  A five month decline so far.

Existing Home Sales:  Up 7.6% after reaching an all time low in July.  Of these home sales, 34% were distressed home sales.

Leading Economic Index Indicators:

Seven of the ten were, anyway.

Coincident Economic Index:   


Inflation:  None on the horizon.

Future Real GDP Growth:  2-3%


A reminder that every mid-term off-presidential year correction over the past 50 years has produced a rally in the S&P 500 index of at least 27%, making a range of 1275 to 1325 not out of the ball park.  These numbers still stand.

Assuming you wish to take on market risk, stay fully invested and buy on the dips.

Buy Recommendations

Suncor (SU)
when you can get it under $33.00 a share.

Comment:  I have found that with this stock and a beta of somewhere around 1.7,  Suncor makes for a better trading stock than a buy and hold stock.  You just need a little patience.

 Bandon Lighthouse
The Bandon Lighthouse - Bandon, Oregon...on a day when the clouds not as bad as they usually are for the time of year. 

Personal Portfolio

September was a Surprise.......

The proponents of a double-dip recession certainly came away with some well deserved egg on their faces.  What was that percentage gain for the month again?

Meanwhile out here in Nevada where Harry is talking about how much he loves guns and that is the main reason we should vote for him,  Nevada leads the nation in unemployment and locally the unemployment picture is about 14%.  Maybe this time around we can get rid of this embarrassment to the state, if not the country, and vote in someone who actually has the best interests of the state at heart.

The odds of this happening?   I'd give it 45% that Harry is given his well deserved walking papers.


Personal Portfolio

09-17-2010 - The business of accusations and demonizing.......something......... got off to an early start this month but I was prepared:


I took this to be one of the better bets in that the next time financials run, and they will,  that  BAC will return some nice, reasonable profits to the pile of cash used for buying up demonized stocks.  It is in my opinion a mildly disturbing way to increase portfolio assets but it works.

09-22-2010  - What happens when you miss estimates?


Adobe did, and promptly lost 20% of its value.


Is it worth looking at?  I don't know.  I asked my sister who is quite familiar with the company and she suggested staying away from it because of the popularity of open source, which she thinks will eat into the bottom line.

I think their applications are fine, but they are in my opinion overpriced.

How are a few of my favorite dividend producers doing?

Note:  It's interesting that everyone nowadays is talking about dividend producing stocks these last few months.  How long have I been talking about them?  Let's see.........quite a while.  Can't do that with money markets or bank savings accounts these days.  

The Small One:

BGS Foods

I've  basically owned B&G foods since it went public and have not been disappointed.  

A P/E of 35 I think is a little rich to make any major purchases but if you like the yield, you  can buy on the dips and do ok.

Year to date the stock is up almost 25% on price alone, which makes it worth a look.  

The Big One:


Sin stocks tend to weather recessionary pressures quite well.  Altria is up almost 18% for the year so far, excluding dividends.  
And speaking of dividends,  the dividend increased by 3 to 38 cents.  With a yield of about 6.5%, that's not bad!

The Government Guaranteed One:


Don't  let the big price drop fool you.  This was the result of a large distribution of cash which in this case, was invested in more shares.
A  6.7% yield  year to date in this climate?  This fund is doing better than some large cap stocks.  The fund does use leverage to boost returns and..........


It normally outclasses the Vanguard fund by a bit more that what is shown here but if you are on a fixed income,  half a percent does make a difference.

Here is a reminder as to why if would be a good idea for the conservatives to regain control of one or both houses.

If you think your taxes are high now,  here are the tax rates scheduled for next year:  2011 Rate Changes

So what is up with Government Motors, formerly known as GM?


What exactly are Pink Sheets - How do they Work?  Is a Pink Sheet Trade Risky?

As we all know by now,  GM went bankrupt and tax payer funds were used to bail the company out, as tax payer funds were used to bail practically everything else out.  This even includes the restoration of mosques worldwide (what this has to do with bailouts does leave one curious about exactly what side of the aisle the teleprompter aligns itself with).

When a company like GM goes bankrupt,  odds are the stock will no longer meet the minimum listing requirements of the major exchanges like the NYSE or NASDAQ.  Minimums might mean the ability to keep the price of a share of stock above $1.00 or a minimum value for the company itself, expressed in mathematical terms thusly:  Number of Shares Outstanding X the share price.


If you hold on  to shares of a company facing imminent bankruptcy,  you can lose everything if hang on to those shares.  Shares you are currently holding do not automatically morph into OTC or Pink Sheet shares if the company gets delisted.  The original shares become worthless.  

If a company (GM in this case) fails to meet minimum listing requirements the stock gets delisted and usually ends trading Over the Counter (OTC) on the Pink Sheets.

From a quality (and I use the term loosely) point of view, being listed on the OTC exchange is preferable to the Pinks.  Companies listed on the OTC still have to meet some minimum standards and still have to file paperwork with the SEC.  The ticker symbol changes as well, which should notify an investor that there is something amiss.

A company that cannot meet the minimum standards of the OTC has one more option left.  This option is one step lower on the investing rung of the ladder and that would be the Pink Sheets.

Pink Sheets don't have to report anything, nor are they required to meet any minimum standards at all. Pink sheets by the way, were so named because info on the company was actually traded on pink paper. There are other reasons for listing on the Pinks, other than standards.  Sometimes the company is too small to list.  Sometimes it is a small start up and it doesn't want competitors to know how much cash it actually has on hand. is a way for crooks to make a lot of money.

Out of curiosity one day,  I looked for the new GM ticker symbol to see what was going on.  I could not find a ticker for GM on the OTC exchange.  I thought that rather strange.  Looking further,  I discovered that GM was actually trading on the Pinks:

Government Motors

Motors Liquidation Company......You have to hand it to those doing the listing - they do have a sense of humor.

Motors Liquidation looks like a real prize to invest in, doesn't it.  One could have made a lot of money if they bought  (let's see... $5000 divided by 6 cents.....that would be 83,333 shares)  
83,333 shares at 6 cents and managed to sell them at the high of 88 cents, which would have netted me a gain @ $72,000 dollars.

This is the allure of the OTC and the Pinks.  You can make a lot of money.  You can also just as easily lose a lot of money.  These two exchanges are full of pump and dump, naked short selling and much manipulation in general.

It is best to walk rapidly the other way when you see these types of offers which are either for a service or info on a specific stock.
Offers like this most likely pump the pink or otc shares they own, hoping to make money off of you - the sucker who ends up with thousands of shares of a worthless stock.

If you thought you were getting a fantastic deal on 500,000 shares at a nickel a piece,  consider that the people that put you up to this could have bought millions of shares at a half cent or less.  They are the ones making a fortune on that stock that got pumped up to a nickel because they sold, leaving you holding the bag.

This is a Test:

You know GM is going to go public in a couple weeks. Do you:

A.  Buy up as many shares of  GM, now trading under the pinks as MTLQQ and hope to make a killing when GM gets re-listed in a major exchange?

Wait until the IPO comes out and buy as many shares as you can afford?

C. Sit this one out.

The only wrong answer here is A.


It works both ways.  Shares in MTLQQ cease being of any value once GM goes public.  Don't get left holding a bag of worthless shares.

My last observation on this whole GM fiasco is this:

Why would such a large company choose to list itself on the pinks rather than on the OTC.  

I think it's a rhetorical question.

An Actual Example


Herman Cook is a busy boy.  He continually spams investing bulletin boards in hopes of enticing investors into buying up shares of OTC companies and at the same time promotes these penny stocks in his 'investing' newsletter.


Herman Cook then scours the news for really cheap penny stocks which are trading for next to nothing and buys a boatload.

No news is not good news and Herman is not above manufacturing his own news regarding some kind of upcoming statement about blow-out earnings, new contracts etc. pertaining to the company.   I checked this out and it was an actual OTC article.  I wouldn't say the stock is set to explode though........


Herman's pump and dump scheme started in early February.  He probably began buying massive amounts of shares in the .05 to .08 cent range.

He then started filling up the bulletin boards with news of this explosive penny stock and how one could make a small fortune off of his timely advice.

It took less than a month after people got on board, pumping themselves up with words of encouragement from other 'investors', who praised them for their sound investment decision.

At this point herd mentality enters and people bid the stock up.  After all,  the stock was 8 cents yesterday and today it's a dime.  That is really nothing at all! 

And on it goes until someone pulls the plug and dumps their shares.

Let's say Herman buys 100,000 shares at the outset for 8 cents apiece. That works out to an $8,000 investment. If he successfully rides the run-up to 19 cents a share and sells,  he has done very well indeed and has doubled his investment, plus a little.

(Note: this is an extremely conservative example of what one could make)

Fast forward eight months or so and the penny stock is now truly a penny stock.

Herman has moved on to other penny stock pumping schemes, leaving lots of novice investors who had stars in their eyes, with pennies instead.  Hopefully they learned something.

I had my fun with the really cheap stocks for a year or so and it centered around all the new wireless start ups.  I actually made out quite well but enough was enough. It's a suckers game over the long term.


Some of the last blooms of the season.