A Golden Opportunity – GLD breaks $100 resistance

Some government institutions just don’t know when to quit.  The Wall Street Journal reported this week that Fed officials are still arguing for low interest rates (and a de-facto support of higher inflation).  Unfortunately, that means that with the Fed continuing its policy of cheap money, and Congress drowning the country in debt, your savings are not safe in the bank.

Thankfully, there are ways to protect your savings and make a tidy profit. The value of commodities like gold are expanding quickly, and gold ETF’s in particular are reflecting this.  As Obama came into office and fears of deflation diminished a few weeks ago, I hopped into a few gold ETFs, the outperforming ETF being streetTRACKS Gold Shares ETF (GLD). Since then I’m up 20%. Here’s why:

For the past two or three years, GLD has been bouncing off its upper resistance of $100/share (in recent weeks the range has been between$90-$100). So, my strategy for the past few weeks has been to short off the $100 bounce and go long at around $90.  Funny thing is, as the government has made announcement after announcement on new spending in recent weeks, GLD has smashed its long-term resistance of $100 and established $100 as its new support (it currently sits at ~$109).

Long story short, GLD is a buy. I don’t have a specific target price, mainly because there isn’t much historic resistance past $100 in GLD.  Maybe some psychological resistance around the $110, $125, and $150 marks, but not much to go on other than that.

As the U.S. economy slows and optimism on Wall Street decreases, gold may fall a bit on deflationary fears, but in the long term there is no reason to believe that the government will not continue to pump the system. Politicians want to stay in office, and to do that, they will inflate the money supply to make us feel good. If and when the economy improves, the market will still have to deal with the government’s inflationary measures, and that will benefit gold immensely.

I for one plan to be there for the ride – both to protect my savings and make a bit of money on the side.

SPNGE could be dead – I’m not

For you visitors that have either been in SPNGE or watching from the sidelines, no, I haven’t died. I haven’t run away from the rapidly sinking bulkhead of SPNGE like it seems other popular posters have (although I did sell the last of my small position about two weeks ago).  And yes, in between the craziness of class, my internship, heading up my school’s debate program, I have been reading the constant flow of negative comments showing up on my blog.  Unfortunately, I do not have time to write a full length response as I’ve been incredibly busy lately, and stock interests have had to take back seat.

Suffice to say, I stand by my previous posts. Honesty and evidence have and continue to guide my analysis – not strong rhetoric and ad hominem as seems to be the case with Tim Sykes. As I’ve stated, I could be wrong, and indeed with the recent halt on trading it looks like SPNGE could be dead in the water.

Oh, and Sykes, about an ‘apology’ post?   My answer is no.  I don’t entertain the requests of posters who act more like petulant children than mature adults. Learn some civility, start treating others like humans, then I’ll think about it.

More posts to follow soon on SPNGE as well as some other big board stocks that seem to have shaped up nicely since January.  Now back to Constitutional Law, Economic Thought, and some menial work for my public relations internship.

Cheers and happy trading.

SPNGE and Impending SEC Investigation – Reduce, Wait and See

I’m sitting in the lobby of a Comfort Inn in beautiful Burlington, Vermont working on a Constitutional Law paper — well, I was until I read I received an email update that per an SEC filing:

“On September 18, 2009, the Company received a formal order of investigation issued by the SEC regarding possible securities laws violations by the Company and/or other persons. At this time, it is not possible to predict the outcome of the investigation nor is it possible to assess its impact on the Company. The Company and its officers and directors have received subpoenas requesting the delivery of certain documents. The Company has been cooperating fully, and intends to continue to cooperate fully, with the SEC with respect to its investigation.”

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What an announcement!  The iHub and yahoo finance boards lit up like fireworks seconds after the filing was posted.

So what does it mean?

I’m not going to pretend to have the answers, SPNGE has been in increasingly hot water lately, but I cannot shake the feeling that something here is wrong. Something is different than every other penny scam out there.  When I look back on the past six months of this company, I’ve seen a company continually strengthening in its ability to penetrate key markets and sell product.  I’ve also seen it spend millions in advertising that has been exceptionally effective.

Now I’m going to say something that you don’t want to hear: the fundamentals haven’t changed.

What I am not referring to is the company’s financials. Those are in the process of being restated (and possibly subpoenaed by the SEC). What I mean is, the fundamental story, the fundamental narrative at SPNGE is still the same: either management is lying and longs are toast, or is a group(s) of people that want to see Spongetech fail.  Either longs will lose their money, or they will reap massive benefits. This is what I’ve been saying all along for those that have followed me on iHub. Posted July 16th on iHub:

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For those on the sidelines

This stock is all about the basics. With this company’s history and circumstance, it is easy to become incredibly enthusiastic about the stock, or incredibly cynical. When the PPS goes down,bears blame dilution while bulls blame manipulation, neither claims having solid proof.

If you are trying to decide whether this is stock is for you, you have to move past the white noise and analyze the fundamental difference between the bulls and the bears.

We’ve all seen the PR’s and the SEC filings. The fundamental complaint that the bears have with Spongetech is not in regards to its press releases or SEC filings. The bears criticism of SPNG go straight to the fundamental consideration of any company – the management. In this case, however, because SPNG is on the OTCBB, the bulletin board’s reputation of pps corruption and manipulation taints SPNG.

So the fundamental question is, can the management be trusted? Bulls say “yes.” Bears say “no.”

If they can be trusted, then management is not diluting. And do they need to? As the 8k states, management purchased Dicon in cash, without dilution. The company is now profitable, and able to pay out of pocket, and not at the expense of shareholders. If this is the case, and management is in it for the long haul, all of the press releases are legitimate, the SEC filings are in order, and the stock is severely undervalued (when compared to earnings).

If the management cannot be trusted, then the first question, just like in criminal investigation, should be to the motive. In other words, “what incentive does the management have to lie to investors?”

By lying to investors, the management runs a severe risk of being prosecuted for securities fraud. If Spongetech is not what management claims it is, if it is indeed a shell to profit from a few investors like in other OTCBB scams, then the list of criminal charges will be long. Accusations on these boards range from management criminally diluting by issuing restricted shares from RME, to issuing false press reports (such as with the 7500 new stores selling Spongetech). If even half of the wild allegations heard here are true, every individual in management will lose not only their money, but their freedom as well.

So we see that by continuing to lie to investors as many bears and bashers suggest, management only digs themselves a deeper hole. And for what? Some say the estimated payoff (assuming they got away with it) would be around $80 million to split between them.

The alternative to the gruesome scenario above is, of course, that management is telling the truth, that Spongetech is growing rapidly, and that the long run is managements intention (i.e. the jump to Nasdaq). And how much more incentive management has to take this route! Even if we assume that they are evil people just out for their own profit, there is still even more incentive to play things by the rules, because if Spongetech becomes the giant that it can be, they profit even more without the risk.

Management intention – My answer

Even if management is out only for their own profit and no one else’s, it still serves them better to play by the rules. Only a group of incredibly stupid and naive managers would scam at this point in the game. Call them evil, call them selfish, but you can’t call them stupid.

So, if we assume that management are rational actors working for their own welfare, the scenario that we should conclude is reality is one where management is running an honest business. In which case, shareholders need only wait for the light of reality to banish the fog of accusation and doubt.

Disclaimer

I’m 20 years old and own 16,000 shares of SPNG (all I could afford), of which currently I’m in the red about 20%. Because of the above, I’m not worried, and it is why I don’t feel the need to sell. You may wonder why such a tiny shareholder would take so much time to write long posts like these: it’s because Spongetech does have things about it that should make any investor uncertain. However, when we view it through the lense that management would have to view this for it to be a fraud (i.e. self-interest), the scam theory falls, because self-interest (the weighing of risk vs. reward) would lead management to play the game fairly.

If you have any questions, or just want to chat, pm me.

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The fundamental question remains: is management slimy, or does someone out there want this stock to fail?  Right now, I do not know where I stand.  This morning I significantly reduced my exposure to SPNGE to help protect my small portfolio. However, I do know that I’ve seen:

- Horrendous reporting in the name of “the public good” against SPNG. Not only has it been for the most part baseless, it has also used people with current or past short positions as references, and consistently barraged the smallcap headlines with anti-spng stories that are largely unsubstantiated.  This is something I feel passionate about, and I’ll debate it all day.  Agree with the articles or not, it was shameful reporting.

- Fake websites set up and then attributed to SPNGE management.  Really? They couldn’t pay a thousand dollars and have a professional site set up and with working links? Please.

- A massive inflow of new anti-spnge accounts on iHub and yahoo finance that has materialized seemingly out of nowhere, which is what I predicted just a few weeks ago.

None of the above ‘proves’ management innocent. Obviously, they have not played the last few weeks very well regardless of their intent. Still, it goes without saying that there has been a concerted effort to bring down the share price, and shouldn’t we expect it when there is so much at stake here with a massive short position?

If you bet against SPNGE with a massive amount of wealth and started to see it fail and get threatened, what would you do? Would you lay down and take it, or can you understand why someone desperate might 1) create fake websites 2) use the media 3) employ a massive amount of ‘good samaritans’ to bash the stock?

This has obviously digressed into rambling, so I’m going to stop. I have a debate tournament tomorrow, a Constitutional Law paper to finish, and a major headache.  Again, none of the above proves anything, it is just my take that not all is as it seems. Maybe it is. In any case, we will find out soon. I would suggest reducing to avoid further losses (that seem imminent), while waiting on the sidelines to see what comes of the investigation, the 10k, etc. etc.

Good luck to everyone, and as always feel free to comment.  Again, I own < 10k in spng, so a very small position. I don’t care whether you believe me or not, I have no interest in pumping this stock up, or seeing it fall.

Sykes is Still Wrong: My Response to Tim Sykes and other SPNG(E) Skeptics

Below is my response to Tim Sykes and other SPNGE skeptics who posted numerous criticisms on another of my blog posts yesterday. You can find their posts here.

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Dear Mr. Sykes and all involved,

Thank you for visiting my blog! I’ve been greatly surprised to see with such a hyped stock there haven’t been more opinion pieces floating around the internet.  Noticing the lack of analysis, I decided to do my own.  You’ve all made some very good points below, and so now it is my turn to reply.  Sorry about the whole new post, but my response wasn’t going to fit down at the bottom of the last post. I will try to be as clear and methodical as possible.

Sykes, I’ll address you first:

I still think you’re wrong. Spongetech has not used paid advertisement online in quite some time now. There are many articles recommending Spongetech, but those are mainly penny stock sites that just want to jump on the bandwagon and the excitement that is SPNG.  Could you by any chance site an example of a penny promoter who was paid say within the past 3 or 4 months? I think what you will notice searching is that either a) they weren’t paid, or b) if they report payment, they are actually reporting payment that happened last year, but hasn’t happened since (i.e. they are simply trying to maintain fiduciary responsibility).  So no, I do not think there have been paid website pumpers recently, and I do not think you have any proof for it (which, unfortunately, is what I use for my analysis).

You say that, “then the stock cracked 50% when stock promoters sold (dump).” Although I appreciate you guessing as to what happened, unless you can verify that promoters sold, as opposed to other options (i.e. panic selling, short manipulation on June 12^th that sparked stop orders), no one has any logical obligation to believe what you have claimed.

Aside from a few other nonsensical, unsupported claims you throw in there like “all the stock promotion and dilution is evidence enough,” as well as a few (admittedly funny) jokes, all you have left to say is that because SPNGE’s auditors have come under suspicion that they are guilty.  I think it goes without saying that every other company that used those auditors also have to redo their financial statements, so it is in no way conclusive that SPNGE’s numbers were cooked.

That isn’t to say that you aren’t right about something: a ton of penny stocks are shells and scams. You have proven that with your research and your results. However, I think you misunderstand where the profit motive lies with management in control of a product and patent that work, provide increased convenience, and are therefore inherently valuable. Most other scams do not have claims to HSN/QVC coverage (which by the way, Spongetech sold out immediately and was featured on the Whitney Report Top 10).  All that to say, the evidence strongly supports Spongetech at least in this way being radically different than the normal penny stock company. You have failed to take this into account.  If you haven’t changed your mind, perhaps you would post logically consistent proof of management dilution?

Now onto some fact-checking for the other posters.

1. Hedge Crusher

Thanks for your posts. Your first claim is that the managements refusal to release the exact share structure on demand proves dilution. It does not. There are many legitimate reasons for an OTCBB company to keep that information close to their chests, as has been detailed tirelessly around the internet. One example can be found here.

You then claim that RME is bad and seem to imply that RME is the instrument of share dilution. RME’s shares, as has also has been detailed tirelessly on forums everywhere, are restricted by SEC Rule 144. Meaning: shares cannot be sold onto open market without a filing. Even further, as the SEC site states:

“Even if you have met the conditions of Rule 144, you can’t sell your restricted securities to the public until you’ve gotten the legend removed from the certificate.”

So, I don’t think RME shares have been sold onto the market, at least not from the evidence you didn’t give. In fact, it seems the opposite is true. In April of 2009, Spongetech filed a 10Q that states:

“On April 16, 2009, RM Enterprises cancelled 526,585,544 common shares to reduce the common shares issued and outstanding from 1,249,451,605 to 722,866,061 common shares. These common shares were put back into the treasury.”

So the evidence seems to suggest that, instead of diluting on the open market, Spongetech has actually bought back initial share investments in an effort to increase shareholder value. Interesting.

You then go on to say that “investors do not have a quality audit on this company.” You are correct, they do not, which I think is why on August 24^th SPNGE announced in a PR and an 8-K that,

“SpongeTech(R) Delivery Systems, Inc. (“SpongeTech”) “The Smarter Sponge(TM)”, (OTCBB: SPNG – News) today announced and filed a Form 8-K, that the Company has retained Deloitte Touche LLP (“Deloitte”) as the Company’s independent registered public accountants for the May 31, 2010 financial statement audit. Deloitte’s engagement will become effective upon the filing of the Company’s Form 10-K for the year ended May 31, 2009. Deloitte has already begun working with SpongeTech’s management team on the transition from the existing auditing firm that is completing the annual report for FY ‘09 that ended May 31, 2009. This is another step towards securing SpongeTech’s future as a world class organization.”

So interesting for a diluting company to sign on one of the world’s 5 largest and most respected auditing firms! Yet more evidence that doesn’t support your theory.

Lastly, and probably most importantly, you talk about management dilution being the reason for the Fail to Deliver count. Once again, as I’ve shown above management has proven to be concerned with shareholder welfare (buying back and retiring hundreds of millions of shares). I think the biggest problem with your argument though, is that we would all expect to see a very different Reg SHO list if what you say is true.  If penny stocks are diluting scams as often as Sykes says, then we should expect to see hundreds of OTC stocks on the Reg SHO list every day. Yet there are only 31 out of the thousands and thousands of OTC and Nasdaq stocks.

It just doesn’t add up. Once again, observable, verifiable evidence on my side, and not yours.

2. Reaper

Thanks for citing Universal Express. Unfortunately, USXP is not SPNGE. It’s as simple as that.

3. Kawatan Trader

How about you read the rest of the report which states that SPNGE canceled about 500 million shares? OTCBB companies almost always have to increase share structures. It is when that is all they do that your type of skepticism is warranted.

4. NGB

I appreciate your response. Personally, I don’t think I’m naive, but I’m grateful for your thoughts anyway. In any case, we will see who is right soon. I may be wrong, I freely admit that. Sykes may have a lot of other examples of crashed penny stocks, but stock abc does not = stock xyz. It is apples and oranges.

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Those are my thoughts and my reply. Feel free to respond. I appreciate everyone posting and hope some may find this beneficial. Good luck to all (even Sykes!).

Why Tim Sykes is Wrong About Spongetech (SPNG)

In an article by the New York Post published today, Timothy Sykes is quoted declaring SPNG “a blatant pump and dump.”  Regardless of any personal distaste I may have about a lifestyle supported almost exclusively by betting against the success of American business, I am still amazed by his apparent refusal to understand SPNG’s current business as well as their financial structure. His central accusation seems to be that Spongetech management is engaging in share structure dilution at the expense of shareholders. Tim Sykes is wrong.

As I’ve recently been called a pumper that is ‘biased’, let’s look at this from a standpoint strictly relying on confirmed factual information.

Sykes, bashers, and those ignorant of Spongetech as an anomaly in the penny stock world assume that management has dumped massive amounts of shares onto the open market.  If Sykes is right, then the market is flooded with hundreds of millions, and possibly billions of unannounced shares. Yet, of thousands of OTC and Nasdaq stocks, SPNG is just one of only 31 symbols on the SEC’s Regulation SHO list. Regulation SHO measures and reports the number of Failures to Deliver for any given symbol. Failures to deliver that are reported by Regulation SHO can indicate that more shares are being traded than actually exist, making matching buyers to sellers incredibly difficult. Spongetech has consistently been reported on the Reg SHO list over the past month, possibly indicating a heavy naked short position. Regardless, even I can tell it is not a normal market scenario.

This, however, is not what is so essentially important to SPNG’s posting on Reg SHO.  What SPNG’s listing indicates is that the share structure is not large enough to support the amount of shares trading hands. After all, how do hundreds of millions of failures to deliver (over ten million in just two weeks of August!) occur in a diluted share structure? The answer is they don’t. The more reasonable conclusion to arrive at is that the outstanding shares count is too low to support the amount of fails. So, say what they will, bashers cannot claim that Metter and Moskowitz have diluted the share structure into the ground. The observable evidence just does not support that claim.

Why this is so important

Spongetech’s inclusion on the Reg SHO list is indisputable fact. Unfortunately for the dilution theory, normal market mechanics do not allow for 10 million legitimate failures to deliver in just two weeks in a severely diluted share-structure.  So, say what you will about management, call them promoters and scammers, but if they are trying to rip investors off like other shell companies, they must be doing it in a way that does not involve diluting the share count. Put it another way, the New York Post can quote Sykes all they want, but that neither makes him an expert or correct. That isn’t to say that this stock does not have its problems. I detailed some of them in my last post. But being an “obvious pump and dump” needs to be justified by proof that the share structure has been diluted. Proof can be filings, skyrocketing volume (use a 10, 30, and 60 day avg. volume indicator), PPS decline proportional to claimed dilution, etc. Anything legally binding and/or observable (aka not gut instinct and rhetoric).

Tim Sykes, you are wrong. Unlike many OTCBB shells, this company has a clean record, marketing geniuses that sell a great product (I have bought and used their sponges), and a growing distribution base. Perhaps their greatest mistake (aside from late filing) is being a publically traded company in a financial system with little or no enforcement of fraud, collusion, or libel.

Spongetech’s advertisement and sales will continue. They are selling a product that works, people are buying (as demonstrated by QVC & HSN among others) and that is what the market will ultimately value. Regardless of what anyone says, the market will accurately determine the price when filings are complete and/or the artificially diluted share structure is corrected.

Perhaps I’m wrong. Maybe the PPS will collapse and I’ll lose the few hundred dollars I invested in SPNG a few months ago.  However, I do know one thing: the share-structure is not being diluted as Sykes says. His only evidence is his aggressive rhetoric and frightful logic. If he (or anyone) can show up with clear evidence of dilution, or explain how SPNG’s Reg SHO listing is a result of natural market mechanics, I will reconsider my position. After all, I don’t like losing money any more than the next guy. What I refuse to accept, however, is arguments relying on sophistry and misinformation.

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Comments are welcome.

SPNG(E) Delinquency, R/S, etc – Short and Long term

I think I can sum up the drama surrounding Spongetech’s annual financial delinquency with “the plot thickens.” Today Spongetech management filed an 8-k stating that,

“On September 11, 2009, the Company received notification from the SEC that, as a result of the revocation of Drakeford’s registration with the PCAOB, the Company would be required to have its financial statements re-audited by a PCAOB-registered firm for any year previously audited by Drakeford in order for the Company to include such financial statements in its future filings with the SEC. Accordingly, the Company’s financial statements for the fiscal year ended May 31, 2008 are currently being re-audited by the Company’s current independent registered accounting firm, Robison, Hill & Co., A Professional Corporation, a PCAOB-registered firm, in connection with the preparation of the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2009.”

So, it seems Drakeford’s annual report was rejected by the SEC due to it’s loss of priviledges. So, now the big question. What does this mean for SPNG?

1. Because SPNG does not have a filing extention protecting them from OTCBB rules, the Spongetech ticker will have a “delinquency” status notification at the end of it’s symbol. SPNG will soon be SPNG-E. The OTCBB will update the symbol on September 18th, which is Friday. This will most likely have a negative impact on the short term price-per-share.
2. SPNG will need time to reaudit its financial documents and submit them to the SEC. Everyday that goes by without a 10K filing will put more downward pressure on the stock.
3. This could jeopardize Spongetech’s plans to join the Nasdaq. However, as circumstances are… unique, SPNG management may be able to prove themselves worthy of Nasdaq registration.

The above is the bad news. No 10-K has been released, and the short term does not look positive.

What about the medium to long-term (i.e. 1-3 months)? In my opinion, Spongetech’s current price is severely undervalued, and the medium to long term will correct it.  Some have speculated that in fact management has lied to everyone about the company’s revenues and profitability. After all, the PR’s are “forward looking statements,” right? Therefore they can’t be held accountable!

Let’s put this to rest once and for all. In the September 2nd NT-10K, it is officially announced in a legally binding way that,

“Both our sales and net income for the year ended May 31, 2009 increased. Sales for the year ended May 31, 2009 were approximately $50,000,000 compared to $5,633,084 for the year ended May 31, 2008. As a result, our net profits for the year ended May 31, 2009 also increased to approximately $11,000,000, compared to $1,244,455 for the year ended may 31, 2008.”

That means that unless Moskowitz and Metter have strong desires to spend some long nights with rapists and murderers, it is absolutely and indesputibly true that Spongetech has net profits of at least $11 million for 08′-09′.  Of course, this isn’t a guarantee that sales will continue to rise as rapidly. What it does prove is that management has been honest with shareholders about the value of the company, which is what the market will ultimately value. I’ve said it before, and I’ll say it again, no stock can avoid/by constrained from market valuation for long. For that reason, the medium-long term is good. The bad news is above, so what is the good news?

1. The release of the 10-K, confirming in an audited and legally bind fashion that the company is massively profitable and financially well-managed.
2. The release of the 10-Q, which will confirm that in the first quarter Spongetech will have achieved over $70,000,000 in revenue. That’s more than all of 08′-09′ combined!
3. Uplisting to the Nasdaq exchange.
4. And finally, depending on your interpretation of regulation SHO (which SPNG has been on for over a month), we may see an impressive squeeze of the NSS (naked short sellers).

Well, that about covers all of it… wait. I’ve forgotten one small detail, the much decried 1-100 Reverse Split. Let’s talk about that.

As I will quickly admit, I am a market fundamentalist. Technicals can only sustain or oppress a stock for so long. In the end, it is about supply & demand. If the stock undergoes a 1-100 split, we’ll have a new outstanding shares of at most 7,000,000 shares.  Supply will have declined, pushing the fundamental value up. Yes, we will probably see a selloff in the moments following the split, but look what happened to GGC after their 1-25 R/S in July.

But enough ranting. Here’s my opinion: SPNG(E) is in for a beating in the next 2 weeks. We could see a return to a PPS not seen in months. However, SPNG will not evade market forces for long.  Right now might not be the best time to get in (although the stock is severely undervalued), but it may be the easiest time to. If you are already invested, don’t miss the move! It can be very difficult to get in once you’ve sold (I know from experience).

In the face of thousands of honest criticisms, and a few dozen bashers, SPNG (E or not) is a long-term buy. If you believe otherwise, please comment!

Spongetech and the 1-100 Reverse Split… What happens next?

Today Spongetech announced a bombshell: 100-1 reverse split. This is normally taken as very bad news, and the market reaction this morning confirmed this.  After posting my thoughts on iHub, I had a few people asking for my initial thoughts on the RS.  For any SPNG investors/traders reading, here they are:

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Hey rsq,

I appreciate the response to my post. What an interesting bit of news today! I swear, this is the kind of stuff I live for. I talk a lot about market rationality and keeping your head on straight because it is days like these that winners and losers are truly made. Those that lose their heads get sunk, or realize a fraction of the profit they could have if they had just thought more with their head than their pounding chest. That isn’t to say that I know where this is going, I could be wrong and we could head south and stay there. I don’t happen to think so, and here is why:

Travel back to the end of last week. What were the major problems with this company that were being floated by the more legitimate posters on iHub? The only legitimate one I can remember is people complaining about the 10K not being released. I was a bit frustrated too, but we were all smart enough to realize that a late filing said nothing bad about the fundamentals of the company. With any piece of news, you have to ask “what does this mean for the value of the company?” – because in the end, that’s what you care about.

So today, after all of the dust has settled on this reverse split, is Spongetech really worth just .10 a share (if that is where it closes)? I don’t think so. We have been shown time and time again that management is full of smart guys who know how to get their job done, and I have no reason to believe that this isn’t part of it.

Then we move on to the naked shorts. As far as I understand it, a reverse split will force an accounting of all outstanding shares on the market, forcing the shorts to cover. We have observed this before, as one poster pointed out. For an example, take a look at the three month GGC chart here. All that to say, the market will still determine the value of this stock, and what we are seeing today is not a natural valuation, but a panic selling. When the dust has settled, these guys will still be selling tens and hundreds of millions of dollars of product, maximizing their advertising (as seen with the GetFugu PR), and laying the foundations for either a business empire or a very profitable acquisition.

So, all of the above to say, the market will still determine this stock’s price. Whether or not the price corrects up or down is I believe determined in whether or not we have competent management, which I believe they have proven themselves to be.

I don’t have a recommendation, after all I’ve only been trading/investing for about nine months, but I’m going to sit tight and play this one out. Luckily, I’m still far enough ahead to take a profit on this, which I will do if I have to, but only if the fundamental valuation of this company is proven to change.

Those are my thoughts! Hope you’re having a great day.

Best,

Matthias

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We will see how all of this pans out. Maybe I’ll be a loser, maybe not, but either way I can’t wait to find out.

Waiting…

SPNG annual financial comes out today.

I’m nervous.

We will see what happens. I will let you know.

This could be really, really good.

Now we’re really in trouble…

As everyone is aware, the markets have been performing in a rather crummy fashion for quite a while. No investment is safe, and it seems that turning a profit in the struggling markets has gotten more difficult with each passing month. Still, the economy has shown signs of recovery, which has prompted many to ask just what would signal that the world economy is in for worse.

Well, my friends, that signal has arrived, in the form of a South Korean parrot.

According to a recent Telegraph article, a five year old parrot named Ddalgi (or “Strawberry”), outperformed eight of ten stock investors competing in a six week test of trading prowess. Apparently, the bird made it’s stock choices by randomly selecting blue balls (representing blue chip stocks) with his beak. I can only imagine the embarassment of the underperforming investors, and the deep relief of the two guys who managed to come out ahead.

Now, I’m a fan of the stock market, and I think the world economy will recover from this mess. But when a bird named Strawberry beats eight investors lightyears ahead in experience, maybe it’s time to call it a day – or buy a parrot.

The scum at the bottom of the market.

For the past few months, I’ve been trading the OTCBB. For those not familiar, it is the Over the Counter Bulletin Board – aka the penny stock exchange.

It has been quite an experience.

Time spent trading on the OTCBB is full of its technical spectacles – rampant market manipulation, frequent bankruptcy, dizzying volatility, etc.  Still, what surprises me the most are not the technical spectacles, but the social ones.

People will do anything to make money – they’ll praise a worthless stock to push the price up, they will bash a promising stock just take your shares before a bump up.   They are the slime at the bottom of the market – the bashers.

For example, one popular penny stock, Spongetech Delivery Systems (SPNG) has seen more than it’s fair share of manipulation and bashing. False reports stated as truth abound on the yahoo.finance and ihub forums.  I’ve seen people claim the death of SPNG’s CEO, that the company doesn’t exist, that no product is sold, or that the management releases illegal documentation for personal gain.   Bashers will even create fake documents, upload them onto the internet, and then point to them as proof.

I’ve also learned, if you’re ever hanging around down there, not to touch the scum.  After one basher posted a forged document claiming to be from a lawyer, I decided to post a reply confronting him. He didn’t respond to my post, because he didn’t have any evidence to support his claims. He did, however, take the time to send a flattering private message

“It doesn’t surprise me that a wet behind the ears 20 year old snot nosed kid would laugh when he saw the real thing. Go back to your mommy’s skirts.”

I imagine with some glee the noise the 45 year old man in his pajamas made as his fat fingers angrily typed his response.

Unfortunately, after the 100th false and predatory post, the humor begins to fade. I’m a new investor, and predatory posts like these are not always apparent, especially with a new stock. How likely is someone to invest in a company with allegations of securities fraud floating around, even if completely unsubstantiated? Bashers are shameless, ruining clueless investors to take the last few bucks in their portfolio.

Of course, there are the honest bears, those who are honest in their approach. I appreciate them. After even a short period of observation, however, the bashers become apparent. If you want to learn more about the slime at the bottom (how they are paid by bosses, and rules for operation), read the stock basher’s handbook.

– UPDATE –

Another set of blatant deception and forged documents, hot off the press.