To OTC Journal Members: 
 

A Ripple in the Force

There was a "Ripple in the Force" that's been pushing stocks higher today, and it roiled all the markets. Equities, commodities, currencies- you name it, and it sold off. Gold was one exception- that commodity had an ok day, and dragged silver along for a very shallow ride up.

Standard and Poors, that brilliant firm that officially "ranks risk", issued a shot across the bow on US Treasuries, stating "very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable."

It's worth noting Standard and Poors was the same outfit who was asleep at the wheel in 2007 and 2008 as our financial institutions took on heaps of over leveraged and over valued debt, all the while keeping their AAA ratings. I expect S&P has a more of a hair trigger mentality now, and wants to be out in front of any pending problems.

Oil tanked, which took the luster off our junior resource companies for the moment. Unfortunate for the first day of new idea Imperial Resources (IPRC) that was up over 10% in the early going, but only ended up delivering a 1% gain the first day.

However, as predicted, there was a very nice volume surge in the stock. Almost 400,000 shares traded, and it certainly tried to work higher. There's a gap from $.49 to $.50, and it might fill that gap before heading higher, but who knows for sure.

I'm pretty sure the Government will take steps to allay the fears of S&P. More aggressive deficit fighting rhetoric will come out of the dunderheads in Washington, and the Force will be with us once again.

I predict we're not going to get any real relief from high oil prices for sometime. OPEC suggested it was going to cut production- citing a "lack of demand". I don't quite get how prices get up over $110 with no demand. I know speculators drive up prices based on global unrest that could interrupt supply, but still..... Give me a break. 

Coming Attraction For Value Investors

Watching and waiting, and I believe we're at the bottom. The small cap China sector can best be described as a mess right now. There's about 200 China based companies trading on the NYSE, NASDAQ, or AMEX. Most of them are quality companies. Most of them are providing the markets with really positive results.

However, of late, short sellers have brought a lot of attention and scrutiny to some companies who's numbers seem to good to be true, and it's turning out that some of them are too good to be true.

The entire sector has taken a severe beating. The focus has been on companies that came public through "Reverse Mergers".

So, how would you like to have been a China Small cap who did a traditional IPO in the middle of this mess? Painted with the same brush, but a different genre. Not a reverse merger. Massive due diligence done before embarking on the process.

Now, suppose this stock were trading about 33% below the IPO price, and at 4X trailing earnings and 30% top line growth.

Hence my observation- for "Value Investors". Tomorrow- after the market closes, look for an idea- $4 stock, 30% top line growth, $1 plus in EPS in 2010. I kid you not. Were it not for a few bad apples in a very strong sector, this one would be $10 today.

Attention KMart Shoppers. This is a Blue Light Special!!

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