To OTC Journal Members:

Don't forget to check out our new feature: Daily Market Commentary can be found every day just prior to the market's opening at www.otcjournal.com.
 

Market Comment: Greenspan Moves Markets This Week

I believe the market is nearly human. Just like most people, the market overreacts emotionally in the short term, but gets it right in the long term.

Over the past few weeks the market moved into one of its "bad news and good news is bad news" phases. It became fixated on the realization that interest rates are going up this year, and in typical fashion emotionally overreacted.

A slew of outstanding earnings reports resulted in lower successive days until Wednesday. When Fed Chairman Alan Greenspan declared the threat of deflation had disappeared on Monday, both stocks and bonds were crushed as the market assumed inflation was back. Higher interest rates were priced in the next day.

On Tuesday, the Fed Chairman calmed the market by declaring "extraordinary productivity acceleration means pricing pressures are not anywhere near where they would be under normal circumstances". Greenspan meant prices aren't going up, which means he expects inflation to be tame. The market decided it wasn't so bad, and stocks and bonds rallied.

In my view, interest rates will not be a factor in stock market performance this year. The Fed will raise rates. Perhaps 1/2 point is in the cards before the election. 

Most economists consider a 3% Fed funds rate to be neutral, meaning 3% is the point at which interest rates are neither stimulating nor slowing economic expansion. By the end of this year, we will still be around a 1% Fed funds rate, leaving the accommodating interest rate environment intact.

The market rolled up nicely in January, but has since been grinding in a range. 1140 is like a magnet for the S&P 500. It gravitates back to that level when it gets too far below or too far above. Look for a breakout to the upside as the market realizes inflation won't be a threat for some time, and both the quantity and quality of earnings is as good as it gets.
 

OTC Journal Micros- Getting Ready To Rock

Some of the OTC Journal's current ideas are getting their fair share of the economic expansion. If you have been patiently waiting for some market moving events, a couple are on the way starting with this edition.

NetWork Installation was in the news on Friday. Your stock just became worth about 20% more than it was last week, and I will explain why below.

Monday's edition will highlight an epiphanal news event from one of our big winners in 2003. It has been quiet lately, but looks to come back to life after Monday's news.

On Tuesday, I plan to introduce a new idea. This will be my microcap idea in the current nutritional mega trend towards Low-Carb/Sugar Free eating. Consumers are beginning to grapple with America's obesity epidemic. Atkins and South Beach are everywhere. This company's sales are exploding. Save some funds to get in early.
 

NetWork Installation (OTC BB: NWIS) News; CEO Retires Shares

NetWork Installation got next week's party started with news after the market closed on Friday. NWIS is our microcap idea in the exploding Wi-Fi internet access infrastructure build out, which analysts predict will grow ten fold over the next three years. The stock has already been a big win for OTC Journal members, but is just on the front end of a major expansion phase. A glance at this year's chart proves this one has been a strong performer.

NetWork's operations are focused in the Southwestern US. They have offices in Southern California and Las Vegas. I expect the company to expand to a nationwide footprint over the coming year.

CEO Michael Cummings retired 2 million shares of his founders stock on Friday. The number of shares issued and outstanding has now dropped from 12.8 million to 10.8 million.

Therefore, if you are a shareholder, your percentage of ownership in NetWork just went up by almost 20%. Theoretically, if the stock was worth $5 at the close on Friday, it should now be worth $6 on Monday. The price should start to adjust on Monday.

At this point, you are probably asking yourself why the CEO would voluntarily retire shares? The answer: the company now has a more favorable capital structure for expansion, and therefore more flexibility to maximize shareholder value. 

NetWork Installation can capitalize on its participation in the wireless infrastructure build out by expanding. They can open new offices, acquire existing companies in a highly fragmented industry, or do both.

The company can issue stock for an acquisition, which it did when it acquired Del Mar Systems. The acquisition resulted in a big move in the stock price because they also acquired leading edge VoIP technology. The company can open new offices, which requires capital. It can raise the capital through the issuance of stock.

Wherever we are headed from here, NetWork Installation's CEO has set the table for the next expansion phase. NetWork now has 2 million shares to work with before there is any dilution to shareholders from where we were last week.

Here is the complete text of Friday's news release for your review:
 

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