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Comments
in the BLOG |
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The BLOG is chock full of
new entries over the last 48 hours. Readers have been asking for updates
on NIHK, EFSF, CPNE, PNWIF, and USEI. I complied on
all of the above, and posted new thoughts- fresh starting Thursday. We
are having a great time with several of these ideas, and it is far more
efficient to provide comments in the BLOG and let you go read the
ones of interest to you. Early next week I will post a new BLOG
with ideas on where we go from here with BTYH.
The BLOG is your opportunity
to ask questions and offer comments. I will make an effort to answer every
legitimate question. If I don't know the answer, I will contact the management
and get the answer. Alternatively, if you have questions you don't want
publicly displayed, you can always email me directly at editor@otcjournal.com.
To use the BLOG, simply go
to the home page at www.otcjournal.com
- the BLOG scrolls down from the upper right hand corner. The most
current journal entries appear on the right hand side of you screen. Check
back frequently for updates particularly when stocks are moving to overbought
or oversold levels in volatile markets.
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Drinking the
Kool-Aid: Musings of a Grizzled Microcap Vet |
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Here's a cautionary thought frequently
bandied about by microcap vets- "Don't Drink the Kool-Aid".
You might ask yourself, what does nostalgic childhood beverage have to
do with investing in microcap stocks?
I'll tell you. Microcap investors
are inherently optimistic. We are "glass half full" people. We always want
to believe the best is possible, and we are easily swayed by a good story.
We believe the best is possible until proven otherwise.
"Drinking the Kool-Aid" stems
from the 1978 Jonestown Massacre, a bleak chapter in history. Jonestown
was a communal settlement built in the mid 1970s in northwestern Guyana
by the Peoples Temple, a cult from California led by Jim Jones,
for whom the settlement was named.
913 committed mass suicide under
gun point by drinking a punch laced with cyanide and valium. It wasn't
actually Kool-Aid, but that phrase has stuck. Cult leader Jones convinced
the congregation a CIA sponsored militia was on its way to murder them
all. Many thought it was going to be another "fake suicide", which had
been rehearsed in the past. Every individual who drank the punch, including
Jones himself, ended up perishing.
The metaphor is a bit harsh, but
nevertheless to the point. When microcap stocks trade as well as they have
of late, we are all in danger of "drinking the Kool-Aid"- another
words believing these companies are all going to be enormously successful
and the stocks will just go up forever.
The ultimate mass stock market Kool-Aid
binge was 1999 to 2000 when anything with "Dot-Com" in the name exploded
to absurdly overvalued heights long before their business models proved
out. When that bubble burst it was truly ugly. Individual investors are
finally coming back to the market for the first time in a meaningful way
right now- six years later.
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A
List I Love |
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Here's a list I love:
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PhotoChannel Networks: (OTC BB: PNWIF)
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Commerce Planet: (OTC BB: CPNE)
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Titan Global: (OTC BB: TTGL)
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eFoodSafety (OTC BB: EFSF)
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Nighthawk (OTC BB: NIHK)
What do all the participants on this
list have in common? Several things. First, they are all trading at or
near OTC Journal all time highs. Secondly, if you acted on any of
these ideas at or near where I first featured them you are now enjoying
a very significant return- doubles or more in most cases.
So- is it time to lock in your profits?
In a word- NO. I don't think we are even close to the top.
I believe CPNE and PNWIF will both end up moving to the NASDAQ
later this year, and both could have a long ways to go. I believe EFSF
could still have another double in it, and I believe TTGL is the
most undervalued of the bunch. That one could easily triple from here.
I believe NIHK could also have a huge move left in it before the
summer months.
I also believe the current bull market
for small stocks could easily run through 2008. If you own some or all
of those stocks, you are an early entrant into this sector. More crowds
are coming.
However, it is important to keep
a clear head and realize there will be a top at some point in the future.
It's never too early to start thinking about mitigating your exposure with
partial sales.
As it stands today, at this time
I would be more of a buyer than a seller of any of those names. However,
start thinking in terms of taking partial profits in the late April/early
May time frame. Keep some cash on the sidelines for summer bargains. It
happens every year.
Wall Street is the only place in
Earth where consumers don't want to buy merchandise when it's on sale.
We prefer to buy the merchandise when there is more demand than supply,
and everyone wants to buy at the same time.
As these market caps start to dizzying
heights, be careful not to drink the Kool-Aid.
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