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Special announcement- the OTC
Journal will be down for some routine maintenance in the near future.
There is an edition scheduled for next Monday or Tuesday, and shortly thereafter
we will take the site down for a day or two.
The only BLOG posting this
week was on this year's darling, Spicy Pickle (OTC BB: SPKL), which
I believe is still a little ahead of itself. However, after making an outstanding
run in pretty short order post introduction, the stock is really holding
up magnificently. I speak with shareholders of this company all day long,
and I can tell you one thing without a doubt- many shareholders love this
company, and don't really seem concerned about where it might trade over
the next several months. They are more concerned about where it might trade
over the next several years, and wondering just how big the company will
be. Review the BLOG for my thoughts.
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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In
the OTC Journal Doghouse |
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The OTC Journal is devoted
to very risky and volatile ideas in the microcap end of the stock market.
With the exception of a few departures (see AAPL and CREE),
I cover companies that are very risky, and we are going to have some losers.
Here is a short list of stocks I
am very content to continue to cover: AAPL, SPKL, PNWIF (hasn't had
much to say of late), TTGL, NIHK, and TCGD (very early in the game
for this one). EFSF is a bit disappointing as a stock right now.
All the product introduction delays have shareholders concerned. I, on
the other hand, am very impressed with the financial condition of the company
when considering how poorly sales have gone. They are "positioned". I'll
stick with all of these names. CPNE is a weird one. I have sold
very single share, and don't know where I am on it until I see Q3 numbers.
I don't trust the management. I'll continue to post BLOGs with thoughts.
There are two problem children that
I am very concerned about. New Century Industries (OTC BB: NCNC)-
long on promise and short on result. This one has been a huge disappointment.
I interviewed CEO Dan Duquette at great length last June, and have pages
of notes concerning expected contract awards. At this point, I thought
they would be knocking the cover off the ball with Windmill contracts,
and follow up with accelerating business from the Boeing 787 next year.
What has the company actually delivered?- nothing. Horrendous performance.
Sell it and get out. Their trailing sales increases suggested they were
on the right track when I picked it up, but their performance has been
atrocious. I have no faith. I'm dropping it. If you held it below the SSL
level of $.45, it's a problem. Probably a good idea to take your
losses and move on. This one has been a disaster.
Another recent idea that has been
troublesome is Enigma Software (OTC BB: ENGM). The stock traded
far above my suggested entry level of no more than $.20 on the first
trading day, but has since simply fallen apart. This is a very illiquid
stock- there are very few shares in the public float, and it seems to have
to ability to double or be cut in half on very little volume. I didn't
even have time to publish a stop loss on the stock. It closed at $.08
on Friday, but could simply run back up if breathed on. I don't know what
to make of this one, but the company is sure delivering some good numbers.
I guess we should hang in there for a while on that idea and see what happens.
A few of you have been whining about
TTGL
of
late. As readers know, at this price I consider it my #1 idea, but it hasn't
got any traction. You would do well to remember I first introduced this
stock about 1 year ago at $.85, so it's more than a double in that
time frame. You would also do well to look at a chart- the stock couldn't
get past $1.40 for months, and frustrated everybody. Look where
we are now. This one will start trading well when you least expect it.
In the microcap space, you are going
to have losers. That's just the way it is. They become psychological cancer
if you don't cut them out of your portfolio and move on. If you can't accept
the fact that there will the OTC Journal will publish some losing
ideas, cancel your subscription using the unsubscribe link. It's not for
you.
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Market Shaky
on Rocketing Oil |
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This past week has been a real blowout
in the market. The parabolic rise in oil and the falling dollar has investors
and traders freaking out- $95 dollars a barrel? Wow- unbelievable.
In 2006 Oil rocketed from the high
20s to the mid 70s, and the market tanked. The market assumed skyrocketing
oil prices would throw the economy into a recession (there's that "R" word
again). The "R" word is back this past week, and it has stocks swooning.
Want to see a scary chart? Check
this one out:
The value of the dollar against other
currencies is shown in red, and the price of a barrel of oil is shown in
green. The pricing is relative, but the point is obvious. As the dollar
sells off, the price of oil rockets. Which leads us to a market divergence.
I was struck by an interview I heard
earlier this week with the CEO of one of the major oil refining companies.
He said his company buys oil in the open market everyday, and there is
no shortage of supply. So why is oil rocketing?
It's simple. Oil is up because the
dollar keeps going down. As the dollar falls, it requires more of them
to buy the same barrel of oil, so the price of oil is going up as we are
such huge disproportionate consumers of the greasy black stuff.
Perhaps we should look at why the
dollar is falling. When there is excess supply of commodity, the price
goes down. Here's the list:
-
The US Government spends more money
than it takes in.
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In order to make up for the short fall,
the US Government prints money it doesn't have in the form of newly issued
Treasury Bonds which it sells at auction, and the FED's use of interest
rates and money supply. This is called deficit spending.
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We spend a lot more money than we take
in for 2 reasons: The current administration has lowered taxes, while simultaneously
paying for a very expensive war that we normally don't have in the budget.
There are times when everyone spends more than they make. For us, it's
becoming quite prolonged.
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It can be argued that decreasing tax
rates actually stimulates tax revenues through additional taxable transactions
in the economy- this is called the multiplier effect- I happen to believe
in it.
In summary, here's the problem. As long
as we keep printing more dollars in huge quantities, the dollar is likely
to keep falling, and oil prices could continue to rise to equalize the
falling dollar. Many argue a weak dollar is actually good for the economy
as it makes our goods and services cheaper to other nations, and brings
money in. I happen to believe this as well.
Here's the $64 trillion question-
how high does the price of oil have to go to throw us into a recession.
Are we there we now? Will the consumer quit spending, lock up the economy,
and cause a free fall in the stock market?
I don't know what the magic number
is. I know the market was spooked this past week, and sold off rather violently.
I can tell from trading patterns that investors are a bit nervous right
now.
Seasonality trumps high oil prices
for the next three months. The bar got reset a bit in the last week as
we move into the best time of the year to own stocks. Which- coincidentally
is the best time of the year to sell what you own and don't want to hold
long term.
I am warning you now- if oil keeps
rising and the economy continues to slow as a result, look out below from
about March on. The market will really tank next summer. For now, it is
still full steam ahead for the next three months as PR ratios continue
to be reasonable and earnings continue to rise.
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