Sunday, March 20, 2011

20 March 2011 Ignore That Man Behind The Curtain


20 March 2011 Ignore That Man Behind The Curtain

No I am not talking about Hilary Clinton and the intervention in Libya, I am talking about stock pimping. As you can imagine we are on every kind of e-mail and snail mail list you can find about investing. Almost every week, we get a stock tip from (Don’t bother is pure stock pimping at its worst.) and even though I know these are purely speculative and usually done just to bump a penny stock the author and his friends are already in, they do get my attention from time to time.

This week was no different. It is a gold stock. It wouldn’t be right for me to mention the name of the stock GUNPowder because this newsletter has spent months following the secret little company GUNPowder and that is why I can’t divulge it’s name GUNPowder to you. What I can tell you is the stock is selling for about a buck and the sales job the newsletter is doing is quite impressive.

Well as we read the 16 page newsletter for the stock, we decided to let our little Brindle Caine Terrier down on the floor and ToTo went running to the booth near the stage with all the fire and smoke and Jumbotron pimping the stock. Toto went behind the curtain (Did you know the real ToTo actually broke its leg filming WOO when of the witches guards stepped on its leg, But I digress.) to the SEC filings page and there was the quarterly earnings report for GUNP. Guess what? They have no sales, no profit, it appears to be a holding company for some guy in England. They changed their name in 2008 from Business Service Inc. to GunPowder Gold.

My point is, when the wizard manages to get your attention, don’t forget to let your dog down on the floor and start sniffing around. You may actually find the man behind the curtain and save yourself a lot of frustration and embarrassment.

Barron’s this week.

The cover story was and advertisement for investing in Japan. The cover story by Leslie P. Norton does a great job of explaining why Japan based investments were cheap before the tragedy and even cheaper now (dah!) but should be considered for the mid term to long term investor. (What is the half life of a bad investment?) They discuss 26 or so equities which are “unloved” and with time should recover nicely. You would know about half of them. One ogt my attention Takeda Pharmaceuticals, but it appears it is not traded in the US. (Interactive Broker customers might have a shot at it. DO YOUR HOMEWORK.)

This week, Alan Abelson redeemed himself with us by providing and interesting holistic view of the doings in Japan. The 40,000 foot point of view was helpful in putting together some of the pieces of the currency, sovereign debt issues, equity issues nuclear issues. It was a good read. (As I mentioned, Forsyth’s article concerning the Yen and the G-& intervention was phenomenal. We could see that being case study’s at Wharton and Harvard.)

Santoli, one of my favorites explores the many notions that this correction could be done. He reminds everyone that the bulk of big investors and analysts were looking for a 507% correction and we now have that. We were pontificating about a 5-20% correction under normal circumstances. Those guesses of a 5-7% correction were also under normal conditions. We don’t think this is over YET. Let’s see what happens in Japan and Libya and points east and look for a couple more day’s of positive accumulation before we get back in.

The Week Ahead

There are six key economic data points this week. But before you go back to your Google homepage and look for something more interesting to read, we will not bore you with our take on Existing Home Sales (Down), New Home Sales (Down), Durable Goods Orders (UP), Initial Jobless Claims (Down), GDP Figures (UP), and Consumer Sentiment (Down), because all of these will be back round music to Libya, Japan, Yemen, Bahrain, US Budget politics, and European Sovereign debt issues.

We will expect to see the major market down another 2% this week. Look for the S & P to end around 1,253 (We understand that 1,250 is an important resistance point) and the Dow to finish at 11,620.

Pick of the Day

Now we have been warning you this in NO TIME TO BUY. 75% of the impact on a stocks price is market trend. We are in a correction. However is the market trend is due to a specific cause (Oil prices, Tsunamis, social unrest, and Nuclear calamities) that correction can be your friend if you find a good stock that will benefit because of the bad news. We may have found one.

RAE Systems Inc., together with its subsidiaries, develops and manufactures multi-sensor chemical and radiation detection monitors and networks for oil and gas, hazardous material management, industrial safety, civil defense, and environmental remediation applications. It also offers safety, environmental, and personal protection monitors and equipment; and portable and fixed use safety products to the mining industry. The company's sensor and measurement products include photoionization detectors that are used to measure volatile organic compounds, toxic chemical warfare agents, and toxic industrial chemicals; catalytic bead pellistors, which are used to detect and measure combustible gas; and non-dispersive infrared sensors that are used to measure carbon dioxide and hydrocarbons. These products also consist of electro-chemical sensors, which are used to measure oxygen and toxic gases, such as carbon monoxide and hydrogen sulfide; solid polymer electrode sensors that are used to measure oxygen; and solid-state scintillation detectors, which are used in neutron and gamma radiation. The company's integrated wireless products consist of AreaRAE, a wireless-enabled gas detector, which provides transmission of monitoring information to a base station located two miles away from the detectors; and MeshGuard that has the ability to transmit radio data in and around metal structures that are difficult for clear radio transmission. Its radiation products include Gamma RAE II R, NeutronRAE II, AreaRAE Gamma, AreaRAE Steel Gama, and DoseRAE that are used in handheld instruments to detect low levels of radiation on a real-time basis, as well as dosimeters, which are used in nuclear power plants to protect personnel from radiation exposure. RAE Systems Inc. sells its products through its sales force, and a network of sales representatives and distributors worldwide. The company was founded in 1991 and is headquartered in San Jose, California.

This is a small cap stock with little debt and little income. It appears to be below the radar, but its accumulation rating is sliding upwards. It sells for under $2.00 a share. From reading the SEC filings, there is some information implying aht a revocable trust may be attempting to take the company private. Beyond that the company looks well positioned to drive some sales and apparent profit in the Japanese market. Hysteria may push products outside the Japanese market.

IBD has some positive ratings and as we mentioned it looks as though some players MIGHT be taking positions in the stock. We are getting in Long below 1.75 a share. We will look for a double by fall and then reevaluate. If the “going private” action carries, we could loose about 75% of our value. This is a speculative play. BE CAREFUL.

Sometimes a picture does not tell the whole story. In a quote earlier today, President Obama said and I quote, “Qaddafi has lost his legitimacy as a leader.”

Salve Lucrum


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