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EverydayInvestor (< 20)

December 2008



Celebrate the return of pumped penny stocks!

December 29, 2008 – Comments (10)

Proteonomix (Pink Sheets: PROT) is in the business of ... well it doesn't matter. It is a tiny little pink sheet company with no audited financials, a stock on fire (from $1 to $13 in just over a month), a negative book value, no hope of ever earning money, insider self-dealing, and a web site that was until recently overwhelmed by typos (thanks to fellow stock trader Investors Live for noticing and recording).  [more]



How to lose 110% of your money in real estate in 2 years: A happy ending with a few morals

December 25, 2008 – Comments (16) | RELATED TICKERS: LQD , JNK , VTI

If you subscribed to my twitter feed (which is a a must), then you were likely confused by my tweet from earlier today in which I simply said "free!!!!". That tweet was a celebration of having sold an investment property (a 4-family rental property) two days previously. I lost approximately 110% of my equity investment in the property. This is in addition to the money I lost when I sold my house at the beginning of 2008. And yet I couldn't be happier. Why? Because real estate has not bottomed and prices will continue to fall. Furthermore, over the next couple years, even after the bottom in housing, prices will remain stagnant. So while I lost a lot of money, I have avoided losing more. And don't cry for me--I've been doing quite well in my day job, so my financial situation is the same as it was before I lost all that money in real estate.  [more]



The SEC isn't the only incompetent regulator: Canadians are incompetent too

December 22, 2008 – Comments (6)

Check out this article by David Baines of the Vancouver Sun. After spending over $100 million (Canadian) on a new "integrated market enforcement team" (IMET) division of the Royal Canadian Mounted Police (RCMP), there has been a grand total of 1 conviction and two charges filed.  [more]



All the Pundits are Idiots: An Example with House Prices

December 22, 2008 – Comments (6) | RELATED TICKERS: OHB

It is actually not uncommon for experts to be completely wrong and to make very dumb mistakes. A case in point comes with the charts of house prices relative to trends shown at, taken from a presentation by Chris Mayer (who recently wrote an op-ed in the WSJ in favor of subsidized mortgage rates).  [more]



The stock market as state lottery

December 22, 2008 – Comments (12)

Guess who plays the lottery disproportionately? Poor people. Guess who buys the riskiest stocks with the lowest returns (particularly penny stocks)? Also poor people. Interesting article here (pdf). People are also more likely to purchase volatile penny stocks in an economic downturn.



Bernie Madoff Scandal Spells the End for Funds of Funds

December 19, 2008 – Comments (13)

Not one of the hedge funds of funds or banks that steered investors to Bernie Madoff's funds has admitted their idiocy in failing to spot huge red flags. They have all tried to blame the SEC and other regulators. While the regulators failed spectacularly, even a successful effort on the part of regulators could not have stopped Madoff before he had harmed many investors. That was the case with Enron, with Bre-X, with US Windfarming, and with every penny-ante Ponzi scheme. A regulatory authority cannot act until a crime has been committed, and because of the need to prove a crime, there is little chance of stopping frauds when they begin.  [more]



AE Biofules Stock Drops 88% in One Day and Demonstrates Another Risk of Penny Stocks

December 15, 2008 – Comments (4)

Besides being sketchy companies, most OTC BB and pink sheets stocks pay for a lot of things in shares. They also fund operations by selling shares at huge discounts. Those shares sold at discounts are restricted for a period of time (usually a year). What happens when that restriction runs out? The shares tumble as everyone tries to get out at once. Case in point, AE Biofules (OTC BB: AEBF) today dropped 88%.  [more]



Treasury Bonds Offer Return-Free Risk

December 05, 2008 – Comments (20) | RELATED TICKERS: SHY , TLO , TIE.DL

“There are no bad bonds, only bad prices,” the traders used to say. They should say it again, only louder. In the spring of 1984, long-dated Treasuries went begging at yields of nearly 14 per cent in the context of an inflation rate of just 4 per cent. Those, too, were fearful times, the recollected horror being the great inflation of the 1970s. Inflation was ineradicable, the bondphobes said. Now a new generation of creditors espouses the opposite proposition. Deflation is baked in the cake, they say.   [more]



Calling the bottom on Junk Bonds

December 04, 2008 – Comments (6) | RELATED TICKERS: JNK

Okay, maybe it is not the bottom, but I am willing to bet that junk bonds will offer a good return on investment for those who invest now. At current yields, over 20% of the companies in a junk bond portfolio would have to go bankrupt each year for the portfolio to lose money. Large investors of course should pick and choose, avoiding bonds issued by private-equity backed companies. For smaller investors, the JNK ETF may be worth considering. It currently has a 19.99% SEC yield. The NAV at yesterday's close was $27.22. I may buy a small bit of JNK in the near future.




Some topical poems (with apologies to Carl Sandburg and WH Auden)

December 03, 2008 – Comments (5)

PILE the forclosures high in Las Vegas and Bakersfield.
Shovel them under and let me work—
I am the deleveraging; I cover all.  [more]



64% of stocks underperformed the Russell 3000 since 11980

December 02, 2008 – Comments (11) | RELATED TICKERS: VTI , VEU , VEA

Take a look at this article and see for yourself how poorly most stocks do. First, some other interesting facts from the study:  [more]

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