I answer the questions my readers’ searches pose, Part II

Q: Is NNRI very undervalued?
A: Ha ha ha ha. Seriously, what is wrong with you? What could be undervalued about a little over-hyped penny stock with no assets, no sales, sketchy management, and a $66 million market cap?

Q: Are there problems with technical analysis?
A: Yes. It doesn’t work. Actually, I have to qualify that: there is some evidence that momentum exists, such that companies near their 52-week highs (or lows) tend to outperform (or underperform). However, complicated technical analysis is worse than useless.

Q: I want to invest in YTBLA.
A: I mourn for your net worth, which shall soon fall.

Q: Why is YTBLA’s stock price declining?
A: Because the company’s business is nothing more than a pyramid scheme that shall soon fall apart.

Q: I want to find a blog on cheap stock under $2.
A: Um, just because a share price is cheap does not mean anything. That is like saying that a 14″ diameter pizza cut into 100 slices is bigger than one that is cut into 4 slices. What matters is the stock price in relation to earnings per share, book value per share, and cash flow per share.

Q: Who are some famous short sellers?
A: Jim Chanos is probably the most famous. Jesse Livermore made money both long and short back in the day. Manuel Asensio achieved some prominence. Andrew Left of Citron Research is a prominent short seller of microcaps. I will soon join the ranks of famous short sellers.

Q: Are hedge funds an Illuminati scam?
A: Yes. I work directly for the core council of the Illuminati, so I would know. We also control all short selling activity, the UN, all major governments, and just about every union and company. The only major entity not controlled by the Illuminati is Rupert Murdoch’s News Corp. Of course, he has his own issues.

Q: Who are Krispy Kreme Short sellers?
A: They are smart people. I almost shorted Krispy Kreme [[kkd]]. I didn’t and I missed out on making a lot of money. C’est la vie. My hunch is that Krispy Kreme will go bankrupt within the next two years. I am not willing to bet money on that, though.

Q: What about Continental Fuels Inc?
A: It continues its slow slide into irrelevance. That is the usual occurrence after a penny stock is pumped (that was last April and May in this case). The company’s stock price has fallen by 60% since I last called it way overvalued and over 90% from its peak.

Q: Is the SEC investigating Continental Fuels (OTC BB: CFUL)?
A: No. I previously contacted the SEC’s enforcement division about the company’s promotion of its stock at the same time it valued its stock at 1% of the market price in certain debt conversion transactions. The enforcement division never followed up on this activity. I guess people like Martha Stewart are a lot more dangerous than pump-and-dump schemes that bankrupt the gullible.

Q: Is it true that you cannot short sell OTC BB stocks?
A: No. It is just that most brokers do not allow it. I am aware of only a couple that do allow it. Also, for stocks priced below $2.50, there is negative leverage involved in short selling. A short seller needs $2.50 in cash for every share sold short (even if the shares are $0.50). This is why many OTC stocks maintain absurd market caps: their low share prices prevent short sellers as a practical matter from selling them short.

Disclosure: I have no interest in any company mentioned above. I have a disclosure policy.

0 thoughts on “I answer the questions my readers’ searches pose, Part II”

  1. Hi,

    Elsewhere someone asked the following

    Is it true that you cannot short sell OTC BB stocks?

    and you responded

    A: No. It is just that most brokers do not allow it. I am aware of only a couple that do allow it.

    Who are they?

    David

  2. The full service brokers allow it (eg, Merrill and Bear). They probably only would deal with it for their better customers. Prime Brokers and anyone who caters to hedge funds generally allow it. Interactive Brokers is the only discount broker of which I am aware that allows it. They do not cater to the casual investor.

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