Unrealistic expectations

This cartoon really sums up the approach that some take when it comes to retirement.  It is shocking to me that there are bright folks who earn a good living and don’t put anything away for retirement.  Forget about the rainy day, I am talking about retirement.

Some feel that when the time comes they will just ‘get aggressive’ to achieve a return.  The cartoon shown here is a great representation of that detachment from reality and if you have ever had to give folks advice, and let them know how unrealistic their expectations are, you will appreciate this.

I am in the same office building with someone who has an interesting view.  He talks about what to do with a spare $1,000 and literally said this the other day “If I could just turn the $1,000 into $4,000 or $5,000 in a few months, I would be happy”.  I am serious!  That was how out of touch he was with a realistic return.  My reply was something along the lines of “Really?  Really?!  You would be happy with 400% to 500% in 6 months??? Really?!  Really?!!”

I had to remind him that he had a poster in his office pitching a product from his company.  It was a product that was offering 1.92% annually.  He is pitching 1.92% annually and he is shooting for 400% – 500% in 6 months.  I can’t print my full response to his statement.  It went something like this “Are you f*#*ing kidding me?! Get real!  You have got to be joking.”

Don’t forget to set some funds aside from retirement.  The level of risk that you have to take in order to achieve a greater return is not something that you do in your later years.  With risk comes volatility.  You might have 3 years at 25% followed by a year of -20%.  That isn’t something that your portfolio can handle headed into retirement.  If you are 30 or 40, you have many years to make up the down year.  You don’t have it if you are already at the age where you need the funds.

Even if you don’t have much to put away, put something away.  $50 per month or $100 per month adds up over time.  Check out the following savings calculator to use your own assumptions.

I will continue to watch the stock of GAEC, but as of today, I am out. I covered my 2555 shares @ $0.40 per share. The whole trade was odd. I shorted with a limit of $0.50 only to get a price of $0.55. I was pleased at the price on my short, but this reeked of “painting the tape”. When attempting to cover the trade over the past few days, I found that I could not get a bid or ask on this. In most cases you can find a quote for an OTC stock at PinkSheets.com. In fact, your broker probably uses Pinksheets.com. Take a look at what comes up for Gulf Alternative at the site:

GAEC at PinkSheets.com

You can’t find a quote.  My hunch is that the market maker is a bit too cozy with this company.   Pure speculation.  From everything that I read about the company, there isn’t much there as far as operations or technology.  I am not sure what turned up after the 2 week halt by the SEC.

This company is too small to be on the radar of investors or the SEC, but there is enough of a market (created by promoters) to allow the folks that own the company to continue to sell shares and pay their salaries.   The company has virtually no revenue and stated in the quarterly report that the funds to operate and pay salaries are generated by selling shares.

From the quarterly:

We do not have enough cash to satisfy our capital requirements for the next twelve months and we rely on shareholder loans and sales of common stock to pay our operating and research and development expenses.

B. Management’s Discussion and Analysis of Financial Condition and Results of Operation

We currently have few assets and no income. We are continuing to develop our cellulosic ethanol feedstock manufacturing facilities.

I have another short order out there now.  I’ll post if it goes off, but I don’t expect this company to be much more than a trading vehicle for the insiders.

When treading in the pink sheets, you will find some real doozies.  Well, Gulf Alternative Energy (GAEC.PK) certainly fits that bill.  I am currently short the shares.  I shorted a few shares when they were @ $1.60 and within a couple of days, the stock was halted due to an SEC investigation into GAEC.  The shares were suspended for a couple of weeks and reopened at $0.50 per share.  I wish my short was of significant size.

From the SEC:

GAEC suspended by the SEC:
Jul 31, 2009
Pink OTC Markets News Service

Washington, D.C.— SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
RELEASE NO. 60410 / July 31, 2009

SEC SUSPENDS TRADING IN THE SECURITIES OF GULF ALTERNATIVE ENERGY CORPORATION

The U.S. Securities and Exchange Commission today announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of Gulf Alternative Energy Corporation, at 9:30 a.m. EDT, July 31, 2009, through 11:59 p.m. EDT, on August 13, 2009.

The Commission temporarily suspended trading in these securities because of questions regarding the accuracy of statements made by Gulf Alternative Energy Corporation in press releases to investors and on its website concerning the quality of the company’s technology and the company’s business prospects and agreements.

The Commission cautions brokers, dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company.

Further, brokers and dealers should be alert to the fact that, pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until they have strictly complied with all of the provisions of the rule. If any broker or dealer has any questions as to whether or not it has complied with the rule, it should not enter any quotation but immediately contact the staff in the Division of Trading and Markets, Office of Interpretation and Guidance, at (202) 5515760. If any broker or dealer is uncertain as to what is required by Rule 15c2-11, it should refrain from entering quotations relating to the securities of Gulf Alternative Energy Corporation until such time as it has familiarized itself with the rule and is certain that all of its provisions have been met. If any broker or dealer enters any quotation which is in violation of the rule, the Commission will consider prompt enforcement action.

If any broker, dealer, or other person has any information which may relate to this matter, they should contact Christopher Ehrman, Branch Chief, at (202) 551-4590, or by emailat ehrmanc@sec.gov.

There is little chatter about the company, but when you do find it, there are clearly some people who have followed the company for quite some time.

From Zekel at Hotstockmarket.com
The technology you reference has been alleged to be stolen from the inventors of the pre-processing technology. GAEC has no expertise in this field, no assets, a mountain of debt, and 30+ million shares (and counting) issued to management and friends at PAR Value – a virtual ATM machine!

Complaints have been issued to the SEC, including allegations that they (management at GFET/GAEC) stole over 6 million shares of partnering company, AETE.

William Carmichael, former CEO of GAEC, has audaciously taken GAEC’s equipment down the street to a new private venture called Proven Technologies, pretending to have clients (CNFO, Biotricity) and pretending to have proprietary equipment (which is the GAEC’s same equipment they are alleged to have stolen from AETE).

To say that this isn’t the first go round with the SEC might be putting it mildly:

From: http://www.sec.gov/litigation/litreleases/2009/lr20961.htm

Two Texas men, who perpetrated a massive e-mail spam campaign to drive up the demand for low value stocks they owned, will pay nearly $4 million in penalties and fines and will no longer be able to trade penny stocks under an agreement reached with the Securities and Exchange Commission.

The agreement, which was entered today in the form of two final judgments by Judge Kenneth Hoyt of the U.S District Court in Houston, prohibits Darrel T. Uselton and his uncle, Jack E. Uselton, from violating antifraud provisions of the federal securities laws and trading in penny stock. Darrel Uselton also agreed to pay $2,838,866.72 in disgorgement and prejudgment interest and another $1 million in civil penalties.

Another incredibly interesting point is the fact that I am placing a limit order to short shares @ $0.50 per share and the transaction is going off at higher price than my offer.  This reeks of a market maker who is in on the game.  A higher transaction price could be viewed as a positive for the stock. It appears as though the stock is up 10% today due to the transaction that I placed @ $0.50 hitting at $0.55.  My hunch is that if I were to offer 100 shares for sale @ 0.12 that my trade might just go off at $0.55 or $0.60.  I would try it but I don’t want to waste the trading fee.

Look at the history of the folks behind GAEC (GFET @ $0.03, no volume | AETE @ $0.13, no volume)

Here is another Gem from the March 31, 2009 quarterly report:

We do not have enough cash to satisfy our capital requirements for the next twelve months and we rely on shareholder loans and sales of common stock to pay our operating and research and development expenses.

B. Management’s Discussion and Analysis of Financial Condition and Results of Operation

We currently have few assets and no income. We are continuing to develop our cellulosic ethanol feedstock manufacturing facilities.

Gulf Alternative Energy

I am a bit perplexed by a couple of things.

1. With the relatively poor housing numbers this  morning, why are the housing stocks headed up? ie: BZH, HOV, etc.
2. How is the commercial real estate market holding up?  Read below.

Fitch Announces Expanded Review of U.S. Bank Commercial Real Estate Exposure.

Is housing in trouble?

This is one of the largest failures in the past couple of years.  It is pretty apparent that we are far from out of the woods.  I am not sure that we will retest our March lows, but things are not exactly rosy.

- Commercial real estate crunch is likely.
- More failed financials likely (AIG ?)
- Jobless recovery has been propped by government money. That will run out, in time.

———————-

On Friday, Colonial BancGroup, a large lender that rode the excesses of the nation’s real estate boom, was seized by federal regulators, making it the largest bank failure of 2009 and one of the most costly since the collapse of IndyMac Bancorp last year.

via U.S. Seizes Colonial BancGroup and Sells It to BB&T – NYTimes.com.

Insider trading data can often be telling.  Generally, it isn’t easy to read for many people.  Some might be surprised how many more insider sales there are than purchases.  Keep in mind, insiders are generally obtaining their shares through option, grants stock grants, etc.

However, the disparity in the size of the insider transactions this past week could be very telling.  I haven’t had a great feeling about the economy and have withdrawn from market activity a bit. There is still another debt crisis looming… Commercial mortgages.  There is a slim chance that this can pass with companies finding ways to refinance and/or locating sources of funds to keep a non-performing property going.

We could take the insider sales transactions as a sign that the folks running corporate America may not feel that our prospects are as strong as this market is acting.

Within the past week there were a couple of fairly good sized commercial foreclosures.  More to come…

Last Week’s Insiders Transactions: 10 Buys For $60 Million, 136 Sells For Over $1.15 Billion

via Last Week’s Insiders Transactions: 10 Buys For $60 Million, 136 Sells For Over $1.15 Billion | Phil’s Stock World.

Bob

If you are interested in hearing more from the writer of the article in Rolling Stone regarding Goldman Sachs (Matt Taibbi), you should listen to the Adam Carolla Podcast from 8/10/2009.  There is some profanity in the podcast, so if you are easily offended…

If you aren’t familiar with Adam Carolla, give him a listen.  I have been an avid listener for years and his podcast is terrific.  Very smart humor from the guy that Jimmy Kimmel dubbed “American Genius”.

Adam Carolla Podcast

I normally post my quick thoughts via Twitter.  I’ll spit a few out here since Twitter has a major failure this morning.

• I feel like the ultimate contrarian indicator right now.  Distorted, wrong, missing out.
• Sold AIB and C yesterday.  How is that for timing?!  AIB up 8.7% today, C up 3.6% right now. I made money on the trades (met my goals), but I HATE TO MISS THE GAIN!
• Could I be that wrong on AIG?  Short covering??  Sure, but there is more than that.  I still don’t see AIG here for the long term, but the value of the parts just went through the roof.  The shelf offering pricing is looking pretty great right now. Tomorrow will be a big tell.
• Companies are going to benefit before individuals in this recovery. The head count reductions and cost reductions are why the market is a leading indicator.
• CELG had some very good news and got knocked with a downgrade today.  Better entry point for someone.
• GLW floating aimlessly.  I like the restructuring of their green tech division, the street didn’t seem to.
• Is the risk of a commercial real estate implosion suddenly gone?  I don’t see it.  In my eyes, it still exists.  Better earnings from many co’s are certainly not thanks to taking on more commercial space.  Personally, I lost a good tenant due to cutbacks from his co.  We could/should see a major fail coming up.

This is what Michael Gondry came up with as a caricature for me.  I really don’t look like this.  However, my recent trading activity has made me feel like this.

Distorted Bob

To say that Goldman is sailing along would be a major understatement.

However, when you control the sail and the wind, along with the tide and the water level, you should be able to sail like this.

Goldman Sachs $100 Million Trading Days Reach Record

Goldman Sachs

via Goldman Sachs $100 Million Trading Days Reach Record Update3 – Bloomberg.com.

Looks like Mario Gabelli loves Omnova.  I am not sure of when Gabelli, and related entities, purchased the shares, but it is clear that they love Omnova (OMN).

Here is the ownership detail in a recent 13d filing.

Gabelli Funds
1,492,000 shares
3.40% of class

GAMCO
3,294,843 shares
7.51% of class

Teton Advisors
250,000 shares
0.57% of class

Mario Gabelli is deemed to have beneficial ownership of the Securities owned beneficially by each of the foregoing persons. GSI is deemed to have beneficial ownership of the Securities owned beneficially by Gabelli & Company. GBL and GGCP are deemed to have beneficial ownership of the Securities owned beneficially by each of the foregoing persons other than Mario Gabelli and the Foundation.

Full filing can be found at: 13d filing for Omnova 13d

Mario Gabelli