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 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

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

Gulf Alternative Energy Corp (GAEC) is a rather sketchy company.  I shorted and made a few dollars from 2.45 down to 2.13 (11.8%).   The support at any price appeared to unravel and I attempted to short again at $1.60.  I was unable to get much as they fell, but ended up with 55 shares.  This trade might just pay for lunch.  Lunch at Subway or Moe’s.

The SEC halted trading in the shares for the following reason:

It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Gulf Alternative Energy Corporation (trading symbol: GAEC) because of questions regarding the accuracy and adequacy of information contained in press releases and on its website regarding the quality of the company’s technology and the company’s business prospects and agreements.

Full detail at: http://www.sec.gov/litigation/suspensions/2009/34-60410-o.pdf

I am no expert, but that sounds bad.  Real bad.  Not good.  Bad!  What is surprising is that the SEC is picking up this blip that barely even garnered a reaction on the Yahoo stock message boards.  You are almost always able to find chatter around some of these P.O.S. companies on the YHOO finance boards.  Someone must have blown this company in.  I can’t see any way that it would be on the radar otherwise.  My hunch is that it is a jealous, or bitter, former employee or partner.

From TimothySykes
GAEC I shorted because the company is the sketchiest thing I’ve seen in a while as evidenced by its top two shareholders being named “Joe Schmoe”…the stock is being manipulated high from 25 cents to $2.50 in the last month, I’m short 800 at $2.36 and will hold…the key here is simply finding shares to short, the stock shows no signs of stopping so I’d love to get squeezed so I can take a greater position at higher prices as this kind of manipulation almost always ends in 50%+ intraday collapses.

We’ll see how it plays out.  I am short a whopping 55 shares @ $1.60.  My hope is that it opens up on 8/14 (that is when the SEC stated it will) and that it will be at around $0.50.  I’ll cover and take a buddy to Moe’s with my $50.

Wow.  I just went to the Gulf Alternative web site to grab a logo for use in this story.  The site is a wreck (seem image below).

Gulf Alternative Energy

Actually, it isn’t as bad as it first appears.   Well, it is, but not if you know how to find the real site:

Dead: http://www.gulfalternativeenergy.com
Real:  http://www.gulfalternativeenergy.com/index.php

It actually appears as though this company was recently GFET.  Odd and sketchy to say the least.

When I bank my small gain on GAEC, I’ll probably take the guy to lunch who brought Omnova to my attention (OMN).  I picked up OMN @ $2.90 and it has surged to $6.30.  It shows no signs of slowing.  The chemical sector is hot and earnings are behind them.  There is room to continue.

After pounding on AIG for a few weeks, I finally realized that I should be making money on this call.  I hammered AIG from the reverse split point on.  (remember, I owned it from $2.02 to $1.45).  When they did the reverse, I felt there would be very little but down.  The parts of this company do not equal the whole.  The 1 for 20 offering didn’t do much other than mask the dismal condition.  Wait… do you know what else it did?  It allowed for certain entities to participate in the just announced shelf offering.  Innnnneresting!

When would you announce news that isn’t likely to help your shares or your company?  Friday after the market close!!  Wait, that is when they did announce their shelf offering.

AIG Shelf Offering

AIG is in trouble.  I finally placed a small short on AIG today by buying put contracts.  I have avoided doing so for quite some time due to the fact that AIG options are priced with a SICK premium.  The movement needed to get into the money is big.

The 40%-50% recovery in the shares, over the past week or so, initially felt like a dead cat bounce.  After a few days it felt like something more than that.  I tweeted about it a bit.  Didn’t make sense to me.  I was perplexed.  Well, the shelf offering that came out after the close today (Friday Jul 17th) might explain a bit of it. There is support for this dog from some high places.  People “in the know” can make money from these movements and events.  They can make money on all sides, from the buy side, sell side, and underwriting side.  I haven’t looked yet, but I am going to guess that Goldman is the lead.  Hang on… I’ll go look… no one listed yet.

The recent support could have been generated to garner a good price for the offering.  I know, I know, I sound like Mel Gibson in the Conspiracy Theory movie.  Or, I sound like Phil at PhilStockWorld.com.  Either way, I might be right.  Phil, what do you think?

Back on topic, I am pleased that I took the action today to buy some puts.  As always, when I am right, I wish that I committed more funds to the trade.  I bought August 14 puts based on the fact that I felt AIG moved back way too fast.  The move didn’t seem natural and there was no news that called for a 40% bounce.  A typical dead cat bounce would have died off much sooner and wouldn’t have bounced as high.  The action prior to today’s offering reeks of the action prior to an offering.  The higher the price, the more money raised.  Less of an impact on the shares (perhaps).  But in the end this is a dog that is in rough shape.

This offering will cause dilution and if it weren’t for the recent run, it would have been nearly impossible to place.  The terms on this one will be interesting.  Those who commit to the offering will likely be assured a profit thanks to recent action.

The shares are going to come back down.  They should reach 9 before they reach 14.  I am happy that I stand to benefit from this since I have been pounding the table calling it a dog. I am not alone.  Jared Levy, who is on Fast Money on CNBC, said it well when he said “They’ve got a lot of debt and I have no idea how they are going to service it”.   Well said, Jared.

Here is what it comes down to.

• They are selling assets of any value to pay down the debt.
• Continuing operations cannot support the debt.

I have a couple of topics to touch on with this entry.

First, pay attention when trading.

Second, stop fighting what you believe to be true

This isn’t the first time I have mentioned how important it is to have your head in the game when trading.  Not all trading software is dummy proof and you can make mistakes if you aren’t careful.  I was a bit fatigued today and decided to make a relatively small long term investment in a stock trading around $147 per share.  When trading, I get used to shares that are in a certain price range.  Determining the number of shares to buy or sell for a trade is generally in the hundreds or thousands of shares.  For example, a trade in MTB, GLW, or CELG would be in hudreds of shares.  A trade in shares of Citi (C) or AIB would be in thousands.

It isn’t often that I am trading something that is north of $100 per share.  Today was no exception.  I was INVESTING!  I decided to open a position in shares trading around $147.  I had a trade in my head as I was making this purchase and placed my order for 250 shares rather than 25 shares.  Due to my setup, I don’t get a total trading cost confirmation from my software until the trade goes off.  I had intended to purchase about $3600 worth of shares only to find I made a purchase of $36,000 worth of shares.  Oops!   Big oops.

I was in a position that has bitten me in the past.  Not one where I made a large trade by mistake, but one where I held onto something when I didn’t like the risk reward.  At the point the trade went off, I felt that there was possibly another $0.50 upside in the stock for the day.  I felt the downside probably carried about $2.00-3.00.  That kind of risk/reward didn’t suit me and I got rid of the excess shares within about 15 minutes of my trade.  Within about 2 hours, I was missing out on a gain of about $700.

The investment that I describe above was in shares of Goldman Sachs.

In earlier articles I mentioned how Goldman Sachs is at the center of it all.  Well, rather than continuing to fight (on whatever ground I was fighting) I decided to pick up some Goldman shares as a long term investment.  If I believe what I read, write, and discuss, Goldman will find a way to make money regardless of what the economy does or what the markets do.  They are a huge part of the market.  In some cases, they put themselves in the position to be the tail that wags the dog.

• Is there a bubble? Goldman will short it and cause the fall…
• Are things oversold?  Goldman will buy in with great entry points helped, in part, by their own research and trading action and participate in the upside movement.
• Is oil trading on supply and demand of the oil, or of the instrument that is used to trade the oil?  Doesn’t matter… Goldman will work it to their advantage.
• Compensation an issue with firms that took TARP money.  Easy one.  Pay it back and bring in the warrants at great prices.  Ahhhh.. it is good to have friends in high places.

Goldman Sachs

What will Goldman do with the riches that they will generate?  Well, for one, I now hope that their shares fly high.  However, I would imagine that their are some other classes of shares that participate in some rather sweet dividends.  I suppose that I could look that up, but I wouldn’t be allowed in the club anyway.  Goldman common is good enough for me.

If you are a regular reader, you will probably know that I am a big fan or Corning (GLW).  They are positioned so well for the spending that is still occoring in the economy and also to take advantage of the spending that will come once we recover.

Flat panel: TV shift continues
Green Tech: Filter products
Network build outs: ongoing and stimulous money helping to spike the current spend
Cell phones and other devices: Gorilla glass ®.  Let’s hope for that Apple tablet type device to boost 2h 2009.

If you are looking for a nice long term investment, consider Corning.  There has been a bit of a swing in share price, but anything under $15 a share should look like a fantastic entry point in a couple years time.

I am trading in some option contracts right now.  Down a bit on one batch and up a bit on my second batch.  I might just see myself out of these contracts tomorrow.   However, I am getting a bit greedy and will consider a hedge of a gain rather than an outright sale on these contracts.  We’ll see what tomorrow brings.

Corning - GLW

Google Chrome OS vs. Windows Operating System

Google confirmed their operating system that has been discussed quite a bit in the past.  In fact, it is something that become obvious to Bob and Scott some time ago:

Google OS PC is Here
The Google PC is Coming

This Google Chrome OS news was confirmed late last night on the Official Google Blog.

This certainly changes the game in the PC world.  What a time to jump in.  Microsoft is coming with Windows 7 and netbook style PC’s are all the rage.  Google’s OS is taking aim at that.

Speed, simplicity and security are the key aspects of Google Chrome OS. We’re designing the OS to be fast and lightweight, to start up and get you onto the web in a few seconds. The user interface is minimal to stay out of your way, and most of the user experience takes place on the web. And as we did for the Google Chrome browser, we are going back to the basics and completely redesigning the underlying security architecture of the OS so that users don’t have to deal with viruses, malware and security updates. It should just work.

This is a bit different than my earlier speculation that this would be running with Android as the base OS.  In fact, it is essentially the Network Computer that Larry Ellison claimed was the future way back in the mid 1990′s.  Scott McNealy was on board with the network PC talk about the same time.  Google might just have the timing to make it happen.

In 1995, you couldn’t use the web as your platform.  The apps weren’t there and you didn’t have the ability to be productive with a network PC only.  A local set of apps were an absolute must.

If Google can do this right and ensure an open platform for developers to latch on to (wait, I think I heard facebook say that), then they could create an entirely new ecosystem the way that Apple did around the iPhone.  Create a platform, a marketplace, a user base and development will come.  Plug in your app, give up your 30% and you are in business.

How will a company like Facebook react to this.  They had a similar idea to make Facebook a platform and not just a ‘website’.  Guess what, the Twitter distraction might just turn Facebook into the next MySpace.  The bold plan to create Facebook as a platform is being lost in favor of an eyeball grab.  The worst thing for any company finding that Twitter is distracting them and stealing their user base is the fact that the founders of Twitter don’t need to be bought out. They have been there and done that.

I expect some interesting fallout from the Google OS.  If the OS takes hold, here is what I will watch for:

• What happens with Firefox?
  Gobbled up by Google was my feeling in the past.  Maybe not anymore.  Would MSFT gobble up Firefox? Perhaps
• How does Facebook react?
  Have the abandoned the Facebook as a platform to replace Windows?
• How do the PC manufacturers handle this?
  Can they jump on board without a backlash coming from Redmond?
• What does Apple do?
  Is there a reaction needed from Apple?  They continue to grow share from folks that realize that their phone was that far ahead of everyone else, so let’s buy their computer.  ”Besides, I like their ads” I say “was” to the phone being that far ahead. The Palm Pre is the mobile OS that has finally mounted a challenge to the iPhone in terms of quality.

We have been starved for a catalyst in Tech.  Could this be it?  I doubt it, but it will be a fun game to watch.

As a small business owner, I am finally starting to appreciate the benefits of having an Internet business. The amount of inexpensive information is priceless. Recently, I introduced live chat to my website and have noticed the pluses and minuses of this approach. First, you always have to be at the computer. That’s a negative. I am not always at the computer. Yesterday, had to leave and someone was waiting to chat 56 minutes. That’s not good. On the positive side, it looks like it is adding credibility to my site and I am seeing some increased interaction. Also, there is some reporting available with this live chat software that is also good. I have noticed where people are coming from, which browsers they are using, etc. I’m using LivePerson.com chat software and it seems to be doing the job. Now I just have to get a ball and chain so I am ALWAYS at my computer.

AIG has completely given up.  As I have mentioned, I owned it from $2.02 down to $1.45 in a long term account.  I changed my mind about the “long term” viability of AIG and expect it to be swallowed up by a government entity as soon as they are done splashing the $180 billion dollars that we (taxpayers) gave to them.  Money well spent?  Probably not.  Consider AIG the sacrificial lamb.  If the gov’t gave $180 billion to all the names that ended up receiving it through AIG, there would have been a bigger fight against the various stimulous packages that have been pushed through.

By using the shell of AIG, they can dole out billions to foreign entities, Wall Street favored firms (GS), and others.  It is  more orderly to set up one company to be the hated scapegoat than to tar the entire industry.  Aparently GS is putting their money to good use with huge volume automated trading.  GS is in the driver seat.  If you don’t believe that, please read about how Goldman Sachs is at the center of the financial universe.   Chasing the mighty dollar!  Markets and country be damned!

AIG is now trading at $14.11. That is a split adjusted $0.70!  I feel lucky to have only lost 25%!

AIG