After watching Gordon Ramsey beat up restaurant owners on Kitchen Nightmares, I’m having a hard time eating out. It’s pretty disgusting how dirty some of these kitchens are. If you saw the episode on the Mexican restaurant, you remember the beans in the trash can incident. Just plain nasty. Also, judging by the filth, in some of these restaurants, the health department is not doing a very good job.

One thing is painfully obvious; fresh ingredients and a clean kitchen are two “must have” parts of a viable restaurant. I’m no chef but I also know you don’t put cooked chicken with raw chicken or use rotten peppers, rotten potatoes, etc. Maybe I can run a restaurant. Some of these owners are in for over a million dollars and still hanging on. If I ever buy one, I’m not buying the inventory…that’s for sure! I’ll also make sure the kitchen is clean. Oh, and I’ll have a basic menu.

The best part of each show is when Gordon asks the owner to taste what he/she is making…and the owner refuses. It’s a wonder more people aren’t more seriously affected by eating out. If you haven’t seen the show, I recommend it. If you like eating out, I don’t recommend watching.

After taking a couple month “break”, I’m back. Excited and ready to go with, what else, a new business venture. As an entrepreneur, I often accuse myself of being unable to stay focused. I have my strengths. I have my weaknesses. Focus is a weakness. Everyday I have a new idea. Some are better than others. Some are not worth the time wasted in thinking about the idea. But sometimes, I think of an idea that fits.

I have a background in starting, buying, selling, and brokering small businesses and I’ve decided to get into the business brokerage industry. My business is really easy to explain. We help sellers find buyers.

So, I am getting into this business immediately. First, however, I think it’s important to create a map. If you go somewhere you should have a map right? Right.

So, for the last several months, I’ve been building my map. Today, I am happy to say I am ready to start following where the map will hopefully take me. Actually, I still have some fine tuning to do but feel confident that I can pay attention to other things now…like BobandScott.com.

About the Business:
Peer Business Group
We educate business buyers and sellers. We work with privately held businesses with annual revenue between $500,000 and $10,000,000.

Down - Bob

If you are a regular reader of BobandScott.com or or the Bob and Scott feed, you will see that I haven’t had a positive view of this economy and my feeling is that the market got way ahead of itself.  Today could be a pretty big move toward a prolonged down move.

The Gov’t threw a TON of money at our economic problems. Unfortunately, the public sector is hoarding any cash they have and not backing up the buying. How is the car market?  How is the housing market? How do you feel if you are an insurance agent or financial planner? Has your insurance rate gone up? Look at your own neighborhood and ask the questions about how things are going.  Your own back yard should be telling.

When real estate sales are rolling along, there is equity coming out of homes and moving into alternative investments.  That has not been the case. Folks who used to qualify no longer do (2 in 3 applications do not qualify).

I expect the downside in the DJIA to test 9100.  This down move could be prolonged due to some very likely bank issues that could rock the market.  Remember, the bank projections were based on a worst case scenario unemployment number.  Not only are we at that number, and likely past it, but those who are employed are seeing salaries, hours, and overtime cuts.  9.5 ouch.  9.5 with less payroll. Big Ouch.

I asked Am I too doom and gloom? back on 9/17/2009.  I really don’t think so.  Now, I am thinking that I might not have been negative enough.  Sure, I moved some money to cash, but I haven’t positioned enough for the downside move.

Let’s also not forget that we just got out of the 3rd quarter.  Wall St. (the gov’t involved portions anyway) has seen their pay scrutinized and cut.  Bonus that comes from a strong quarter was at risk.  Guess what happened at the end of the 3rd quarter?  We powered up.  Nice move when it comes to bonus time.  Traders, you can remove the window dressing now.

What do you believe?

By the looks of a 3 year chart on IMGG, you would think that they cured a disease or struck oil.  Not the case.

Imaging 3 (imgg) Stock Chart

IMGG is a stock that has had a very rapid run as of late.  The company offers 3d imaging technology, but the stock is acting like a typical pump and dump.  When reviewing a pump and dump, you need to read any press with a grain of salt.  One of the easiest things for a company, whose stock is being hyped or promoted, to say is that they are a development stage company.  When that is said… hands are off.  That would explain the lack of revenue and the lack of revenue in the bank.

Deeper digging will give you the facts.  The following is from Tim Sykes (TimAlerts.com) on 9/24/2009

Imaging3, Inc. (IMGG) is another pump & dump, promoted by the same scoundrels as behind GVBP…10 cents to 70 cents/share so far, many people ask, why not just buy these? Because I’m not good at it, I don’t sleep well when I do and these things can fall out of bed quicker than I can send an alert so it’s not worth the risk….much easier to short when they show signs of cracking…sometimes short even down to 0 like GVBP…this one will be nice, but I hope it gets above $1 first to give it more downside.

IMGG did not crack $1.  Not even close.  It reached $0.70.  I shorted at $0.67 and took a small gain covering at $0.52.  The downtrend is continuing and the event that they were hyping on 9/30/09 appears to have been a non-event.

The biggest tells here are with the promoter behind the stock and snapshot of the company.   Read any news on this company with this thought.  ”Enough to string you along believing it could be real”.

When trading in this arena, you have to be a cynic.

I have been a big fan (and owner) of Corning for a number of years now.  I own some in my traditional account and a couple of retirement accounts.

I have been making the case for the company, and a market that they own a huge share of, taking shape.  They are the leader in emissions and pollution control.  There are products produced by Corning that you wouldn’t imagine.

Corning - GLW

As a leader in the emission space, any future EPA regulation regarding smokestack gases will help Corning.  They are in a market, as the leader, where they don’t have to grow share because the market itself is growing.  They can grow this division of the business by hundreds of millions over the next couple of years thanks to the regulations that most people felt Democrats would put into place.

If it weren’t for this little “economic meltdown” thing, this probably would have happened sooner.  You are getting GLW at a very good price right now.  If you have some funds to invest, it might make sense to break your buy into 2 transactions.  Should we experience an October crash, you will be able to get in at an even better price.

EPA moves to regulate smokestack greenhouse gases

Boy oh boy, it doesn’t feel that way to me right now.  Many companies have not yet come to grips with the financial truth.  There are plenty of folks who feel we are out of the woods, but it doesn’t feel that way to me.  The market is the tail that is wagging the dog (economy).

Perhaps things are turning.  The market doesn’t want to go down on bad news.   Is there terrible news to come?  We’ll see.

What I do know is that there is certainly a shift in the economy.  There is still money out there.   Rather than a call center selling magazine subscriptions, they are manning the phones making collection calls.  There are plenty of collection agencies that are thriving right now.  Banks needed capital and sold off bad debt at bargain basement prices.  Collectors are bringing the funds in and getting paid.  They are able to settle debt for lower amounts than they might normally have.  The debt cost basis was less because the banks needed to raise cash and a book of bad debt was a relatively easy sale.  The collector wins, the deadbeat consumer wins, and the taxpayer looses.  Remember, we are covering the banks on a lot of these losses.

I also see an interesting trend in the insurance business.  I am not talking about the grand scheme, I am talking about the Main Street insurance agency.  There are a couple of companies eating the lunch of some old players who raised rates to make up for investment loses.  Large public carriers, such as Allstate, need to keep Wall Street happy.  Investment returns over the past couple of years haven’t exactly kept the boat afloat.  Let’s not forget the fact that the companies also have solvency requirements.

Insurance companies, especially public ones, tend to be very shortsighted.  They need to make a change now… tighten guidelines…. raise rates…. etc.  What this allows for is a carrier such as Geico or Esurance to continue down the path to win market share.  Sure Geico is part of a public company (Berkshire Hathaway), but they are shielded by the massive parent.  Because of that, they can be patient, grab share, and become the dominant player.  Who wins here?  The consumer, the company (GEICO).   Who loses? Main street insurance agents?  Perhaps.

Money is out there.  It is shifting.  Biotech…. tech….dot com…financials… next.

Bernanke Recession

We might be turning the corner in our recovery (at least that is what the talking heads are saying).  I am not convinced.  I have been wrong quite a bit lately.  I moved to about 35% cash last week and missed this last bump.  I placed a bet against AIG holding above $34 (I think it is headed back to the teens soon) and am losing that one.

We are not out of the woods here, but the tail might just wag the dog as it did on the way down.  This economy is not great.

I am not positive what the next catalyst will be to move us up or down, but it appears it is going to take a lot.  Wall Street players (GS) are moving money by the billions and practically printing profits.  According to Meredith Whitney, the banks and real estate are far from out of the woods.  She predicts many more bank failures along with a potential 20% decline in housing prices.

Any strong indication of that being the case could cause a short term panic.

I am going to be patient with my position here.  I might make a longer range play with AIG.  I can’t stomach the fact that this company is worth less than $0, yet trades above $35 per share.  Bad.  The parts do not equal the whole!!

More about the commercial real estate troubles by following the link below.

Hotels, Retail Properties Make Up More Than 63% of Largest Problem Loans – CoStar Group.

I feel like I have a sense of what I should be doing in this market.  Back in April, I put a note on my calendar to move to cash in September.  Perhaps not a bad idea.  I moved to about 30%-35% cash during the downturn today.  Perhaps that was foolish.  Perhaps it wasn’t enough.  Only time will tell.

I also took the opportunity to place a few trades on vehicles that will move with the downturn.   I looked to the Diamonds (essentially a trade on the DJIA) and to AIG.  View my trading log to see the few moves that I made.

I placed 1 option trade on AIG that turned a profit of 5.57% in about an hour.  The problem is that I left another 8-10% on the table. The stock reacted the way I expected and I only have a small gain to show for it.

I can’t believe how wrong I have been on AIG over the past few weeks.  I have been calling for them to “go away”.  As I often say, we are never wrong, we are  just early or late.  I am not alone in the feeling that AIG is simply a trading vehicle at this point.  (Investors Trading 3 Stocks that May be Doomed).  This is nearly an ideal vehicle.  There is more than 80% of the company tied up in hands that will not act (remember the taxpayers own more than 80%). This could be manipulation.  I don’t see AIG as a long term play.  As a short term trading vehicle it is great. One analyst has this to say about AIG.

“their price is almost certain to go to zero”.

The other trades made between yesterday and today were in options on the Diamonds (DIA).  I bought puts (a bet that the shares will move lower).  In all cases I left much more on the table than I took off.  I have become tight after a few plays of mine headed the complete opposite of my expectations.  I did pull a few percent on each play, but holding a bit longer would have yielded gains of more than 8x my profit (approx 80% gains).  I am not talking about holding for the rest of the day, I am talking about simply sticking with the momentum (10 more minutes).  On 2 occasions, I was headed out of the office and was forced to place a conservative limit, but on the others, a more disciplined approach could have yielded much more.

HINDSIGHT!

Today was a very poor day for the market. I don’t feel comfortable that I raised some cash today and the small profits in my trades simply kept my spirits up.

FAIR WARNING!: This market could get ugly. Down, down, down. Vacation time is over and there is big money ready to move this market. I don’t think that we will be able to digest bad news the way we have been able to for the past few weeks.  In fact, the market shrugged off some good news today. Not a great sign for the bulls. Stay tuned.

Bob

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.