Ethics – Page 5 – The Aleph Blog

Three Dimensions, and Printed, but not Real

Posted on 10 December 2013 by David Merkel

Okay, let’s run the promoted stocks scoreboard:

Ticker	Date of Article	Price @ Article	Price @ 12/9/13	Decline	Annualized	Splits
GTXO	5/27/2008	2.45	0.014	-99.4%	-60.9%
BONZ	10/22/2009	0.35	0.001	-99.6%	-74.2%
BONU	10/22/2009	0.89	0.001	-99.9%	-79.4%
UTOG	3/30/2011	1.55	0.001	-99.9%	-93.0%
OBJE	4/29/2011	116.00	0.350	-99.7%	-89.1%	1:40
LSTG	10/5/2011	1.12	0.015	-98.7%	-86.2%
AERN	10/5/2011	0.0770	0.0001	-99.9%	-95.3%
IRYS	3/15/2012	0.261	0.000	-100.0%	-100.0%	Dead
RCGP	3/22/2012	1.47	0.300	-79.6%	-60.4%
STVF	3/28/2012	3.24	0.490	-84.9%	-67.1%
CRCL	5/1/2012	2.22	0.028	-98.8%	-93.5%
ORYN	5/30/2012	0.93	0.038	-95.9%	-87.6%
BRFH	5/30/2012	1.16	0.420	-63.8%	-48.6%
LUXR	6/12/2012	1.59	0.015	-99.1%	-95.6%
IMSC	7/9/2012	1.5	0.800	-46.7%	-35.8%
DIDG	7/18/2012	0.65	0.049	-92.5%	-84.4%
GRPH	11/30/2012	0.8715	0.053	-93.9%	-93.5%
IMNG	12/4/2012	0.76	0.063	-91.7%	-91.4%
ECAU	1/24/2013	1.42	0.330	-76.8%	-81.2%
DPHS	6/3/2013	0.59	0.007	-98.8%	-100.0%
POLR	6/10/2013	5.75	0.090	-98.4%	-100.0%
NORX	6/11/2013	0.91	0.160	-82.4%	-97.0%
ARTH	7/11/2013	1.24	0.182	-85.3%	-99.0%
NAMG	7/25/2013	0.85	0.785	-7.6%	-19.1%

	12/9/2013		Median	-97.2%	-88.4%

Market regularities are heartening.? It’s astounding how regular the losses are from promoted stocks.

On to tonight’s loser-in-waiting, Makism 3D Corp [MDDD].? This is another company with no revenues, has never earned a dime, etc.? It used to be a company that supposedly was trying to improve cellular telephony, but never earned a dime doing so.? So they bought a UK company that was supposedly working on 3D printing, and surrendered the company to them.

It would be incredibly surprising that a company of three people would be able to overthrow the 3D leaders — DDD and SSYS.? They have invested a lot of time, money, and effort to improve 3D printing, and a startup can beat them with less than a million bucks, and less than a year, with a young undifferentiated staff?? I don’t think so.? Or, as an old-style pinball machine might say, “TILT!”

I don’t buy it, and you should not either.? As with all promoted stock scams, the hard part is identifying who benefits.? My guess is affiliates of the guy who wrote the glowing report.? The company has disclaimed ay responsibility.

In any case, avoid promoted stocks.? Do your own research, and buy stocks that you find attractive.? Don’t buy anything that another is trying to pitch you.

Two zeroes merge, and should we expect a positive result?? I think not.

Two More Good Questions

Posted on 29 November 2013 by David Merkel

I had two more good questions in response to my piece Why I Resist Trends.? Here we go:

I think you have some idea which ones are the best by the discount to intrinsic value. If you were running a business (which you are when you are investing) and you had 10 projects with lets say a minimum return of 5% but a spread of 20% to 5% wouldn?t you first invest in the 20% return project and fund each project in descending order of return. By equally weighing aren?t you equally investing in the 5% and 20% projects? If you were a CEO shouldn?t the shareholders fire you? I know the markets have more volatility than projects due to the behavioral aspects of investing but in my view equally weighting is more important when you do not know much about your investment and less important when you do. I think you know a lot about the companies you invest in. Why not try an experiment. Either in real time or historically take a look at what would have happened overtime if you would have weighed you selections by discount from intrinsic value. I think you will be pleasantly surprised. I and John Maynard Keynes have been pleasantly surprised.

I do this in a limited way.? In the corporate bond market we have the technical term “cheap.”? We also have the more unusual technical term “stupid cheap” for bonds that are very undervalued.

When I have a stock that is “stupid cheap” I make it a double weight, if it passes margin of safety and other criteria.? On one rare occasion I had a triple weight.

But I meant what I said? in Portfolio Rule Seven — “Run a largely equal-weighted portfolio because it is genuinely difficult to tell what idea is the best.”? I have been surprised on multiple occasions as to what would do best.? Investing is not as simple as assessing likely return.? We have to assess downside risks, and possibilities that some things might go better than the baseline scenario.

I don’t use a dividend discount model, or anything like it.? I don’t think you can get that precise with the likely return on a stock.? My investing is based on the idea of getting very good ideas, as opposed to getting the best ideas.? I don’t think one can get the best ideas on any reliable basis.? But can you find assets with a better than average chance of success?? My experience has been that I can do that.

So, I am happy running a largely (but not entirely) equal-weight portfolio.? It is an admission of humility, which tends to get rewarded in investing.? Bold approaches fail more frequently than they succeed.

By the way, though Keynes was eventually successful, he cratered a couple times.? I have never cratered on a portfolio level, because of my focus on margin of safety.

On to the next question:

What are the tests you use to check if accounting is fair?

Start with my portfolio rule 5, here’s a quick summary:

Over time, I have developed four broadbrush rules that help me detect overstated earnings. Here they are:

For nonfinancials, review the difference between cash flow from operations and earnings.? Companies where cash flow from operations does not grow and? earnings grows are red flags.? Also review cash flow from financing, if it is growing more rapidly than earnings, that is a red flag.? The latter portion of that rule can be applied to financials.
For nonfinancials, review net operating accruals.? Net operating accruals measures the total amount of asset accrual items on the balance sheet, net of debt and equity.??? The values of assets on the balance sheet are squishier than most believe.? The accruals there are not entirely trustworthy in general.
Review taxable income versus GAAP income.? Taxable income being less than GAAP income can mean two possible things: a) management is clever in managing their tax liabilities.? b) management is clever in manipulating GAAP earnings.? It is the job of the analyst to figure out which it is.
Review my article ?Cram and Jam.?? Does management show greater earnings than the increase in book value plus dividends?? Bad sign, usually.? Also, does management buy back stock aggressively ? again, that?s a bad sign.

Then add in my portfolio rule 6, here’s a quick summary:

Cash flow is the lifeblood of business.? In analyzing management teams, there are few exercises more valuable than analyzing how management teams use their free cash flow.

With this rule, there are many things that I like to avoid:

I want to avoid companies that do big scale acquisitions.? Large acquisitions tend to waste money.
I also want to avoid companies that do acquisitions that are totally unrelated to their existing business.? Those also waste money.
I want to avoid companies that buy back stock at all costs.? They waste money by paying more for the stock than the company is worth.
This was common in the 50s and 60s but not common today, but who can tell what the future will hold?? I want to avoid companies that pay dividends that they cannot support.

Portfolio rule 6 does not deal with accounting per se, but management behavior with free cash flow.? Rules 5 and 6 reveal large aspects of the management character — how conservative are they?? How honest are they?? Do they use corporate resources wisely?

On Ethics in Business and Investing

I would add in one more thing on ethics of the management team — be wary of a company that frequently plays things up to the line ethically and legally, or is always engaged in a wide number of lawsuits relative to its size.

I know, we live in a litigious society — even good companies will get sued.? But they won’t get sued so much.? I realize also that some laws and regulations are difficult to observe, and interpretations may vary.? But companies that are always in trouble with their regulator usually have a flaw in management.

A management team that plats it “fast and loose” with suppliers, labor, regulators, etc., will eventually do the same to shareholders.? Doing what is right is good for its own reasons, but for investors, it is also a protection.? A management that cheats is in a certain sense less profitable than they seems to be, and eventually that reality will manifest.

All for now, and to all my readers, I hope you had a great Thanksgiving.

Few Things Are Impossible

Posted on 10 October 2013 by David Merkel

Buffett supposedly once said something like, “We’re paid to think about things that can’t happen.”? What would be examples of this?

The Housing Bust, and the ensuing funk with banks.
Hurricane Katrina, and the flood that it helped create.
The Tohoku Earthquake, with the surprising damage to the nuclear reactor
Four hurricanes hitting Florida in 2004.
The Fall of the Soviet Union
The Murderous effect of forced collectivization in the Ukraine, China, Cambodia, and other places.
The rise of Hitler
Chernobyl
Long US interest rates would fall below 5%.

This will be a short piece, but what I want to stress is that things that pundits say can’t happen sometimes do happen.? The application is that it is not impossible that the US Government defaults for political reasons.? Brinksmanship is a tough and heady thing, and it is possible for all parties to miscalculate and be intransigent.? Pride brings out the worst in mankind.

I’m not saying a default will happen, or that it is more likely to happen than not.? I am only saying the probability is non-zero, like rolling boxcars or snake-eyes at the craps table.? Thus credit default swaps [CDS] on a US default have risen considerably, because a few are hedging the possibility.

Personally, I think it would be interesting to see what would happen in a default, because we don’t have a lot of data points there, even for a short default.? That said, vain curiosity of mine should not be satisfied to the harm of many, so would prefer that the GOP and Dems would agree to a short-term extension of the debt ceiling combined with spending reductions.

But nothing is impossible among men.? Pride has often driven the otherwise sane to take courses of action that harm their enemies more, even as their friends are harmed also.

The Bible says, “An eye for an eye, and a tooth for a tooth.”? People look upon it as cruel, but it was meant as a limit.? You can’t force suffering at a greater level than you were harmed, and the threat of equal suffering would lead offenders to negotiate a monetary settlement to protect their eyes and teeth.

But when men will not restrain themselves, and seek to gain revenge, all manner of bad consequences occur.?? There is something to having limits on political processes.? There is something to having manners in society.? There is something to having personal self-control.

We have lost a lot as a society as the Greatest Generation has handed power over to the Baby Boomers.? We agree far less on what society ought to pursue, and what is right and wrong.

That is why the fights in DC are so bare-knuckled.? Gerrymandered districts send ideologues to Congress, which have very different views on policy and ethics.

Back to the main point — when the two or three sides of the debate have widely different views should it be surprising that it is possible that we may end up with a stalemate leading to a temporary default?? A permanent default is another matter — I don’t think the politicians are that stupid, at least not yet.

Quiet Companies Are Better

Posted on 26 September 2013 by David Merkel

I appreciate the companies in my portfolio that don’t say much.? They just do their work, and don’t advertise it.

There is a bias among promotional companies, that one must promote the company in every press release.? I disagree.

Just be honest.? If you don’t have anything significant to say, don’t say it.? Spend your time on growing the business, rather than advertising accomplishments.

Truth: I would prefer that companies simply issue a 10-Q or 10-K, and do not hold a conference call for analysts.? Just give us the data, and let us analyze it.

Let the analysts do their work, and don’t answer their phone calls.? Create a genuine level playing field where no one gets to talk with management unless everyone is invited to listen.

I realize this is radical, but I am trying to be genuinely fair, which does not happen often on Wall Street.

On Avoiding Con Men

Posted on 22 August 2013 by David Merkel

I’ve written on this topic before, but I want to take a different angle of attack on it tonight.? Before I do, I would like to give links to some of the things I have written on the topic:

Okay, enough.? I’m surprised that I have written so much on this topic.? There’s more, but I leave out the marginal stuff.

This article is partially prompted by my review of Octopus.? But it was triggered by my receipt of an e-mail today, that when I clicked on the link, led me to something like this.

Passive income is one of the ways that scammers appeal to the greed of people.? You get money, and you don’t have to work.? But passive income stems from buying or creating something that will have continual demand.? That takes effort or ingenuity at taking risk, and if you are wrong, you could lose a lot of effort and/or capital.

Passive income is easy to achieve.? What is hard is making sure that it continually rises, and that it stays at a high level relative to capital deployed.

With President Obama, his book “The Audacity of Hope” brought him a lot of passive income.? But there was risk involved; who knew that he would be elected President?? Few of us writing books will get so great an audience, and get such a long tail.? Most books are here and gone.? Same for most songs.? Same for most plays, etc.? Royalties are not as easy as they seem.

Most royalties are wasting assets.? Mines get mined out.? Wells go dry.? Things that are published stop selling as much.? In that sense they are worse than bonds, because the yields decrease over time.

So, no, passive income isn’t a solution, and may end up delivering less than conventional investments.

Developing a Defensive Mind

I have a saying:

Minds work best when they are like castles, when there is a moat, and defenders at the ready to deal with deceivers with arrows and boiling oil.

Here is my main advice: you need to be skeptical, but not cynical.? Skeptics question, but can be convinced with adequate evidence.? Cynics think the world is rigged.? Here’s their flaw — they can be tricked into scams where they think they are on the rigging side, when they are not.

Here’s my advice to aid your thinking: the world is not rigged.? There are few if any significant conspiracies that deny wealth and power to the masses.? The reality is more banal.? Some people, as a result of their training, networking, and effort do better than others.? Most people don’t put forth sustained, focused, intelligent effort that allows them to accumulate wealth.

Are there some that make money off of government connections?? Yes, but they are not the rule, and they don’t advertise for passive capital.

Passive capital is a highly competitive place to be.? Making money with money is desired by financial institutions, pension plans, endowments, etc.? If there were an easy way to do it, the big guys would have figured it out long before you.

If it seems to good to be true, it probably is

Trite, but true.? Condition your mind to dismiss schemes that cannot fail, investments that are a one way ticket to riches, etc.? Get a sense of the scammer voice, where he invites you into a secret “club.”

Look, if I had a path to easy riches, would I share it?? No.? All riches stem from hard mental or physical work, even if you inherit it.? That is why you have to distrust those who try to scam you through proffering easy riches.? There are no easy riches.

There are no secrets in investing.? Don’t let anyone tell you that they have a secret tactic.? I don’t have a secret tactic.? I do have my own methods, which draw from a lot of well known methods, and my own sense of what works in business, which also stems from well-known ideas.

Avoid anything that makes you think you are in the inner ring — the precious few, who due to connections have been able to escape the ordinary lot of men, because they are part of the club that has the secret, or government connections to a secret program.

If someone has a great opportunity, and need passive capital, they will advertise it boldly, because they want the cheapest cost of capital.? Those that limit the message to a select few are likely scamming.

Final Points

Pay attention to auditors and custodians.? They protect you, and they should be high quality, and unaffiliated with the promoter.? Avoid those that do not market broadly — what I mean here is those that don’t go through major brokers.? The more exposure an idea has the more likely it is valid.?? That said, highly exposed ideas will likely produce market-like returns.? There is a trade-off here.

Also, all investing involves uncertainty.? Reject those that tell you something is a sure thing.? THERE ARE NO SURE THINGS!

Sigh.? Do I have to go to that level of emotion/energy?? I GUESS I DO! Because the scammers keep coming around and milk the unwary.

PS — I know my readers are smarter than most, but if you have friends or relatives that you think might need this, please forward it on.? Delete this last line to protect their self-esteem.

Book Review: The One Thing

Posted on 22 August 2013 by David Merkel

Most of us don’t focus enough.? We let important projects lag, while working on matters that are less important.

This book takes the approach that you will do best if you block out the first four hours of your workday, and work on the one task that will make all other aspects of the business work better.

Doing “a little of this, a little of that,” tends to waste time.? We are most productive when we focus.? In an internet age where we live with a huge distraction in front of us, it is all the more imperative that we take control of our time, and focus on the most valuable task.

Quibbles

This book is focused, and as such, you get a lot of repetition.? I’m not crazy about that from a literary point of view, but the author is trying to drive a simple point as many times as he can.

Who would benefit from this book: Anyone trying to improve their time management would benefit from this book.? If you want to, you can buy it here: The ONE Thing: The Surprisingly Simple Truth Behind Extraordinary Results.

Full disclosure: A dear friend gave me this book.

If you enter Amazon through my site, and you buy anything, I get a small commission.? This is my main source of blog revenue.? I prefer this to a ?tip jar? because I want you to get something you want, rather than merely giving me a tip.? Book reviews take time, particularly with the reading, which most book reviewers don?t do in full, and I typically do. (When I don?t, I mention that I scanned the book.? Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.? Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.? Whether you buy at Amazon directly or enter via my site, your prices don?t change.

The Fed Needs Valuation Actuaries (and More Steel in the Spine)

Posted on 20 August 2013 by David Merkel

I reviewed the following report from the Federal Reserve to Congress today, and found it disappointing.? From my prior experience as an actuary, and the time that I spent on the asset-liability committee of a small bank, I know that? the banking industry is far behind the life insurance industry on risk control.? The Fed would have done far better to have studied the works of the Society of Actuaries and the National Association of Insurance Commissioners, and learned from their efforts.

Now, I know that the contingencies of banks are far less predictable then those of life insurers.? Further, life insurers have long liabilities, whereas the liabilities of banks are short, and thus, they are more subject to runs.? But liquidity risk management does not play a large role in their document — and this is a severe defect in what they write.? Almost all failures of financial firms are due to loss of liquidity.? The word liquidity only appears once in the document, on page 15.? This shows the amateurish work of the writers.

The Fed focuses on a lot of process issues that don’t matter as much as the substantive issues of discovering forward-looking measures of risk, and changing business processes to reflect those risks.

Here are some examples:

1) Internal controls matter, but it is a rare internal control auditor that can truly analyze a complex mathematical process.? They don’t have the capacity to review those processes, or they would be doing it and earning far more.

2) Risk identification is important, but the Fed document would have not helped in 2007-2009.? How do you detect risks that have (seemingly) never happened before?? Further, if you do detect a major problem that has happened before, and it would impair some very profitable businesses, why do you think management will kill profits to appease your lunacy?

3) Governance is important, but the board gets data so late that it is useless.? This is not worth bothering with.? Management has to do the job here.

4) The language on capital targets is weak, and allows the banks way too much latitude in performing their own calculations.? The Fed needs to be far more specific, and prescribe the scenarios that need to be tested.? It need to prescribe the loss severities, asset class by asset class.? It needs to prescribe the correlations, if any, that can be used in the models.

5) The document does not speak of ethics.? Valuation Actuaries do the same work on a higher level, and they have an ethics code.? That may occasionally make them oppose the management team that pays them, but it is a necessary check against managements trying to manipulate results.

6)? The piece spends too much time on the dividend policies of bank holding companies, and no significant time on the abilities of the subsidiaries ability to dividend to the bank holding companies.? The proper focus of a bank regulator is on the health of the operating subsidiaries.? Who care if the holding company goes broke?? Big deal, at least we protected depositors.

Banking regulators should adopt the same policy as insurance regulators.? Outside of ordinary limits, they can deny any special dividends from subsidiaries to the holding company.

7) The piece does not get forward-looking estimates of risk.? On new classes of assets, you don’t have historical data to aid in estimates of risk.? At such a point, one must look at similar businesses that have gone through a failure cycle, or do something even more difficult: do a cash flow model to estimate where losses will fall if asset values decline for an unspecified reason (okay, no more ability to buy…)

8 ) Macroeconomic factors rarely correlate well with the factors that lead to losses on assets.? Most of that effort is a waste.

9) As Buffett said (something like): “We’re paid to think about things that can’t happen.”? This is why the Fed has to specify scenarios, and be definite.? The mealy-mouthed language of the document can be gainsayed.? Life Actuaries have better guidance.

10) So all of the banks did not pass the mark.? With the vagueness of the guidelines, no surprise.? Let the Fed put forth real guidelines for bank stress tests, and let the banks scream when they get them.? Better to have slow growth in the banking sector than another crisis.

Book Review: Octopus

Posted on 7 August 2013 by David Merkel

This is not a normal book for me to review.? The claims made by the book are fantastic, and the subject of the book, Sam Israel, would have a strong motive for self-exoneration.? But with any book, unless you have direct insight into what the book talks about, you have to interpret the book consistently, assuming the author has told the truth.? That is what I will do.

I have a saying, “It is very difficult to cheat an honest man.” Why is that so?? An honest man knows that few things come easy in life, and so if something seems too good to be true, he will avoid someone peddling something that is likely to be a scam.

But someone who thinks the world is inherently crooked is much easier to cheat, because he thinks that he will be able to outfox others trying to cheat him.? He is more vulnerable to playing an inside game that few others know about.

Sam Israel drifted into a Ponzi scheme.? He may not have intended to do so, but once you report fake results that are too good, it is difficult to ever come back to true accounting, because the assets have to earn considerably more than average in order to break even.? New money helps a lot, and that is driven by great returns, so there is the incentive to keep reporting “too good” returns.

It’s a treadmill, which is why Ponzi schemes always blow up.? In Sam Israel’s case, it led to all manner of speculative investments that an ordinary investor would never touch.? In the second half of the book, it led to dealing with a smooth-talking guy who charmed and scammed Sam Israel, convincing him that there was a conspiracy that controlled Western governments with a rigged bond market that offered incredible deals to insiders.

Now, to me, anything that seems too complicated to justify the worldview is probably not true.? What reason would a conspiracy have to hand out risk-free profits to anyone?? Governments or conspirators would pocket the money themselves, and would not let anyone else in.? But to a crooked mind that needs an easy win in order to set all things right, this is a perfect setup to separate a fool and his money (or rather, the money of his clients).

As it was, Sam Israel ran out of money and his “hedge fund” collapsed, leaving many foolish investors to mourn their losses.

One more thing: a undercurrent of the book was how they managed to co-opt the auditors.? Beware trusting small no-name auditors.

Quibbles

The book is well-written, and if you take it as fiction, it is a real page-turner.? But as truth, you are reliant on a few voices, mostly Sam Israel and his friends, to tell you what happened.? I’m reluctant to sign onto that, but I can’t fully rule it out either.

Who would benefit from this book: If you like fiction, you will like this.? If you want to look into the pathology of a Ponzi Scheme, it is good there also.? If you like reading sordid tales of greed, foolishness, and lies, you will like it.? Otherwise, avoid.? If you want to, you can buy it here: Octopus: Sam Israel, the Secret Market, and Wall Street’s Wildest Con.

Full disclosure: The publisher sent me a copy of the book for free.

Not Natural Gas, Just Flatus

Posted on 26 July 2013 by David Merkel

Okay, time for the promoted stock scoreboard:

Ticker	Date of Article	Price @ Article	Price @ 7/25/13	Decline	Annualized	Splits
GTXO	5/27/2008	2.45	0.008	-99.7%	-67.1%
BONZ	10/22/2009	0.35	0.002	-99.3%	-73.5%
BONU	10/22/2009	0.89	0.005	-99.4%	-74.3%
UTOG	3/30/2011	1.55	0.005	-99.7%	-91.5%
OBJE	4/29/2011	116.00	0.315	-99.7%	-92.9%	1:40
LSTG	10/5/2011	1.12	0.032	-97.2%	-86.2%
AERN	10/5/2011	0.0770	0.0002	-99.7%	-96.3%
IRYS	3/15/2012	0.261	0.003	-98.9%	-96.3%
NVMN	3/22/2012	1.47	0.300	-79.6%	-69.4%
STVF	3/28/2012	3.24	0.348	-89.3%	-81.4%
CRCL	5/1/2012	2.22	0.040	-98.2%	-96.2%
ORYN	5/30/2012	0.93	0.085	-90.9%	-87.5%
BRFH	5/30/2012	1.16	0.450	-61.2%	-56.1%
LUXR	6/12/2012	1.59	0.016	-99.0%	-98.4%
IMSC	7/9/2012	1.5	1.140	-24.0%	-23.1%
DIDG	7/18/2012	0.65	0.052	-92.0%	-91.6%
GRPH	11/30/2012	0.8715	0.136	-84.4%	-94.3%
IMNG	12/4/2012	0.76	0.160	-78.9%	-91.3%
ECAU	1/24/2013	1.42	0.318	-77.6%	-95.0%
DPHS	6/3/2013	0.59	0.040	-93.2%	-100.0%
POLR	6/10/2013	5.75	0.510	-91.1%	-100.0%
NORX	6/11/2013	0.91	0.510	-44.0%	-99.2%
ARTH	7/11/2013	1.24	0.550	-55.6%	-100.0%

	7/25/2013		Median	-92.0%	-91.6%

Tonight’s loser in waiting is North American Oil & Gas Corp [NAMG].? Formerly known as CalendarDragon, a software company, it became North American Oil & Gas.? If the company were as good as the promoter says it is, it would never have bought a penny stock shell.? It would have negotiated with private equity companies.? Why would you make great claims, and yet:

Have negative income, always
Negative net worth
No revenues, always

Note the risk factor from the 8-K:

We have no oil or gas reserves, and the probability of an individual prospect ever having oil and gas is extremely remote and therefore any funds we spend on exploration will likely be lost.

?

The probability of an individual prospect ever having oil and gas is extremely remote. In all probability, the property does not contain any oil and gas. As such, any funds spent on exploration will probably be lost which will have a negative effect on our operations and a loss of your investment.

This is a constant with promoted stock scams.? They work on dud companies, then a promoter tells a story.? The SEC should prosecute such newsletter writers.? The scams could not work without them, at least for now.

Anyway, expect losses here, as usual.? The major energy companies have a far better idea of where they can find energy than a few people can.

Finally, please note in the 4-point type that the writer is getting paid over $100,000 to write the piece, and he does not have a lot of costs, because it is done online.? I saw the ad at Bloomberg.com.? Hey, Michael Bloomberg, Hopkins Grad like me!? Do you want to be associated with penny stock promotions?? You don’t have enough money already?

This stuff stinks.? Really stinks, like flatus.

On the Value of Writing Well

Posted on 25 July 2013 by David Merkel

I read this article yesterday, Does it matter if students can?t write? at the Financial Times.? I say, yes it matters.

I’m not the greatest writer.? I have no books to my credit, so far, only a blog where I have written 2.5 million words over a 6.5 year period. Oh, and my lost writings at RealMoney.? Contact me if you can get them back.

I never thought I would write so much when I was young.? I was a math & science guy.? That said, I was one of three guys who managed the creation of the top yearbook in the nation in 1979, as evaluated by two separate judging committees.? We had talented copy editors, of which I was not one of them.

Today, when most writing is short cycle, and we find proofreading errors in even the best publications, we tend to deprecate writing.? I want to explain why learning to write clearly is important.

If you want to show that you can evaluate qualitative data well, you must be able to write well.? Good ability to write shows that you can evaluate the softer data that is often more important than the raw numbers.

Qualitative reasoning is as scarce as quantitative reasoning.? Being able to express it in a structured way, so that most can understand it takes skills in writing.

Thus I would say to all:

Learn math and science.
Learn reading and writing
Together, they are more powerful than separate.? I am glad I have both skills.? Skills in both can be developed, if you are patient.

So apply yourself to learning.? After all, that is one reason why God created man.? (For that, read Ecclesiastes… and if you don’t get it, email me.)