Patrick's Rants

Turned the Dec 17 call, closing it out for $.05. I sold the calls for $.80 minus commissions – puts me around a 1200% return. I like the 17.00 calls since the 6 month high for YHOO is 16.79. I’m looking ahead to see what I can collect for January 17.50 calls, thinking I might be able to get around $.60. The other option is to sell the next strike price up, 16.00, free up some cash and start selling the 14.00 puts.

You have probably already heard about the previously secret loans the Federal Reserve Bank made to prop up the nation’s largest banks – so they could show a strong balance sheet and qualify for the bank bailout, TARP. Bloomberg News gives a pretty lengthy look at these secret loans. These very same banks, propped up by the Federal Government (which is you and me) continued to foreclose on delinquent borrowers, made record massive profits off the extremely cheap money, gave oversized bonuses to employees, and ultimately tried to charge $5/month to use your debit card.

Remind me again why regulation designed to reduce risk, limit institution size and limit (or at least expose) fees on customers is bad?

ABAT was delisted as of 11/30/2011. The price promptly plunged from just under $1.00 to less than $.40 and I closed out the last of my holdings at $.41 for a significant loss and picked up another 100 shares of CMRG for $3.20 looking to get out at $4.20. I will be reevaluating how I manage downside risk to see if I need to make any changes in this part of my portfolio management.

The European Union is calling for large CPA-type firms to break up their businesses if they offer consulting services in addition to audit services. The proposed law would separate these businesses and – hopefully – give them a little more independence when reviewing the books of public companies. In Deja Vu All Over Again, I wrote Leaving a tiny piece of regulation in place that kept CPA firms from offering “consulting services”, a euphemism for “what else can we ‘sell’ to our clients?” might have saved Arther Anderson and even possibly prevented the implosion of Enron.

I was, of course, alluding to the expansion of services offered to clients of accounting firms. If the same firm that offers consulting on advanced computer systems, or complex off the books transactions, or SPEs looks over those arrangements to determine if they are legal, appropriate, properly accounted for and reported to shareholders who is the audit firm servicing? In the instance of Arther Anderson, it was argued that the auditors were being asked to approve the validity of the moves made by the consulting arm – of Arther Anderson. The clients’ interests, that is the public, shareholders and employees of Enron, are at odds with the interests of the consulting arm. If the consulting arm signs off on a 20 step transaction that is designed to “move” losses of the books so a company can report increased quarterly profits, the audit arm should recognize the invalidity of such a move and not sign off. When you are talking about two parts of the same company it’s hard to keep that separate. It seems the EU agrees. Consulting and auditing will have to be performed by different companies if this law is enacted and enforced. I think that’s a good thing.

ABAT filed form 8-K, basically a supplemental or informational filing stating that NASDAQ is taking steps to delist ABAT.
The main reasons stated are:

• Listing Rule 5250(a). The notice states that the Company failed to provide information requested by NASDAQ, specifically cash confirmations from the banks holding the Company’s funds prepared in the presence of personnel employed by the Company’s independent audit firm.
• Listing Rule 5250(c)(1). The notice states that the Company failed to file its Quarterly Report on Form 10-Q for the period ended September 30, 2011.

ABAT does appear to have filed a notice that its September 30, 2011 10-Q would be late. And they have filed a number of late 10-Qs without apparent repercussion.

So what’s different this time? According the this recent letter to shareholders it is the short sellers, the lawyers and a complicit NASDAQ (for believing the articles on Seeking Alpha). The stress of asking for cash balances at the banks has caused top level defections, according to the Chairman, of the CFO and the Controller. Is Chinese culture so different from ours that the Chairman’s claims have merit? Could be. It could also be that there is no cash to verify – which would be bad for all shareholders. ABAT had to meet all the NASDAQ requirements for initial listing on the exchange. NASDAQ had the duty to verify the submitted information and listed ABAT on the exchange. Now the deadline of November 30 looms large.

This reinforces my personal rule that not all my account be tied up in a single stock.

Trading has been halted on ABAT according to NASDAQ Trader.com for “more information requested”. I’m not sure where that leaves me and my 600 share position in ABAT. I’ve kept my teeth gritted through the ups and downs since April with the idea that I would “average down”. I’m sitting on about a 60% decline in the shares I own. I’m lucky and not so lucky with these shares. If ABAT never comes back to trade and becomes worthless I have no recover alternatives (unless previously threatened class action suits come to fruition) because the shares are in my IRA – meaning I have no taxable losses. Were these shares in a taxable account I would look to see them become worthless to offset other capital gains. The lucky part is that they are not yet considered worthless and since I can’t sell them I guess I’m stuck with them, for now.

Bought the Nov 17 calls back @ .18 on 11/07. Rolled forward to Dec 17 calls @ .80 on 11/08. If YHOO keeps rolling the way it is I could do this every month.

I’ve just completed my second round turn of SMRT. The first 200 shares @ 8.76 on 1/14/11 sold @ 9.84 3/17/11 for 11%. The second, shorter time frame trade, 100 @ 6.05 10/07/11 sold 7.02 10/27/11 for about 12.5%.

Yesterday afternoon, YHOO popped over 15.35, triggering a stock order to sell at 15.40. I wound 50 shares of YHOO out of my holdings.

I realized that I had not posted my YHOO turns, so here is a history on YHOO: bought 100 @ 16.15 (3/23/11) sold same @17.01 (4/7/11). Bought 100 @ 14.98 (6/23/11), bought 50 @13.83 (7/22/11). Original order: sell 150 @15.95. With nothing happening, I sold 100 Oct 11, 16.00c option for $.50 (after commissions net $39.25).

Not really, but I am taking a step back to remind myself of my investing/trading rules. I had bought 300 shares of CNU on 5/10 at 4.99/sh. I had an order into sell at 5.40 based upon recent chart activity. Just before leaving town on vacation I decided that the lackluster performance of the stock meant I needed to “cut my losses”. I placed my order to sell and got out at 4.20/sh. on 6/23. On 6/24 the price jumped to 4.77. On 6/27, CNU opened at 6.26. Had I maintained my normal patient “hold until it makes it” I would have had a nice gain. That’s a huge reminder that you don’t lose until you sell.

Now where are my newsletter subscribers?