Cash is King or is it Cash is Trash… I’ll take it Why do I favor investing in small, fundamentally valuable companies with real businesses, real assets, published financials (if on the Pinks, rated “Current Information”), ample trade information and coverage available by a simple search on Google or similar, real products, real markets, real distribution, profitable companies with Earnings Per Share (EPS) of at least 15% of the Price Per Share (PPS), a PPS at a fraction of book value, affording 2-3 swing trading opportunities each year for liquidity; companies invariably unknown or ignored by the “street”, well superior high double digit real inflation adjusted after tax returns is one good reason.
Today, investors are in a panic and their fear has brought maximum popularity to currency denominated instruments like money markets, bonds, treasuries, mortgages, pass-through, certificates of deposits to name but of few; all of which they believe “safe” arguing in large part the absence of volatility. History speaks another language however; that these are in fact the market place’s most dangerous breed of assets. It takes little distance back in time, to contemplate the massive erosion, even destruction of the value and purchasing power of these assorted investments. The why has been made entirely too clear since 2008, governments determine the ultimate value of cash, and systemic apparatus make ill conceived policies fly out of control spreading the epidemic of inflation. It takes $ 7 to buy today what I could buy on my graduation day in 1965 for a single buck ! Worse yet is the onerous presence of non-inflation adjusted taxation. Adjusting for taxes (in the US) even at the lowly rate of that paid by a trade analyst like myself, all of these “investments” have rendered negative returns (I don’t even have to ask my accountant – great historians, but don’t bet on their investment advise !). It is clear that there has to be a better way.
Come the proposals which abound from stock promoters of all ilk in your emails for one mine operator after another, Gold, coal, you name it, every promoter of stocks is screaming at you that this is it, you should put your cash in gold, coal what have you, and time and again traders jump in buying these sterile assets forever forgetting that according to unqualified statistical records from clearing concerns, 88% of every trade under $ 200 000 in 2011 produced a double digit loss – less than a fraction of one percent of trades on the OTC or NADAQ exceed $ 200 000 - with near half of that a total loss when adjusted for commissions. Fact is that a deep-seated reason why investment in these assets is flawed is that you are buying something that will never produce anything, the assets are unproductive and the strategic ploy for profit is simply to find another fool crazy enough to buy them from you for a higher price. This reminds me of my heritage in Holland, circa 1700’s, the gold was then called tulips. The investment in such assets (or the stock of the companies involved) promoted on virtually every promoter Email dispensed and which fills yours and my mail boxes should be, in my view, analogized to a Ponzi-scheme. To work, they require an expanding pool of buyers and they must continue to promote the belief that that expanding pool will expand still further – which at some point, usually fairly quickly, it doesn’t, and the stock comes crashing down often into oblivion, leaving the 88% without their money, but with a great flush of adrenalin which apparently explains the initial motivation for most chat-room traders. The old proverb that “What a wise man does in the beginning, the fool does in the end” is confirmed time and again… at the beginning of course, in most of these deals, the wise men are the corporate insiders liquidating their stocks and their promoters who win regardless through exorbitant fees exacerbating the dilution, or at the opening trades when they and their clients control both sides of the screen… leaves what proverbial denomination for the rest of us ?
Personally I favor investment in productive assets meeting my criteria. My current favorite Falken Industries Ltd which trades under symbol FLKI and which meets or exceeds all of the criteria outlined in my first paragraph is an asset that has the ability in inflationary times to deliver output that will retain its purchasing power value while requiring a minimum of new capital. There are two additional points which buttress my opinion for my decision to invest in Falken Industries, (i) The company has 57 million shares outstanding in the hands of 4200 public investors, and a float of 33 million shares. Thus the usual argument that a small mass in public hands will artificially enable a run on the share price for the benefit of day traders – and a fortiori – the crash that follows, is simply not there (which may explain why FLKI is on the radar of only the most conscientious and reliable stock promoters if at all). As a result current and future investors in FLKI are sheltered against the tacky market trick of short term trader tactics, including shorts etc. which produce extreme short terms variations in share value ; (ii) contrary to many companies, all common shareholders are on an equal footing, there is no class of higher voting stock ensuring control for the elite insiders, thus at FLKI shareholders are not only equal in theory, but in fact and practice.
As explained in a recent comment by Manuel Garcia, the company’s communication officer : “We view our business as running a marathon, not a sprint. We have enough assets that we’re going to do this right, and we’re going to win in the long run.” I believe he is right and that the company will find itself in the Street’s spotlight for all the right reasons.
Falken Industries Ltd OTC : FLKI is a diversified industrial conglomerate that operates in Chemicals, Wet Wipe and Biodegradable Technology. Falken Industries Ltd is the concept behind more than 160 products distributed through a network of global platforms and the recipient of trade awards for innovations, biodegradability and environmental and health quality standards. As a reliable partner FLKI creates chemistry to help distributors and retailers in virtually all industries to be more successful. With its high-value products and intelligent solutions, FLKI plays an important role in finding answers to global challenges such as environmental protection, energy efficiency, and mobility.