Archives
Blog : Bernie Madoff Escapes Solitary
by John Whitefoot on October 16th, 2009
It’s no Escape from Alcatraz, or Shawshank Redemption, but its close. Everyone’s favorite convicted Ponzi king, Bernard Madoff, was involved in a prison yard fight with a fellow prisoner over, you guessed it, the state of the stock market.
Prisonyard eyewitnesses say Madoff, 71, got into a heated argument with another elderly inmate about the financial markets before the disagreement turned physical.
Madoff, who is serving 150 years for the world’s biggest investment fraud, got shoved by the inmate. But Madoff, never one to give up his throne, shoved back even harder causing his attacker to stumble and lose his footing; retreating in haste.
Madoff is serving his sentence at a prison in North Carolina and was, it turns out, fortunate prison guards did not see the incident that was witnessed by 20 inmates. The dispute could have landed Madoff in solitary confinement.
Fortunately, it appears the two have made up. The following day, the pair was seen chatting quietly together. About what? Nobody knows. Maybe Madoff was giving his anonymous acquaintance a lesson on economics or tips on how to buy stocks. Or…perhaps it was the other way around.
Whether you’re discussing economic nuances in the prison yard, on Elm Street, or Wall Street, one thing is certain…neither the bears nor the bulls have a monopoly on where the economy is going.
Both the bears and the bulls have equally compelling arguments.
On one hand, the global economy continues to face plenty of economic challenges. As was evidenced by the stock market’s sell off earlier this month, in response to weaker-than-expected manufacturing activity.
On the other hand, over the last seven months the stock market has, despite the doom and gloom, climbed nearly 60%. For penny stock investors sitting on the side lines, it's time to take notice.
That doesn’t mean you just sink your money into any old penny stock. It’s imperative to look for penny stocks with a clear vision, great fundamentals, strong operations, and tremendous upside potential.
But where to begin? While picking individual penny stocks does require some time and effort, it can be easier than many investors think. For starters, it can save you money, since you avoid paying fund management fees. You can sink those savings into your penny stocks of choice.
Before making your first penny stock purchase, it's a good idea to have an overall plan of what you want to buy. Your goal is to assemble a diverse group of penny stocks; thereby reducing your risk of ruin if one stock or one industry tanks.
Some money managers suggest you start with a minimum of $50,000 in equity. Further, one article I was reading, implied that anything under $30 was a penny stock; I think her threshold for risk is quite low.
Since most of us don’t have an extra $50,000 kicking around, and can’t afford to take a solid position in stocks trading at $30, I think it’s fair enough to say that it’s up to individual penny stock investors to decide how much they’re willing to part with.
For starters, if you are new to investing, it is a good idea to follow a couple stocks so you can learn the ropes. Or, better yet, you can always paper trade.
Once you have identified a penny stock of interest, always check out the company behind the ticker. Review the company's website. Become familiar with the company’s products or services and decide if the company has a future.
Examine the company's quarterly and annual results. Is the penny stock profitable? What about revenues? Normally it’s important to look for penny stock companies with a decent cash position and low debt load. But in this economy, I think its most important that your penny stock company has a strong cash position.
I’d rather have a penny stock company that has some debt and lots of cash than no cash and no debt. Raising capital in a recession is tough. Raising capital in a recession rooted in a credit crunch is another matter. Cash on hand means your penny stock will be able to weather the recession and hopefully, come out a leaner, stronger organisation.
Ultimately, every penny stock has to pass your review. Once you’re comfortable with your decision…you can put in your order to buy.
Should anyone bully you in the elevator, school yard or prison yard about your investing acumen…you’ll have an arsenal of information at your disposal. And that’s always better than citing an unsolicited email or Madoff as your economic advisor.