Ever play Jenga? Fun and quick game where you attempt to build a tall tower out of wooden blocks, by pulling a block from lower down and then adding it to the top. Sooner or later, the unstable foundation causes it to fall over
That is where we are today. The over-usage of debt globally has caused an extremely weak foundation. The credit crisis weakened the foundation even more. And pretty soon I am afraid that all the world central bankers and all the president's men won't be able to put it back together again.
Jiangbo announced their earnings after the bell this evening (JIANGBO PHARMACEUTICALS, INC. Files SEC form 10-Q, Quarterly Report). JGBO is either the absolute cheapest stock on the Nasdaq or their financial statements are false. If they are false, they are terrible liars as they showed their revenues going down for fiscal year 2009 (from 117m to 99m), Riddle me this Batman, "why would you show a 17% decrease in revenues if you were making up your financial statements? I also gain comfort by the fact that their creditors (who JGBO was not able to pay in cash for reasons I admittedly do not quite understand), did accept stock in lieu of cash (Jiangbo Pharmaceuticals Reaches Settlement Agreement with the Holder of its November 2007 Debenture and the Holders of its May 2008 Notes).
Now, to be honest, there is a very real possibility that JGBO is a fraud in some ways. I touched upon this in my recent post (MFI Diary: Chinese Reverse Merger Stocks). So do not place your life savings in the stock, nor even an out-sized investment. But I stand by my statement that for a basket of these stocks, the reward is worth the risk. Per their 10Q, this is a 77m market cap stock with 135m in cash and earning @10m per quarter. It does seem too good to be true, but I have been around long enough to see the market severely mis-price equities, both high and low.
Mechanical Stock Shines
Once again, MFI shows why it may be best to just pick stocks mechanically or randomly. TTHI was added to my mechanical portfolio jusr two weekends ago. And since then... they are up 55%! And no, this is not a Chinese RTO! I did not even see any "news" driving up the price, I just think people finally got around to reading the February 7th earnings that placed the stock on the MFI list.