Symmetry Capital Management, LLC

Interview: “The Skinny on Penny Stocks”

I was quoted in an article about penny stock investing that our friend Jon Heller wrote for Bankrate.com back in August (I’m putting the link up now because we’ve resolved an editorial tussle with Bankrate’s staff over one of my quotes). You may remember that Jon interviewed us back in May regarding our investment philosophy and our active investment strategy, Symmetry Capital’s Opportunistic Portfolio.

Jon asked us to participate because we often purchase low priced shares of companies in the Opportunistic Portfolio. We do this because there are multiple structural and institutional inefficiencies that sometimes create attractive risk-reward situations among low priced securities. However, as all of the experts in Jon’s article point out, there’s a lot of risk and hard work involved in finding the handful of gems among the slag pile of penny stocks, as well as a number of con artists willing to prey upon people’s desire to get rich quick.

It’s a well written article with some good insights – highly recommended.

URLs:

http://www.bankrate.com/finance/investing/the-skinny-on-penny-stocks-1.aspx

http://stocksbelowncav.blogspot.com/2009/05/cheap-stocks-interview-art-patten_26.html

Tags: Interviews, Investing, Low Priced Securities, Trust

News and Views | art October 8, 2009 | Comments Off

TR2: Rangel Holds Onto Ways & Means Post

House Republicans tried unsuccessfully yesterday to oust Democrat Charlie Rangel from his chairmanship of the House Ways & Means tax writing committee. The attempt was based on a continuing investigation by the House Ethics Committee into improper tax filings and various ethical lapses (if you play the video at that link, you’ll see Rep. Rangel’s unique character in action, and also a couple of voters who are troubled by the allegations of “skeezy” conduct; perhaps this will help reanimate the ’tax revolt’ that seems to be flagging of late). As the WebCPA article noted (emphasis added):

John Carter, R-Texas, had introduced the resolution in the House. “Today the majority party in the House of Representatives approved a double-standard for taxpayers, one for powerful Washington politicians, and another for regular working Americans,” he said. “Chairman Rangel can neglect his taxes for years and pay no penalty or interest, while the American public faces massive penalty and interest charges for the same infractions. That was the judgment delivered by House Democrats today. Let the voters take note.”

That’s a powerful and potentially incendiary statement. Here’s the rub though — neither party has a monopoly on corruption or poor ethics. As Mary Ann Akers noted for Current:

The motion, brought by House Minority Leader John Boehner (R-Ohio) was handily defeated, 226-176. Backing their leader in trying to punish Rangel were the following embattled GOP lawmakers: Don Young of Alaska, Tom Feeney of Florida and four California members who are under ethics clouds – Ken Calvert, John Doolittle, Jerry Lewis and Gary Miller. All six Republicans made this year’s “most corrupt members of Congress” list published by the ethics watchdog group CREW, Citizens for Responsibility and Ethics in Washington.

Akers also noted that indicted Democrat William Jefferson (LA), and his colleague Alan Mollohan (WV) who is under investigation, both voted to protect Rangel, while “Reps. Vito Fossella (R-N.Y.), whose drunken driving arrest last Spring revealed he had a secret mistress and child, and Rick Renzi (R-Ariz.), who was indicted on 35 counts of public corruption charges in February” both abstained. Good grief…

The natural objection to Akers’ laundry list is that most of Rangel’s alleged ethical violations pertain to the tax code, making it unthinkable that he would continue to chair the House’s tax writing committee. That’s especially true when you consider that, according to CREW, he fumbled his disclosures yet again for 2007, after settling back taxes with the IRS for prior years without penalty:

Recently, we learned that Rangel filed a grossly misleading financial-disclosure report for 2007 — failing to report at least $500,000 in assets. It turns out Rangel had a credit-union account worth at least $250,000 and maybe as much as $500,000 — and didn’t report it. He had investment accounts worth about the same, which he also didn’t report. Ditto for three pieces of property in New Jersey. Beyond that, we’ve learned that Rangel has failed to report assets totaling more than $1 million on legally required financial-disclosure forms going back to at least 2001. The news comes on top of revelations last year that Rangel didn’t report — and didn’t pay taxes on — income from a villa in the Caribbean. In that matter, the IRS gave him sweetheart treatment; Rangel paid about $10,000 in back taxes but was not required to pay any penalty or interest.

We have somewhat mixed fillings about this. On the one hand, Rangel has done precious little to advance pro-growth tax policy, or to expand awareness of America’s increasingly uncompetitive tax code (to be fair, he has proposed lowering the top marginal corporate rate, but only in exchange for closing loopholes; this might be more efficient, but it doesn’t necessarily lower the net burden on business investment; it also leaves distortions in place regarding the choice of corporate structure). On the other, he’s attacked the AMT, and has been a persistent advocate of fairness in the tax system, which is important. His idea of fairness probably goes a lot further then ours, but we agree with him up to a point – and conservative pundits and their followers should take note – talking only about ‘the percentage of income taxes paid by the top 1% (or 5%, or 10%) of earners’ does NOT provide anything close to a complete picture of our tax system, its fairness, or its efficiency. Of course, Rep. Carter’s observation that Rep. Rangel paid no penalties and no interest for his tax errors provides grounds for intense public cynicism about what Rep. Rangel’s idea of fairness really is. In fact, Carter has even introduced a tongue-in-cheek bill proposing something called ‘The Rangel Rule’. As an article posted on CREW’s website describes it:

The work of Rep. John Carter, a Texan who spent two decades as a judge before coming to the House in 2002, H.R. 735 would require the IRS to give everyone the same kid-glove treatment it gave Rangel.

The bill’s title is modeled on something known in Texas as the “Hobby Rule.” In the 1970s, Bill Hobby, then the state lieutenant governor, was pulled over for drunk driving. Hobby was taken to the police station, but when his attorney showed up in the wee hours of the morning, authorities simply let Hobby go — no bond, no nothing. That special treatment became a precedent for future drunk-driving cases, as lawyers cited the “Hobby Rule” to demand their clients be freed with no questions asked, just like Bill Hobby.

Thus the “Rangel Rule.” Under H.R. 735, if you’re caught cheating on your taxes, you simply pay what you owe, then write “Rangel Rule” at the top of your return, and you won’t be charged any penalty or interest. That way, Carter said when he introduced the bill, ordinary taxpayers will be “treated with the same courtesy that, it seems, the IRS is treating the chairman of the Ways and Means Committee.”