Update on my Penny Stock Experiment

It has been awhile since I provided an update on this and a lot has happened since my last blog entry on the Penny Stock Experiment. Since then I have sold off all but one of my penny stocks and invested in Ford and General Motors Government Motors. I got in when the stock really tanked and then got out when the stock rebounded on the news of a pending bailout package from the House of Bush.

Anyway, I saw that coming from a mile away and wanted to cash in on it. From that I was able to profit $361.27 US Funds. Not the thousand dollars I was looking for, but a good haul none the less. So what I did was take my profits out of the system and bought some silver.

Next I went to work trying to find an under-valued gold mining company that has millions of ounces of gold ready to be brought to market. You know what…I found two:

Yamana Gold Inc. (USA) (Public, NYSE:AUY) – Since I bought them on December 15th, the shares are up over 9% so I cashed them out profiting almost $150.00. I would have left my money in their but the so-called experts are saying it will meet resistance around $8.00.

NovaGold Resources Inc. (USA) (Public, AMEX:NG) – This stock was a bit of a gamble because these guys did have some cash flow problems. However I bought in because these guys are awash in gold deposits and have set up strategic partnerships with other companies. I had planned on staying in for a while on this but was able to make a large profit after owning the shares for less than 27 hours. I bought 350 shares at $1.7299 per share and then sold them the next day at $2.7301 per share for a profit of $350.07. What made me cash in was that the CEO of the company went public and said he had no idea why the share price was so high. There was nothing from his end to justify the increase. I was glad I did because as of today the price sits at $1.49.

I still think that both of these companies have potential to go up but I have found another stock that I am very interested in and took the plunge yesterday…oil.

Do you really think that the current price of oil represents a fair market value? Of course not. $37 per barrel of oil is just as crazy and just as extreme as $142 per barrel of oil was this past summer.

These extremes are unsustainable over the long term. If prices get too high the whole economy suffers because the cost of goods rise too much and people have less money to spend because it is all going into the tank. In my opinion, the greed of Corpogovernments with respect to oil was a catalyst that triggered the global meltdown.

The greed has come back to bite them hard in the pocket book and a lot of investors and hedge fund mangers took a big kicking from the collapse of the price of oil.

Sucks to be them. Oil is at rock bottom. Companies can not sustain production at this level. There comes a point when it is better to leave the oil in the ground and wait for better days. This will drive the price up because it creates a shortage on the market, thus increasing demand.

Another factor tends to play into the rise of oil, and that is instability throughout the world. War, terrorist attacks, and natural catastrophes all drive the price up. With that in mind I bought into PowerShares DB Crude Oil Double Long ETN (Public, NYSE:DXO). This is a weird stock that is like placing a bet that the price of crude will rise.

If the price of oil goes up I get some dough. If it goes down then I lose. I bought 350 shares yesterday at $2.29 per share. I should have got in on Friday, Dec 26 when the price was at $1.92 because when Israel and Palestine started bombing each other on the weekend it drove up the price.

Even with my late entry into this, I think it is still way undervalued from its high of $29.65 per share. I don’t think it will reach that level again but I do think that a price of $15 per share is not a crazy number.

So what did I do with some of my profits? Well I am now the proud owner of 36 troy ounces of silver: 4 one troy ounce rounds (coins), 22  one troy ounce bars of bullion, and 1 ten troy ounce bar of bullion.

Since watching the Rich Dad video on the rise of silver and the crash of paper money, I have set a goal to obtain a minimum of 400 ounces of silver.  Why 400 ounces? Watch the video and see.

Remember the motto to live by boys and girls: Cash Is Trash!

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