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Author Topic: Interesting situation and 3 possible bounce plays
PCola77
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Here is an interesting situation that I found out about last night. Basically here's what seems to have happened.

There is a company called Brookstreet Securities Corporation, and they are a market maker. They had apparently let (if not encouraged) many of their clients to get involved in some extraordinarily risky investments. What's worse is that they let people buy them on margin, and still worse, they only had a 10% margin requirement. In other words you could have had $10,000 in your account but bought $100,000 worth of these risky investments.

Not surprisingly, the investment failed and margin calls started coming in. Basically if the price went down 25%, your $100,000 was now worth $75,000. In other words, you lost $25,000. But remember, you only had $10,000 in the account. So now you not only lost all of the money in your account, you owe them an additional $15,000. Your options now are to write them a check or sell other stocks in your account until you have the $15,000.

The company had so much invested that they are essentially going out of business and are forced to liquidate their assets. I was able to find a list of companies that this company made markets in, and found 3 that you could surmise that they held quite large inventories in. What you can see by looking at the following 3 charts is that someone sold massive amounts of shares just before the close. The price of each dropped somewhere around 60% in just minutes. My supposition is that it's too coincidental that this would happen to 3 of the companies that Brookstreet had positions in for any reason other than that these huge sell orders were Brookstreet liquidating their positions.

Take special note of the volume at the end of the day.

ETLY

http://finance.yahoo.com/q/bc?s=ETLY.OB&t=1d

FDRA

http://finance.yahoo.com/q/bc?s=fdra.OB&t=1d

QPCI

http://finance.yahoo.com/q/bc?s=qpci.OB&t=1d


Okay, so with all that as background, your probably wondering why you should care. Well here's how this situation may have provided an opportunity to buy some stocks at a huge discount. Imagine you know a guy who has a $50,000 car and all of a sudden he owes someone a bunch of money and has to pay them within minutes. So you offer him $10,000 for the car. Since no one else is around to make a better offer, even though you both know someone would offer him more if they were around to do so, he accepts your offer.

Essentially this is what I think happened just before the market closed yesterday. The company took the best offer, even though it ended up being at an almost 60% discount. It's not that the stock is really worth 60% less than it was yesterday at 3PM, it's that the supply/demand got out of whack for a few minutes because there weren't enough people with buy orders in at the time.

Now, all that being said, if you think that nothing changed in the underlying value of the companies (the ones associated with the stock, not Brookstreet), then it's not unreasonable to think that once people see the price is unreasonably low, it could bounce back up to previous levels, or close to it. If so, that means an increase from this level of about 150%.

Here are some links with more info:

This link you can go to the monthly volume report section, type BKST into the search, click on the market participant radio button and issue/mp button and see all the stocks that they made a market for.
http://www.otcbb.com/dynamic/tradeact.htm

Here are a couple of artciles about the situation:

http://seekingalpha.com/article/39220

http://today.reuters.com/news/articleinves...TION-URGENT.XML

http://www.stockbrokerfraud****.com/2007/0...ities_be_1.html

http://www.investmentnews.com/apps/pbcs.dl...8/BROKERDEALERS


Anyway, here's my plan for today. I will be watching the volume and trades on these when the market opens. If it looks like shares are still being "market dumped" then I will wait for volume to dry up. If little or no sell volume seems to exist, it may mean that Brookstone is done liquidating, and the price may start to head back towards "fair value".

Please let me know if you have any additional DD to ad, or if you thnk I've made a mistake somewhere.

Special thanks to stevenktallman on IHUB for some of the info.

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bb money
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Looks like you were onto to something PCola they are all gapping up premarket pretty big!

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"Remember that time is money."

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Bob Frey
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Nice PC.
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PCola77
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Well, woulda been nice to see it at close, they're all already up like 60% at the open. Guess we missed it [Smile]

Keep an eye on it though, possible Brookstreet will have to dump more shares and eat away at the bid side again.

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PCola77
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Ah screw it. Just got 10000 ETLY at .52 and 6000 QPCI at .63
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BooDog
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from QPCI
http://biz.yahoo.com/bw/070627/20070627005401.html?.v=1
...."It has been reported to us that the position of a large stockholder was liquidated on June 26 as a result of circumstances unique to that stockholder," said George Lintz, QPC's co-founder, vice chairman and CFO. "While we have not yet been able to fully verify that information, we are not aware of any fundamental change in the Company's financial position, operating performance or prospects which would result in such a significant increase in trading activity."


very good eye P. nice research, and great explanation of the margin risks.

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All post are my opinion. Do your own DD. Who's clicking your buy/sell button!?

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RagingBull
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so etly going back to .80 ,qpci back to .90

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a huge fortune will arrive to you once again!

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glassman
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quote:
Originally posted by PCola77:
Well, woulda been nice to see it at close, they're all already up like 60% at the open. Guess we missed it [Smile]

Keep an eye on it though, possible Brookstreet will have to dump more shares and eat away at the bid side again.

i agree 100%, anybody else digging into what other stocks they hold...

alot of people are speculating what they shorted too...

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10of13
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Good call PC...nice find...GL!

quote:
Originally posted by PCola77:
Ah screw it. Just got 10000 ETLY at .52 and 6000 QPCI at .63



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#1 Rule: Protect your capital! #2 Rule: Never fall for the BS on the boards!

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PCola77
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That's my hope.

quote:
Originally posted by RagingBull:
so etly going back to .80 ,qpci back to .90


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RagingBull
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if u look at the charts you see that before yesterday these 3 stocks had started trading up the past 3-4 days

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a huge fortune will arrive to you once again!

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glassman
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OK, here's Brookstreeet's monthly share volume report for the last quarter:


have fun [Big Grin]

http://www.otcbb.com/asp/tradeact_mv.asp?Issue=BKST&searchby=mp&sortby=volume&Mo nth=5-1-2007&view.x=0&view.y=0&downloadname=mv200705.exe

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Don't envy the happiness of those who live in a fool's paradise.

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PCola77
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That's what my one link was supposed to do, but I guess I'm not smart enough to make it all in one fancy link like you [Wink]

quote:
Originally posted by glassman:
OK, here's Brookstreeet's monthly share volume report for the last quarter:


have fun [Big Grin]

http://www.otcbb.com/asp/tradeact_mv.asp?Issue=BKST&searchby=mp&sortby=volume&Mo nth=5-1-2007&view.x=0&view.y=0&downloadname=mv200705.exe


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glassman
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LOL... i just entered their symbol, and copied the page that loaded.....

looks like TTDS was hit too..

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PCola77
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Hmmm, how'd I miss that one... I even looked at the chart... Guess that's what happens when you DD when you're tired [Smile]
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glassman
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theres one on there that is very interesting, it's little tiny low OS that rarely trades...

they handled almost the whole OS this year:
RHWA....

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Don't envy the happiness of those who live in a fool's paradise.

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PCola77
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Okay, I bailed on QPCI at .72 for a nice 14%+ gain. Am holding ETLY until at least .63 based on where it was trading before this crazyness.
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PCola77
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Interesting.

Check out these two things. Not sure what to make of them:

1) Big dump occurred on the 21st/22nd, which is when they first found out they were in trouble I think. Possibly already liquidated that position first.

2) Look at a 6 month chart for it. Seems like it was trading at about .02 no Feb 26 and then $1.00 on the 27th.

Edit: nevermind point #2... just checked the R/S board and see they did a 1:40 that day. Weird that the chart tha I was looking at didn't split adjust.



quote:
Originally posted by glassman:
theres one on there that is very interesting, it's little tiny low OS that rarely trades...

they handled almost the whole OS this year:
RHWA....


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glassman
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my chart didn't either.... guess i shoulda looked further back in the filings when i looked at the OS

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Don't envy the happiness of those who live in a fool's paradise.

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PCola77
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glassman, you're mailbox is full.

By the way, just noticed your signature. Is tha from Tool, or did Tool rip it off from someone else?

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glassman
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fixed the mail, and yes, i was rockin out early this morning and this one got stuck in my RAM [Big Grin]

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Don't envy the happiness of those who live in a fool's paradise.

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RagingBull
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etly got in at .51 out at .62 thank you Pcola

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a huge fortune will arrive to you once again!

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PCola77
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Nice. I have Aenima (or however the f*** you spell it) in my CD player as we speak.

quote:
Originally posted by glassman:
fixed the mail, and yes, i was rockin out early this morning and this one got stuck in my RAM [Big Grin]


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PCola77
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Nice job! I have a sell in at .63 that I thought was going to hit a little bit ago. Still time though.

quote:
Originally posted by RagingBull:
etly got in at .51 out at .62 thank you Pcola


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Happy Valley
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Nice find PCola...BTW, Tool is probably the cleanest live band I have ever seen, Maynard almost sounds as good live as he does on the album...If you are into live shows, definately worth the price of admission... [Wink]
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